Alexis Esposito,

Interesting article. In the past developing countries have been the victims of the IMF and Western institutional investors' 'Structural Adjustment' policies.
Now that the effects are closer to home, in Europe, it might be time to re-consider.

A more accurate description of Singer's fund is "parasite".

Hey Alex!! Good article mate!

Question though. Bearing in mind that Argentina defaulted 20 years after the military dictatorship left, that is, 20 years of successive democratic governments still issuing bonds and badly handling the revenue they raised, mainly siphoning it in to the politicians own accounts around the world, and then offering investors a 10th of the amount they guaranteed; are they any less of a vulture than NML Capital?

As you and I have discussed many times, the fundamental problem in Argentina is not the Vulture Funds or any “colonialist’ foreign power, it is that the Argentinean institutions are rotten to the core and successive democratic governments have used their nation’s credit to enrich themselves, including CK who’s wealth has grown exponentially since coming into power. We need to start writing about the disease as well, so we can put the symptoms into context. As Mat Hardy said, expect the Falklands’ rhetoric to be ramped up.

Well done mate!!!

The whole fiasco with national default is exposing the fact that government bonds are not loans, they are a tax on any investor dumb enough to be holding the bag when the whole thing goes West. As such the primary vultures are the politicians and politically connected people and industries that benefited from the free wealth they were generously given by foreign and domestic investors, who have subsequently been wiped out.

Contrary to the first commenter's plan thye solution is not pure inflation. All governments already inflate at the maximum amount they think the country can bear, but everyone still borrows money - even Australia - despite this. The only solution is to have a smaller, less controlling government with strictly limited powers and scope of authority. And number one on the list of priorities should be to denationalise money. That way inflation is impossible.

These so called vultures aren’t as bad as the article makes out. They wouldn’t exist if they were bad for everyone. They don’t create the debt they just buy a bad debt and enforce it. This provides some compensation for the German car makers (who would otherwise likely receive nothing) and in a way holds bad government policy to account. Whilst I am actually sympathetic with the Argentinian people the one sided nature of the article is frustrating.

This highlights to me the inappropriateness of Trust Indenture Act qualified bonds for sovereign borrowers - the act prohibits binding majority resolutions that affect the principal, rate of interest and maturity, facilitating holdout bondholders like the funds discussed here. English law bonds for example could allow a supermajority of compromising bondholders to bind the minority to an adjusted repayment plan. This is crucially important for states as there is of course no formal insolvency procedure for them if the worst comes to the worst. Arguably the private law courts of another country are in inappropriate forum to decide the competing rights of a sovereign nation (and, judging by some of the comments, its thronging peasants) on the one side, and a financial institution (and its shareholders) on the other. Ideally, the TIA should be amended (as the German bondholder legislation whose provisions the TIA mirrors was in 2009) to allow collective action clauses that affect the core terms of the bonds.

Although less relevant to Argentina, should be be thinking more seriously about the notion of an insolvency framework for nations within, say, the European Union? It would certainly involve a transfer of sovereignty to some supranational forum, and so is usually rejected out of hand, but it might be an interesting avenue to explore.

Good article Sergio. A little one sided but I can understand why.
Now before I get into the arguments against Argentina, let me establish my view that at the end of the day, anyone especially in a global context who's economy is not in a stable state and dares to offer bonds, has only themselves to blame regardless of the lack of ethics or morales of such bond holders. This perhaps is the reason why centuries ago interest was frowned upon and generally illegal. However that's another largely philosophical matter.
Now with regards to the arguments put forward against Argentina, I'll refer to the main (as there are many) otherwise my reply will be too long. The main argument is that such bond holders are owed their money because at the end of the day regardless of the situation, its money that Argentina owes. Yes this is true on the surface, but people seem to forget that as with all financial instruments bond holders take a risk when buying bonds. There is never any guarantee of repayment or the desired end goal of profit. The Argentinian situation on a more micro analogy would be shareholders or corporate bond holders trying to take to court a company whom has gone bankrupt due to no illegal or fraudulent reasons. If there was always a guarantee of return on bonds, people would always buy the highest yielding bonds (which are the riskiest hence the high return on risk), and safe havens such as the US, Germany etc would not even be considered with their dismal 1% returns. Furthermore there would not be insurance options on defaulting bonds. Hence you can't take a country whom it was obvious was already in a severe military ruled bad shape to court for defaulting on loans which evidently posed high risk. Beats the whole premise of investing and calculated risk, especially when you refuse a compromise that most other bond holders accepted.
It is also worthy to note that one of the countries which regards itself as the greatest "ruled by law" nation has taken such laughable action against CEOs of institutions such as Goldman Sach which it has been proven sold financial products to clients before the GFC which Goldman Sachs itself betted would fail. It's literally like selling a Rolex which you know as a merchant is faulty and betting that it will stop operating. Hence the same national courts taking such a severe action against Argentina is specially interesting when one considers that Argentina has recently taken a similar route as other S.American neighbours of nationalising natural resources which has many in the west upset at such "socialist" policies.