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IndustriALL condemns ‘debt vultures’ preying on Argentine economy

7 July, 2014IndustriALL Global Union has condemned the ruthless profit strategy of so-called ‘vulture funds’ that are undermining the economy of Argentina and eroding the principles of sovereignty and democracy in the process.

At the Executive Committee meeting in Geneva in June, Francisco Gutierrez, International Secretary of the Unión Obrera Metalúrgica (UOM) drew attention to the impact of a landmark US court ruling in Argentina’s 12-year legal battle against global debt speculators.

Speaking on behalf of the Argentine National Council of IndustriALL affiliates, Gutierrez warned that the ruling could have profound consequences not only for jobs and the economy in Argentina, but also for the global financial system and for other struggling nations who could in future find it more difficult to restructure their national debt.

The current crisis has its roots in 2001 when, after an economic collapse that caused years of mass unemployment and widespread poverty, Argentina defaulted on its national debt. The debt had to a large extent been run up in previous years by the former military dictatorship and by financial speculators.

During the next ten years, Argentina reached an agreement with 92% of its lenders to restructure its debt. The default provided Argentina much needed relief and led to rapid growth and development. By the end of 2011, the country had achieved record employment, invested in education and infrastructure, and reduced poverty by nearly 70 percent.

However, a small minority of hedge fund investors who had bought debt bonds at fire-sale prices after the default refused to reach an agreement and instead pursued legal action for full repayment plus interest. In 2005 the Argentine Congress passed a law banning repayments to the holdout creditors.

Now a US federal judge has ordered Argentina to repay the hedge funds. What’s more, the ruling also makes it illegal for Argentina to pay its other creditors unless it also pays the ‘vultures’, and requires US financial institutions to provide information about the Argentina’s assets worldwide.

The IndustriALL Executive Committee expressed its full support for Argentina in its struggle to promote sustainable economic development in the face of attacks from avaricious investors.