So Much For The Sanctity Of Institutions

[AmigoArtistico]

Can you cite the law? I doubt the law says that the BCRA would have to respect market rates set in other countries for futures contracts sold on local exchanges (ROFEX and MAE) under Argentine law. In fact, if you try to buy and sell currencies outside of a country, the rates are always less advantageous.

A Central Bank is a monopoly, and the central bank is the only institution in Argentina that is legally authorized to set the value of the Argentine peso. http://infoleg.mecon.../texact.htm��(I disagree 100% with such power, but that is the way it is.)

If that were clear and unambiguous, Vanoli would not be facing charges, which he certainly is, and very specifically, for selling dollar futures at below market rates.

 

[AmigoArtistico]

Can you cite the law? I doubt the law says that the BCRA would have to respect market rates set in other countries for futures contracts sold on local exchanges (ROFEX and MAE) under Argentine law. In fact, if you try to buy and sell currencies (or futures contracts) outside of a country, the rates are always less advantageous.

A Central Bank is a monopoly, and the central bank is the only institution in Argentina that is legally authorized to set the value of the Argentine peso.
http://infoleg.mecon...8133/texact.htm
(I disagree 100% with such power, but that is the way it is.)

Looking for the specific law and more specific details. I removed the link to La Nación because the article was old (only the date at the top of the page was current).

 

[ElQueso]

I still don't see where Macri is saying "this is how it's going to be, take it or leave it." You say Macri is doing the same thing that Cristina and Nestor did but I don't see it. The first thing Macri (through Sturzenegger) did was acknowledge that simply cancelling the contracts would be illegal and that's not what they want to do. Negotiation amongst the parties to find out what everyone can accept (and if it is accepted, it wouldn't be illegal) is a whole lot different than 1) the corralito and 2) the attitude that Crstina took that those 7% (including something like 3% were the "buitres") were unfair holdouts and they weren't going to pay them at all unless they excepted the huge losses that everyone else did.

What gets me here is you previously were on the side of Cristina with the "buitres", saying she had to do what she did (if I remember correctly, forgive me if I'm wrong) because even though there was a contract for the bonds, they were trying to screw over the country (as if that justifies things) and now you are holding Macri to an impossible standard as he tries to resolve an issue that could have just as bad a consequence, brought on by her administration, with consensus instead of arrogant force.

Maybe there's something here I'm not understanding.

 

[RodalfoWalsh]

That being said, I was shocked at the solution being proposed by the new government. I really don't see how this idea of theirs is going to help instill confidence in Argentina as a place to do business.

I think they're trying to negotiate a middle ground with the banks accepting a loss which they might be willing to do if they see the upside. Remember, these are banks, they're highly interested in the economic fate of Argentina and a lifting of the Cepo is most likely to benefit them significantly.

 

[AmigoArtistico]

This, from one of the previous directors of the Central Bank, suggests other crimes besides selling dollar futures below market value.
http://www.lacapital.com.ar/economia/Dolar-UNA-analiza-sumarse-a-la-denuncia-contra-Alejandro-Vanoli--20151116-0014.html

 

[Rich One]

The third option is to not devalue, which the reason why Vanoli and Co. sold the contracts in the first place.

But it looks like we're back to "persuading" (i.e. threatening) companies and banks to accept losses, not paying debt obligations, and not upholding the be-all-and-end-all importance of "seguridad jurídica."

Oh, the irony.

MAcri should argument the same as the Kirchners did , "We inherited the illegal debt from the Dictadura is not ours!". Macri inherited the Trades form a corrupt futures operation....! Its null and void

 

[AmigoArtistico]

This is from the Carta Organica of the Central Bank:

ARTÍCULO 18º — El Banco Central de la República Argentina podrá: a) Comprar y vender a precios de mercado, en operaciones de contado y a término, títulos públicos, divisas y otros activos financieros con fines de regulación monetaria, cambiaria, financiera y crediticia. (Inciso sustituido por art. 10° de la Ley N° 26.739 B.O. 28/03/2012)

Now you can try to make the argument that this only refers to markets within Argentina, but that is going to be an extremely difficult argument for Vanoli to make when you consider that he sold US$15,000 million worth of these contracts at a price of around 10 pesos and change, when he could have sold them in New York (or Chicago, really) for around 15 pesos,

• Causing the country to lose hundreds of millions in direct revenue
• Having no hard currency to back up these transactions
• Putting the economic stability of the country into (much more) jeopardy

When you consider the financial magnitude by which he has harmed the country, (the current estimate of the losses caused by this, which could well go much, much higher, are more that all the money owed to all the holdouts, including all interest and penalties), it is extremely doubtful that any reasonable judge is going to view this as a mere technicality.

And certainly, it's not.

 

[mikic007]

Legally, no.

That will be decided by the court. Trading in bad faith and purposely sinking future management usually has some consequences. Not to mention harmful activities against institution of which head you are.

Or we will just assume "power" in Argentina really means you are above everything?

 

[ben]

A couple points:

1) I think everyone can agree, that whether Vanoli's actions were legal or not, has very little relevance to whether the operations he conducted are binding. If they were indeed illegal, he can go to jail, and the operations he transacted may very well still be binding.

There might be cases where it can be proven that the buyer acted in bad faith, but that is a very high bar and an uphill battle to prove.

2) We are talking about stability of Argentine institutions, but not of the judiciary per se. This is a commercial transaction, and default is an option. That's how futures contracts - how all contracts - work.

3) With regard to the trust issue, the question is "next time there's a trade, should I worry about being screwed or not". There is a case to be made that enough players will buy the argument that this particular default, should it happen, is not a precedent for general stability, viz. that the operation in question was less a commercial transaction than a dirty power play, one that made no fiscal sense, one made with the clock ticking down, and that most buyers had to know this. These trades were taking place here, not in New York, and everybody involved had to understand the implications, unless they were imbeciles: billionaires but imbeciles.

4) No default has actually taken place yet. The position Sturzenegger is taking is is an initial one from where to negotiate - a nuclear option, if you will. Possibly the point is to make the actual buyers come out of the woodwork. Possibly there is a middle ground that can be found, where buyers who can demonstrate good faith will have the contracts honored to a greater extent than those where bad faith can be demonstrated.

I do understand the alarm, but there are very few good solutions for this. Again, this (the sale of these futures contracts) is all a play with 2019 in mind, and these traps were woven well.

 

[Napoleon]

Vamos Macri!

Vanoli should find himself in prison where he perhaps "slips and falls in the shower" and ends up succumbing to internal bleeding.

He would be the first corrupt Argentine politico with inner ear issues.