Argentina fears new economic crisis as US 'vultures' circle
US court ruling that could make Argentina liable for US$15 billion owed to hedge fundsraises concerns of yet more economic turmoil
Argentinians, battered by decades of economic crises, fear a new one following a US Supreme Court ruling this week that could make the country liable for up to US$15 billion owed to so-called vulture funds.
The vultures, led by a US billionaire, are mainly hedge fund investors who snapped up Argentinian bonds at rock-bottom prices following the country's US$95 billion default on its foreign debt in 2001. The court in Washington DC has ordered that they be repaid in full, threatening a new default within weeks.
Argentina descended into chaos after the 2001 financial crisis, then the largest in world history. "My husband and I were never the same afterwards," said Maria Ines Ochoa, a schoolteacher from the small city of Funes in the central province of Santa Fe.
Violence erupted across the nation after Argentina declared itself unable to meet its payments in late December 2001. The rioting, supermarket looting and the death of young social volunteers by police fire took their toll on Ochoa. "That's when I had my first panic attacks, which completely affected my life afterwards and even today," she said.
Argentina had lived through hyperinflation of up to 12,000 per cent in 1989. There had been economic collapse in 1975 and decades of military rule. But what happened in 2002 was unique. Bank accounts were frozen. Barter clubs sprouted everywhere. Old clothes were exchanged for vegetables, psychology sessions for cuts of meat.
"The 2001 crisis hit me with four children already," recalled Ochoa. "I met with the parents of other kids outside school to locate nearby barter clubs, count our coins to get there and find whatever we could find."
Recent supermarket lootings that left 11 dead, caused by the economic slowdown of the last year, have triggered painful memories for those who lived through the 2001 default.
The government tried to deflect attention from those reminders and its handling of the debt crisis by papering Buenos Aires with large posters against the vulture funds, which it claims are bent on destroying Argentina.
"To those who say we should negotiate with the vultures, I say the vultures are vultures because they don't negotiate," Economy Minister Axel Kicillof said.
But with the days of an annual 8 per cent growth behind Argentina now, central bank reserves dwindling, inflation by some estimates close to 40 per cent and Argentina's peso losing value against the US dollar, survivors of 2001 are unimpressed.
Ochoa said: "Nothing makes us suppose our political class have learned anything. Their arrogance and our classical apathy create a lethal combination for it to repeat itself."