Argentina wins ship, loses IMF

The economic situation in the nation is concerning.

The saga of the Argentine ship, the ARA Libertad, seized by a US hedge fund looks to have come to an end, the International Tribunal for the Law of the Sea in Hamburg has ruled that it should be released back to the country. As we wrote when it was originally seized:

The fund, Elliott Capital Management, has been engaged in a long-running legal battle with the Argentine government. It specialises in what is euphemistically termed "distressed debt" – it buys up bonds held by countries which are extremely likely to default, or which have already defaulted. As a result, it gets them for a pittance, around one fifth of face value.

Elliott had been waiting for the ship to enter a port in which it would have a chance to enforce the legal judgements it had been awarded in US and UK courts; but it now seems that the Law of the Sea trumps Elliott's desire that other sovereign nations act as bailiffs for it.

There is a fair amount of sympathy internationally for Argentina; although it defaulted on its debt a decade ago, the "holdout" creditors like Elliott largely consist of investors who bought the debt after the default, and have been hindering the nation's attempts to become a responsible debtor ever since.

The Jubilee Debt Campaign, for instance, is firmly on Argentina's side. Its director, Nick Dearden, says:

We are delighted that Argentina has won this case. It is a disgrace that a group of speculators can seize the property of a sovereign nation in this way and points to the need for a fundamental change in the international debt system. Hopefully the ARA Libertad will now be promptly released.

Argentina is still facing a case in the United States in which the supposed 'rights' of these vulture funds will be put far ahead the needs and aspirations of Argentina's people. We must stop these funds profiteering from economic crises, wherever it takes place. If we don't, then what is happening to Argentina today will be happening to Greece and other European countries in years to come.

Even while past defaults continue to haunt Argentina, its current economic situation isn't much better. The country has failed to meet a deadline set by the IMF over the fact that its official measure of inflation is woefully inaccurate. Official statistics show inflation of around 10 per cent, but the actual rate is more likely to be about 25 per cent. Indeed, Argentina clamps down so much on reporting the true state of its economic situation that there are even suggestions that it has forced McDonalds to discount the Big Mac in order to skew the Economist's famous Big Mac index.

Artificially depressing the reported rate of inflation doesn't just make the country look better. It also means that any inflation linked bonds – and it issued many during its debt restructuring in 2002 –  won't be as expensive to pay off.

Of course, that may be the least of the problems Argentina's creditors have. Although the country has won a stay against Elliott in the New York courts, there is every chance that it may still be forced to choose between paying Elliott and not paying its current creditors. And if it comes to that, it's clear which way Argentina will go.

The ARA Libertad, the ship seized in Ghana. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Corbyn is personally fireproof, but his manifesto could be torched by the Brexit blaze

There is no evidence that EU migration has depressed wages – but most Labour MPs believe it has.

News, like gas, expands to fill the space available to it. That’s why the summer recess can so often be a time of political discomfort for one party or another. Without the daily grind of life at Westminster, difficult moments can linger. Minor rows become front-page news.

There are many reasons why Theresa May is spending three weeks hiking in northern Italy and Switzerland, and one of them is that it is hard to have a leadership crisis if your leader is elsewhere. That makes the summer particularly dangerous for Labour. The danger is heightened as the majority of the press is unsympathetic to the party and the remainder is simply bored. Even a minor crisis could turn into a catastrophe.

Jeremy Corbyn’s interview on BBC1’s The Andrew Marr Show on 23 July, therefore, carried the same risks as juggling lit matches in a dry forest. The Labour leader ruled out continuing participation in the single market after Britain leaves the political structures of the European Union. For good measure, he added that the “wholesale importation” of people from eastern and central Europe had been used to undermine pay and conditions for British workers. Both statements only aggravate the stress fractures in the Labour movement and in its electoral coalition.

The good news for the Labour leader is that he is fireproof. Only God or Corbyn himself can prevent him from leading the party into the next election, whenever it comes, and no one will be foolish enough to try to remove him, even if they had the inclination. Also, while the question of what flavour of Brexit to pursue divides Labour in the country, it doesn’t divide Labour at Westminster. Most Labour MPs nodded along in agreement with Corbyn during the Marr interview. They believe – as the shadow international trade secretary, Barry Gardiner, outlined a day later – that remaining in the customs union and the single market would be a betrayal of the wishes of Leave voters, who want full control over Britain’s borders and laws.

There is no evidence that migration from the eastern bloc has depressed wages. But most Labour MPs believe that it has. “I am convinced,” one formerly pro-European MP told me, “that no matter what the studies say, immigration has reduced wages.”

Most of the Labour people who are willing to kick up a fuss about “hard” Brexit are outside parliament. These include the Welsh First Minister, Carwyn Jones, who wants Britain to remain in the single market; the general secretary of the TSSA union, Manuel Cortes, who recently used the New Statesman website to urge the party to keep all of its options open, including a second referendum to keep Britain in the EU; and the rapper Akala, who lambasted Corbyn’s interview on Twitter. While a large minority of Labour MPs back a softer version of Brexit, they are a minority, and not a large enough one to combine with Tory dissidents to make a Commons majority, even when the votes of the SNP, Plaid Cymru and the Green MP Caroline Lucas are taken into account.

This increases the party’s dependence on Jeremy Corbyn. As the leader’s aides observe, even among the quarter of the country that believes the government should simply overturn the referendum result, only a quarter of that quarter do so because they have a particular affection for the institutions of the European Union.

For the majority of hard Remainers, Brexit is a significant battleground in a larger culture war, one in which Corbyn is otherwise in perfect alignment with their values. His electoral appeal to Labour MPs is that he is someone who can say the same things on Brexit and migration as Yvette Cooper or Stephen Kinnock previously did, but without losing votes in England’s great cities.

The electoral threat to Labour from backing a harder form of exit is, in any case, often overstated. The first-past-the-post system makes the Liberal Democrats an inadequate refuge for anguished Remainers in England, while the SNP’s support for Scottish independence makes it an unsuitable home for Labour refugees in Scotland. Team Corbyn feels that Vince Cable, the Liberal Democrats’ new leader, will struggle to convince Labour voters that he can be trusted because of the role he played in designing the new system of tuition fees (having previously pledged to vote against them). In any case, the risk of letting in a Conservative prime minister – probably one committed to a version of Brexit even harder than Labour’s – further locks Remainers in Labour’s corner.

That leaves Labour in Westminster free to pursue a version of Brexit that meets the needs of both the leadership, which relishes the freedom to pursue a more radical economic policy unconstrained by the European Union, and Labour MPs, particularly those with seats in Yorkshire and the Midlands, who are concerned about opposition to immigration in their constituencies. This has the happy side effect of forcing the Conservatives to take the blame for delivering any Brexit deal that falls short of the promises made by Vote Leave during the referendum and in the high-blown rhetoric used by Theresa May during the election campaign.

However, all is not rosy. What most Labour MPs seem to have forgotten is that Brexit is not simply a political battleground – something to be leveraged to reduce the number of complaints about migration and to hasten the Tory government into an early grave. There is a political victory to be had by using the Brexit process to clobber the government. But there is also a far bigger defeat in store for the left if leaving the EU makes Britain poorer and more vulnerable to the caprice of international finance. That Jeremy Corbyn is personally fireproof doesn’t mean that his manifesto can’t be torched by the Brexit blaze. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

This article first appeared in the 27 July 2017 issue of the New Statesman, Summer double issue