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 Images
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The Fire Brigades Union reaffiliates to Labour - what does it mean?

Any union rejoining Labour will be welcomed by most in the party - but the impact on the party's internal politics will be smaller than you think.

The Fire Brigades Union (FBU) has voted to reaffiliate to the Labour party, in what is seen as a boost to Jeremy Corbyn. What does it mean for Labour’s internal politics?

Firstly, technically, the FBU has never affliated before as they are notionally part of the civil service - however, following the firefighters' strike in 2004, they decisively broke with Labour.

The main impact will be felt on the floor of Labour party conference. Although the FBU’s membership – at around 38,000 – is too small to have a material effect on the outcome of votes themselves, it will change the tenor of the motions put before party conference.

The FBU’s leadership is not only to the left of most unions in the Trades Union Congress (TUC), it is more inclined to bring motions relating to foreign affairs than other unions with similar politics (it is more internationalist in focus than, say, the PCS, another union that may affiliate due to Corbyn’s leadership). Motions on Israel/Palestine, the nuclear deterrent, and other issues, will find more support from FBU delegates than it has from other affiliated trade unions.

In terms of the balance of power between the affiliated unions themselves, the FBU’s re-entry into Labour politics is unlikely to be much of a gamechanger. Trade union positions, elected by trade union delegates at conference, are unlikely to be moved leftwards by the reaffiliation of the FBU. Unite, the GMB, Unison and Usdaw are all large enough to all-but-guarantee themselves a seat around the NEC. Community, a small centrist union, has already lost its place on the NEC in favour of the bakers’ union, which is more aligned to Tom Watson than Jeremy Corbyn.

Matt Wrack, the FBU’s General Secretary, will be a genuine ally to Corbyn and John McDonnell. Len McCluskey and Dave Prentis were both bounced into endorsing Corbyn by their executives and did so less than wholeheartedly. Tim Roache, the newly-elected General Secretary of the GMB, has publicly supported Corbyn but is seen as a more moderate voice at the TUC. Only Dave Ward of the Communication Workers’ Union, who lent staff and resources to both Corbyn’s campaign team and to the parliamentary staff of Corbyn and McDonnell, is truly on side.

The impact of reaffiliation may be felt more keenly in local parties. The FBU’s membership looks small in real terms compared Unite and Unison have memberships of over a million, while the GMB and Usdaw are around the half-a-million mark, but is much more impressive when you consider that there are just 48,000 firefighters in Britain. This may make them more likely to participate in internal elections than other affiliated trade unionists, just 60,000 of whom voted in the Labour leadership election in 2015. However, it is worth noting that it is statistically unlikely most firefighters are Corbynites - those that are will mostly have already joined themselves. The affiliation, while a morale boost for many in the Labour party, is unlikely to prove as significant to the direction of the party as the outcome of Unison’s general secretary election or the struggle for power at the top of Unite in 2018. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.