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Don't Cry to Me Argentina
Argentina's Holdout Creditors Aren't All Vulture Funds

Argentina’s World Cup team is doing very well this week. The rest of the country? Not so much. The Argentinian peso is now so weak that middle-class fans visiting Brazil for the games are forced to eat in soup kitchens. Meanwhile, as negotiations over the bond crisis continue, the Wall Street Journal took a look at the holdouts. Surprise, surprise—they’re not all capitalist “vultures”:

Norma Lavorato worked and saved for decades, but has spent most of her twilight years waiting for the Argentine government to pay back the $45,000 she invested in sovereign bonds and lost in Argentina’s massive 2001 default.

“I’ve had patience, a lot of patience,” said Ms. Lavorato, a spry 85-year-old who turned down the small settlement offers the government made to other bondholders. “I worked for 43 years. That money is mine.” […]

The plights of individuals like Ms. Lavorato have been largely forgotten in Argentina’s public and bitter battle with the big U.S. hedge funds. Much of the hedge funds’ Argentine debt was snapped up on the cheap after the default, with the idea that it would increase in value. But many bonds were also sold beforehand to ordinary Argentines. They saw government debt as a secure investment.

There are thirteen individual holdouts like Ms. Lavorato who took part in the U.S. court case, and hundreds more stand to benefit if Argentina reaches a deal with creditors this month, many of them pensioners. Now, the Argentinian press denounce them as the “little vultures.”

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  • michaelj68

    Sorry to say this but given Argentina’s history of chronic defaulting Ms. Lovarto took a big risk investing in their sovereign bonds. I bet she was attracted to the much higher rates compared to US Treasuries. There is a good reason the yield was higher and she bet wrong. So should I feel sorry for investors in junk bonds who lost out when the companies defaulted on those bonds?

  • Curious Mayhem

    Investors are responsible for the risks they take.

    That said, there is an important point here, that a wide range of people are getting screwed by Argentina, not just hedge funds. What they’re doing is irrational and risks shutting Argentina out of world capital markets for a long time. The one bright spot is that a majority of Argentine voters recognize this and the need for foreign investment (of all kinds, not just in government debt).

    Kirschner’s party is trying to get her to change policy. But her government — prosecuting independent economists for publishing accurate inflation numbers, imposing absurd price and capital controls — has constructed a narcissistic fantasy land for itself. The court decision was a jolt of reality, and they don’t like it.

    BTW, remind you of any large, developed countries in the northern hemisphere?

  • FriendlyGoat

    Can you tell us the relative dollar stakes of the big vultures and the 13 little claimants? Individuals who bought before the default and corporations which bought after the default are two different animals.

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