Argentina’s Chamber of Deputies passed a bill yesterday that updates the country’s 47-year-old hydrocarbon law. The bill, which has President Christina Fernández de Kirchner’s support and has already been approved by the Senate, would ease foreign investment in energy exploration and production. Significantly, it includes regulations for off-shore and shale gas production—categories that were not included in the 1967 law.
The bill provoked significant debate along party lines, and passed largely on the strength of President Fernández de Kirchner’s Frente Para la Victoria (Front for Victory—FPV) representation in Congress.
Argentina’s energy deficit is estimated to reach $7 billion this year. The new bill is part of an attempt to set the country on a course towards energy independence by ramping up domestic production—especially in the country’s Vaca Muerta region, which is considered one of the largest reserves of shale oil and gas in the world. Faced with dwindling foreign reserves and access to credit, the government has looked to increased foreign investment. To do attract investment, the bill would lower the level of investment needed for companies to avoid export taxes and foreign exchange control to $250 million from $1 billion. “The desired horizon for Argentina is only possible if there are investments,” said Mario Metaza, a deputy for the FPV.
Opposition lawmakers have accused the government of steam-rolling provincial interests and selling off strategic resources. “They are ratifying the concept of hydrocarbons as a commodity and not as a strategic resource and a common good,” said Claudio Lozano, a deputy for the Frente Amplio Progresista (Broad Progressive Front—FAP). Outside observers have also raised questions about the current administration’s ability to manage any potential windfall derived from the energy reform, pointing to the mismanagement of the country’s wealth during the economic boom of 2003-2008.
The President of the Episcopal Commission for Social Pastoral Work in Argentina, Bishop Jorge Lozano, issued a call on Wednesday urging the country’s faithful to share information they may have regarding the fate of the children kidnapped during Argentina’s “Dirty War.” In the document, Bishop Lozano notes that, “There has been a network of silence and complicity that has kept the truth covered up.” The Church and its members have historically been a part of this network, Bishop Lozano admitted.
The announcement follows a meeting at the Vatican earlier this year between Pope Francis, formerly Archbishop Jorge Mario Bergoglio of Buenos Aires, and the leader of the Abuelas de Plaza de Mayo (Grandmothers of Plaza de Mayo), Estela de Carlotto. Carlotto and the Abuelas asked the pope to open Church archives that could lead to information regarding 400 children suspected of being kidnapped during the dictatorship. Francis reportedly told Carlotto, “Count on me.” The meeting was a turning point in the relationship between the Abuelas and Bergoglio, whom Carlotto has criticized for his silence on the issue of the kidnapped children.
The Church’s record during Argentina’s dictatorship is checkered. While many priests and other religious figures were among the victims of the regime, elements of the Church are considered to have been either tacitly or actively complicit in the worst abuses of the Dirty War. In the wake of his election, Francis’s own record was the subject of intense scrutiny and debate. Since then, a number of survivors have claimed that future pope secretly helped funnel potential victims to safety.
At a hearing yesterday, U.S. Federal Judge Thomas Griesa decided to hold Argentina in civil contempt of court, asserting that the country’s recent efforts to circumvent his ruling on debt repayment are illegal. Argentina’s Congress passed a law on September 11 that would replace Bank of New York Mellon Corp. as a bond trustee with a branch of Banco de la Nación. This would allow the country to pay the bondholders that agreed to restructuring in 2005 and 2010 in country, while avoiding payment to creditors that rejected restructuring.
Griesa’s ruling came the same day that the Kirchner Administration sent a letter to U.S. Secretary of State John Kerry requesting that the U.S. avoid holding Argentina in contempt and asking for support against the federal judge. After yesterday’s decision, Argentine Foreign Minister Héctor Timerman released a statement claiming that Griesa’s decision was a “violation of international law,” and called for the U.S. to allow the International Court of Justice (ICJ) to preside over the case. The Argentine government filed a suit at the ICJ in August, claiming that the New York court ruling violated their national sovereignty, but no action will be taken by the ICJ until the U.S. agrees to its jurisdiction in the case.
Argentina is scheduled to make a $200 million deposit of an interest payment on restructured debt today in the Banco de la Nación Fideicomiso, and a Central Bank source has indicated that the deposit will be made in spite of the ruling. Timerman affirmed yesterday that the country will continue to fight the blatant violation of Argentina’s autonomy as a nation.
Griesa previously warned Argentina about the potential ramifications of refusing to pay the holdout creditors the approximately $1.5 billion owed to them. However, when NML Capital Ltd. lawyer Robert Cohen called for a daily $50,000 penalty until Argentina pays in full, Griesa declined and stated that potential penalties will be considered at a later, as yet unspecified date.
New technology and capital has boosted shale gas and tight oil production in the United States and Canada—a phenomenon dubbed the “shale revolution.” This revolution has important geopolitical implications and has shifted North America’s energy outlook from one of scarcity to one of abundance.
The rest of the Western Hemisphere is also sitting on expansive shale reserves, but these areas have not yet been fully exploited. A recently released AS/COA Energy Action Group Report, “Shale Gas Development in Latin America,” explores these issues in depth.
Within the Western Hemisphere, the primary point of comparison for Latin American countries looking to develop shale gas resources is the United States, where, in 2014, over 20,000 horizontal wells are expected to be drilled, according to RBC Capital Markets. This compares to 250 unconventional wells in Argentina and just 10 in Colombia that are expected to be drilled during the same time period. Investors spent $90 billion in the United States on developing shale gas in 2012 alone; in contrast, foreign direct investment in Latin America last year, in every sector, totaled $180 billion.
In addition to the U.S. and Canada, Argentina, Brazil and Mexico are among the 10 countries in the world with the greatest technically recoverable shale gas resources; together, they make up approximately 40 percent of the world’s total supply. Colombia also has significant potential.
As the shale gas revolution sweeps across Latin America, many governments are beginning to see the industry—and the significant influx of foreign investment—as a quick stimulus to their sluggish economies. Argentina is no exception—with an estimated 16.2 billion barrels of shale oil and 308 trillion cubic feet (TCF) of shale gas in the Vaca Muerta shale formation, the government aims to capitalize on their newfound resource wealth.
Although foreign investment may help Argentina’s fiscal woes in the short term, it is by no means a panacea for the country’s economic problems, and could in fact encourage poor financial practices.
Efforts by the Fernández de Kirchner administration to attract foreign investment have begun to bear fruit, with various international oil companies and investment firms increasing their stake in Vaca Muerta projects. Argentina’s national oil company, Yacimientos Petrolíferos Fiscales (Treasury Petroleum Fields—YPF), has also made a series of joint ventures with oil companies that will provide the state-owned energy company with much-needed cash and technical expertise to develop unconventional energy projects.
In addition to an infusion of financial capital, both YPF and international oil companies have been lobbying the Argentine government to create a more favorable legal framework for investors interested in shale oil and natural gas projects. The administration has undertaken efforts to rewrite the 1967 hydrocarbons law, which would simplify taxes, royalties, and licenses and effectively reaffirm Buenos Aires’ control over natural resources. Such a law would be a direct rebuke of the 1994 constitutional amendment that recognized subsoil hydrocarbon resources as property of the provinces where they are located.
Three Argentine medical professionals that participated in the clandestine delivery of babies born to female prisoners during the military dictatorship from 1976 to 1983 will be prosecuted for the first time this week. Doctors Norberto Bianco and Raúl Martín, obstetrician Luisa Arroche, as well as former dictator Reynaldo Bignone and retired military general Santiago Riveros will be tried by the Oral Federal Court No. 6 On Wednesday for their role in kidnapping nine babies that were allegedly delivered in the secret maternity ward of the Campo de Mayo Military Hospital between 1976 and 1978.
During the dictatorship, at least 17 pregnant dissident women were abducted and brought to the military hospital where births were often induced by cesarean section. The babies would then be taken from their mothers and adopted by families that supported the dictatorship, including police and military officers. Prior to this week’s trial, the court had concluded that the kidnapping of babies was a systematic terror tactic used by the military government. Thus far, five of the kidnapping victims were able to discover their true identities.
On Sunday, human rights lawyer Víctor Abramovich voiced his concern over delays in prosecuting crimes against humanity that took place during the dictatorship, accusing “certain sectors of the judiciary” and defense lawyers of blocking investigations in order to postpone trials for older defendants.
Over 30,000 citizens are estimated to have been disappeared or killed over the course of the dictatorship. In a 2012 trial, Reynaldo Bignone and Argentine dictator Jorge Videla were sentenced to 15 and 50 years in prison, respectively—though Videla died the following year—and nine others were also convicted for their role in kidnapping an estimated 500 children. Last May, the Attorney General Alejandra Magdalena Gils Carbó noted that there were 74 repressors that had been charged with crimes against humanity and were currently on the run.
Early this morning, the lower house of the Argentine Congress passed a bill that will allow for the restructuring of its sovereign debt. After entering into session Wednesday afternoon, members passed the law Thursday morning with a vote of 134 to 99, just over the 129 votes needed for its approval.
The vote comes after the United Nations General Assembly overwhelmingly approved a new resolution on Tuesday in favor of protecting countries' ability to restructure sovereign debt, with 124 countries in favor, 11 against and 41 abstained. The United States was one of the few countries that voted against the measure.
Argentine Foreign Minister Hector Timerman expressed his approval of the UN result. “The time has come to give a legal framework to the financial system for restructuring sovereign debt that respects the majority of creditors and which allows countries to come out of crises in a sustainable manner,” he said.
After entering into selective default on its debt on July 30, the new law will help Argentina pay back its creditors before its new September 30 payment deadline by allowing the payment site to be moved from New York to either Buenos Aires or Paris. However, New York District Judge Thomas Griesa—who froze $539 million in Argentine deposits in the Bank of New York Mellon and ordered the country to repay hedge funds in full before paying back creditors—has declared the law illegal and threatened to take legal actions against it.
Not everyone in Argentina is in favor of the new bill though. Alfonso Prat Gay, former president of the Central Bank of Argentina, stated that “the fight with the holdouts will be tremendously negative for the country’s future.”
U.S. Deputy Representative to the UN Economic and Social Council Terri Robl also expressed his concerns about the consequences of the new bill. “If lenders face higher uncertainty regarding repayment they may be less likely to provide financing and will likely charger higher risk premiums, potentially stifling financing to developing countries,” he said.
El “default” de Argentina tiene tantas lecturas como tenedores de bonos argentinos hay en EEUU. La apreciación sobre si el país está o no en cesación de pagos ha extendido el debate económico al campo político, en donde el concepto “soberanía” se ha agitado de manera preponderante por el gobierno de Cristina Fernández de Kirchner.
Para las calificadoras de riesgo Standard & Poor’s, Fitch y Moody’s, Argentina entró en un default selectivo el 31 de julio tras no cumplir el pago a los llamados “fondos buitres,”ordenado por un fallo del juez norteamericano Thomas Griesa. Sin embargo, para la Comisión Económica para América Latina y el Caribe (CEPAL), el país todavía se encuentra en un litigio inédito en la Corte Suprema de EEUU, y la Asociación Internacional de Derivados y Swaps (ISDA) revertió su apreciación inicial de default para decir que no hubo moratoria en el pago de la deuda–al fin y al cabo, el dinero del 93% de los bonistas está en las cuentas del Bank of New York Mellon.
After 36 years of searching, Estela de Carlotto, president and founder of the Abuelas de la Plaza de Mayo (Grandmothers of the Plaza de Mayo) was reunited with her grandson in a private meeting in La Plata on Wednesday evening. Ignacio Hurbán, named Guido Montoya Carlotto by his biological mother, discovered his true identity after taking a DNA test Tuesday resulting in a 99.9 percent match with the Carlotto family.
Guido met with his grandmother and his aunt and uncles, Claudia, Kibo and Remo Carlotto, in an undisclosed location from 3 pm to 9:30 pm Wednesday evening, catching up on the decades that had passed since Guido was taken from his 23 year-old mother Laura, who was being held prisoner of the state by the Argentine military dictatorship and had her baby stolen from her only five hours after giving birth.
While recuperated children's identities are carefully guarded to protect the individuals who may be suffering from shock, the news of Guido quickly spread to local and national news. The 36 year-old musician was brought up in Olavarría, a town just under 200 miles from Buenos Aires, by a family with no direct connection to the dictatorship.
During the Argentine military dictatorship from 1976 to 1983—during which time more than 30,000 people were taken prisoner, tortured and killed or disappeared—over 500 babies were stolen from prisoners as "botín de guerra" (spoils of war) and adopted by military and other families. Guido is the 114th grandchild to be recovered after the Abuelas started a DNA bank to help reunite stolen children with their biological families.
The impact of finding Guido has spread across the country. The Abuelas, which usually receive between 10 to 40 calls a day regarding identity, had to bring in additional help on Wednesday to attend to the 100 calls received. While the Abuelas are hopeful of reuniting all of the stolen children with their biological families, they are also cognizant of the difficulty of doing so.
“If it took us 36 years to find 114 grandchildren, calculate how much time will have to pass for us to find the rest of the 400 we’re missing,” said Rosa Roisinbilt, vice president of the Abuelas.
Argentina’s stock market fell 8.4 percent on Thursday after the country slid into what Standard & Poor is calling a selective default. Despite emergency negotiations Wednesday night, holdout bondholders and Argentina’s Finance Minister Axel Kicillof were unable to reach a compromise.
The default crisis was sparked by lawsuits led by Paul Singer for $1.5 billion after the country defaulted on its bonds in 2001. President Cristina Fernández de Kirchner’s administration foreshadowed the default in June after the U.S. Supreme Court upheld a ruling requiring Argentina to pay the full amount owed to hold-out bondholders.
This is the second default the country has seen in 13 years. While Argentina is bracing for higher inflation and increased cost of borrowing, the consequences are not predicted to be as dire as in 2001 when the banking system failed leading to an economic collapse.
June 1: This AQ-Efecto Naím segment looks at sustainable cities in the hemisphere.