Argentina pays off US$1 billion debt and avoids default.

Monica Yanakiew - Correspondent for Agência Brasil/EBC

Argentina's Economy Minister, Axel Kicillof, announced this Thursday (26) that the country deposited more than US$1 billion in a New York bank to pay part of what it owes to the 93% of creditors who agreed to renegotiate the debt, after the 2001 default. The payment, of US$900 million, is due next Monday (30).

Kicillof explained that the Argentine government acted preemptively and deposited more than it should have in order to avoid delaying payment and, at the same time, demonstrate a clear intention to honor its commitments. However, the minister also made it clear that there is a risk that the US courts could seize this money to pay the so-called "vulture funds," which bought "toxic" bonds and filed lawsuits to receive the full amount, without discount.

Kicillof - who yesterday (25) presented the case of Argentina to the G77+China, at the United Nations General Assembly, in New York - made it clear that the creditors' money was deposited in the bank and held the vulture funds (which he called speculators) responsible for any eventual non-payment. The decision to expropriate the money or not will be up to the Americans, he claimed.

"Any conduct that seeks to obstruct this payment to our creditors is a violation of the legal order and international law, which prohibits coercion of other States by virtue of sovereign equality, a clause that also applies in the United States," said the minister. He was referring to the 900 attempts by vulture funds to seize Argentine assets, including the training ship Fragata Libertad.

Since June 16th, Argentina has been at a crossroads: after exhausting all instances of the US justice system, the Argentine government lost the lawsuit filed by two funds and 13 individuals, representing 1% of the holders of the country's debt securities.

New York judge Thomas Griesa ruled that they would be entitled to receive the full amount of the $1,3 billion debt, at the same time as the creditors who accepted the 60% discount proposed in the 2005 and 2010 restructuring plans. Therefore, on July 30th, the Argentine government would have to deposit $2,2 billion to settle both debts.

As soon as she was informed of the US court's decision in favor of the vulture funds, President Cristina Kirchner made a speech on national television to assure that the country would honor its commitments to creditors, who had agreed to renegotiate the debt. She explained that the country is not in a position to pay everything it owes to the so-called vulture funds.

Besides this group, which won the right in court to collect US$1,3 billion, there are other creditors (representing 6% of the total) – most of whom have lawsuits pending. If they all win, Argentina would have to disburse US$15 billion – more than half of the Central Bank's reserves, which would be unsustainable for the country's economy, according to the government.