Three Cheers for the Rule of Law: Holding Deadbeat Debtor Argentina to Account

Doug Bandow Being a creditor is a thankless task. The worst offenders are governments, whose leaders constantly promise their peoples a free lunch, dinner, and more.  Argentina is a typical offender. One of the world’s richest nations at the end of World War II, the South American country embraced political authoritarianism and economic populism. In the most recent Economic Freedom of the World rating Argentina came in at 137 of the 152 nations rated.  The country’s worst measure is rule of law, which is reflected in its treatment of international creditors—and steadfast resistance to U.S. court rulings ordering Buenos Aires to pay its debts. In 2001 Argentina defaulted on nearly $100 billion in debt. The Argentine people essentially had a wild party and woke up with a hangover. Their first reaction was to stiff the fools who had extended credit. Owners of roughly 93 percent of the debt gave in and restructured their paper, accepting huge write-offs. But a few creditors, including NML Capital and Aurelius Capital Management, refused to concede. These creditors argued that Argentina should abide by its contract, which required it to obey U.S. court rulings.  Naturally, Argentina’s government cried foul, complaining about the violation to its sovereignty—after it enthusiastically sought (and spent!) the foreigners’ money. The politicians who wrecked the Argentine economy called the hedge funds “vultures.” However, Buenos Aires didn’t prepare f...
Source: Cato-at-liberty - Category: Health Medicine and Bioethics Commentators Authors: Source Type: blogs