So Much For The Sanctity Of Institutions

[sesamosinsal]

This is from the Carta Organica of the Central Bank:



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.

Vanoli sold these contracts to force the next government to maintain the cepo. The country won't lose much of anything if the cepo isn't removed, and the currency devalues at the same pace as it has over the past year. These contracts are an insurance policy.

Also, these contracts are paid in pesos. The only hard currency the BCRA needs to pay them is pesos.

The economic stability of the country is only put into jeopardy by a devaluation. Whether we like the policy or not, these futures contracts actually provide a lot of stability. Unless the current government can roll them back, it makes a devaluation at this point prohibitively expensive.

There are always price disparities between stocks and other assets depending on the exchange. The value of the USDARS is 9.72. The BCRA is the entity that sets the exchange rate. See the Regimen Penal Cambiario. No judge is going to validate exchange rates set in other markets that aren't explicitly permitted by the BCRA. Why? The law:

ARTICULO 1º — Serán reprimidas con las sanciones que se establecen en la presente ley:

a) Toda negociación de cambio que se realice sin intervención de institución autorizada para efectuar dichas operaciones;

B) Operar en cambios sin estar autorizado a tal efecto;

c) Toda falsa declaración relacionada con las operaciones de cambio;

d) La omisión de rectificar las declaraciones producidas y de efectuar los reajustes correspondientes si las operaciones reales resultasen distintas de las denunciadas;

e) Toda operación de cambio que no se realice por la cantidad, moneda o al tipo de cotización, en los plazos y demás condiciones establecidos por las normas en vigor;

f) Todo acto u omisión que infrinja las normas sobre el régimen de cambios.

Obviously, the BCRA can't legally prosecute entities outside of Argentina. Why anyone would think that the BCRA would be beholden to them is a complete misunderstanding of Argentine law insofar as currency operations are concerned.

 

[sesamosinsal]

double post

 

[sesamosinsal]

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.

I am just quoting news articles. The anonymous sources at the meeting with Sturzenegger called the situation a "disaster" (from La Nación). The Ámbito article is a bit more negative (as to be expected), but according to them Sturzenegger initially said he would pay the contracts with revised prices using the rates set in NYC. Evidently, the BCRA now says it won't even do that. They now want to nullify all of the contracts. When ROFEX and MAE protested this, they were told to "persuade" companies to take the loss, which is diplomatic speak for "F them."

Perhaps not surprisingly, Macri is already contradicting his campaign promises.

 

[Gringoboy]

And how did Macri say he would handle this BCRA mess during the campaign?

 

[scotttswan]

Who are the companies?

To keep the exchange rate artificially high also costs the country lots through loss of exports, tourism etc etc.

 

[Rich One]

OK. I'll take that... but only if you explain. You're saying a contract based on an illegal act is binding? Please explain. As I wrote, I'm assuming they were able to find what he did was illegal. So please... provide case law or point me the section of the uniform commercial code that states otherwise.

Remember the Bank Trader in Singapore that gained millions in illegal ? Tradings ... his transactions were declared null and void?

 

[Pensador]

I think this going to be one of many schemes that will start to unravel in the near future. If there is one thing K was good at it was scams, schemes and rigging things. I find it hard to believe that so many Argentinians were ignorant enough to buy into it. I feel sorry for the poor schmucks that were forced into this charade. One can only hope that as all roads lead to Rome so the path of retribution will lead right to the K family and that justice will be duly metered out accordingly.

I wonder if Bajo bought into this scam? That would not surprise me either.

 

[Rich One]

Bull Market?? No bulls offered in the Liniers Market, Cattle breeders are not selling Bulls , prices climb sharply?? Bulls are capital investment.

 

[maw]

Remember the Bank Trader in Singapore that gained millions in illegal ? Tradings ... his transactions were declared null and void?

This is a rather odd answer to my question. You simply point out an example where it did not happen. So if I point out two more examples than you have pointed out where a contract based on illegal acts and was voided - that will make my argument right? I can sure we can both point out case after case. My argument was only the law.

 

[nicoenarg]

they were told to "persuade" companies to take the loss, which is diplomatic speak for "F them."

LOL!

OR it could mean "negotiate a deal that everyone will be happy with for now in this difficult time and not run the country into the ground further". But unlike you I guess I am unable to read minds.