By Charles Newbery
BUENOS AIRES
Argentina threatened Tuesday to deport the top U.S. diplomat at the American Embassy in Buenos Aires, after his comments about the South American country’s debt default.
Argentine Foreign Minister Hector Timerman summoned Kevin Sullivan to a meeting after the diplomat said it would be beneficial for the country to get back on top of its debt payments.
In a statement, Timerman said he expressed his government’s “deep discomfort and firm rejection” of the diplomat’s “inappropriate statements.”
If Sullivan “repeats this kind of interference in the internal affairs of Argentina, the most severe measures will be taken,” including the possibility of kicking the diplomat out of the country, the statement said.
This is the latest incident regarding tensions stemming from Argentina’s failure to make a $539 million bond servicing payment in July, raising concerns about higher inflation, less investment and a deeper recession in Latin America’s third-largest economy. It was the country’s second default in 13 years, and has led economists to say the economy could contract by a greater-than-expected 2.5 percent this year, compared with previous forecasts of one percent.
In an interview Monday in Clarin, the most widely circulated newspaper in the country, Sullivan said, “It is important for the country to get out of default.” By doing so, he said the country “could return to the path of sustainable economic growth and attract the investment it needs.”
The Princeton University-educated diplomat added that this is the direction the administration of President Cristiana Fernandez de Kirchner was following before the default by settling outstanding lawsuits and debts, including $9.7 billion owed to the Paris Club of creditor nations.
Sullivan, who is in charge of the embassy in Argentina until a new ambassador is named, made the comments ahead of a trip by the Argentine president next week to New York. She will attend the United Nations General Assembly and meet with Pope Francis and George Soros, a Hungarian-born American business magnate with investments in Argentina.
The president will likely raise the issue of the default and how creditors can exploit legal loopholes to stymie restructurings after sovereign defaults.
Argentina said it couldn’t pay the $539 million after a U.S. court barred distribution until other creditors holding bonds from a 2001 default on $100 billion are also paid.
The government has refused to pay these creditors, who hold about one percent of the $100 billion in defaulted bonds, any more than the 92.4 percent that accepted to swap those bonds for new ones at 30 cents on the dollar in 2005 and 2010 restructurings.
The government has warned that paying more could spark lawsuits from the 92.4 percent of creditors for the difference, or up to 70 cents on the dollar and more than $120 billion in claims.
Since the default, the government has lashed out at the plaintiff creditors, calling them vultures out to topple the ruling party and seize assets.
It has also have slammed the U.S. justice system as unfair and biased toward the creditors, even raising questions about the abilities of the judge on the case, Thomas Griesa.
In his statement, Timerman repeated the government’s position that the country has paid its debts but the U.S. court has blocked distribution.
“Argentina has honored all of its obligations on time and on the conditions that were agreed on in the 2005 and 2010” debt restructurings, “and it will continue to do so,” he said.
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