ARE POLITICIANS UP TO HANDLING THE FIGHT?

Argentina’s current confrontation against the holdouts/vultures in New York has a number of implications which differ greatly from the kind of foreign policy, or even foreign economic policy, issues that a nation-state has to deal with normally. Perhaps because of this, Argentina’s politicians might have failed to make their mark.

First and foremost, this is not a social, political, ideological or religious issue. Consequently there is (fortunately) no room for great controversies dividing society. This is about cash. So the Argentine government that is handling the problem has (or should have) simple objectives in mind: to pay as little as possible while — at the same time — minimizing any ulterior damages. And such an objective is (or should be) surely shared by all citizens, regardless of their support of or opposition to the government. The existence of hidden partisan or sectarian agendas would be the only exception. But whoever espouses them cannot go public without attracting widespread criticisms.

Secondly, the main adversary, although particularly unfriendly, is not another nation state or organization of nation sates. A totally different situation from the recent negotiations with the Paris Club or even with the case of Repsol, which had the full backing of the Spanish government. By contrast, the holdout/vulture funds, can — at most —use the law of their home country as a lever (enter Judge Griesa), but this adversary has no public support backing it. Moreover, its line and style of business attracts quite significant criticisms. Even outside Argentina.

By the same token, the holdouts/vultures are answerable only to themselves. Moreover, as they are — in a way — outside the mainstream financial system, there are not liable for too many explanations to be provided to their regulatory authorities. And this is — precisely — their main strength. Their negotiating stance and decisions — as well as the profits or losses emerging from them — are independent from outside scrutiny.

By contrast, the Argentine government seems to be placed in a more difficult negotiating position. The issue has become highly politicized in Argentina. Part of the blame falls on the government itself which turned the confrontation with small private group (true, protected, by the legal processes of its home country) into a national crusade with strong political and ideological overtones, perhaps on account of what many describe as — or wish to be — the end of an era. The opposition followed suit, with some honourable exceptions. But there was no shortage of criticisms to a — supposedly — lack of professionalism or effectiveness of the government negotiators. Both sides showed a significant lack of judgment. It is not the done thing to accuse the opposition of lack of commitment to the fatherland. And it is equally wrong to undermine the authority of the negotiators appointed by one’s government of the day. Even if we expect to defeat said government in next years’ elections.

The same can be said about the description of the consequences. In an effort to rally national support (which was surely there in any case) the government said that the country’s Crown Jewel (the Vaca Muerta shale field) is at risk. Then, quite contradictorily, other government officials went public stating that life would continue as usual even if the conflict is not sorted out by Wednesday’s due date.

The press, politicians and even business sectors from the opposition did not much better. Strong pressure to reach an agreement (any kind of agreement?) attracted many headlines and extensive TV commentary, accompanied by lurid descriptions of what could happen if such agreements were not reached. Definitely, not the best way to underpin a strong negotiating position for the national government.

Now, let us face it. It may well be that the government’s negotiators are not up to the job. And even that the consequences of failing to reach an agreement are really disastrous. There are places to — discreetly, very discreetly — discuss this. They are Congress, the Pink House or even the home of an influential lawmaker over dinner. Moreover, if the government wants to — as it should — discuss such important issues with key political opponents, the latter can be officially sworn to secrecy on account of national security, and in order to avoid leaks. It is done all over the seriously democratic world on a regular basis. And after more than three decades of democratic governments, Argentina should also be able to do it. In the particular case of the holdout/vultures, some silence from Argentina would have strengthened the country’s hand.

One last comment: perhaps these discreet dialogues have been taking place the whole time and the firebrand prose was aimed at tricking “the other side.” If that is the case, then the author is happy as usual to help the national effort.

@andresfederman

CREDITS: BUENOS AIRES HERALD

REALITY CHECK

Last week was abnormally intense in terms of Argentina’s foreign policy. Russia’s Putin arrived on July 12, then the president attended the BRICS-UNASUR summit and finally, last Friday, China’s President Xi Jinping landed in Buenos Aires. All this against the context of two other International Relations affairs: Judge Griesa’s sword over Argentina’s head in New York and — to be realistic — the World Cup final which — given the passions it triggered, played an (albeit marginal) role in International Relations as well.

Perceptions have much to do with foreign policy. And when all this occurs in the context of an acrimoniously divided political system, let alone an administration fighting the lame duck syndrome, the power of perceptions can overcome reality. So it might be useful, for both sides of the divide, to their check perceptions — sometimes overenthusiastic and others too pessimistic — against reality.

The BRICS summit is a good case in point. At the end of May, Foreign Minister Héctor Timerman announced that President Putin had invited Cristina to attend the BRICS meeting in Fortaleza. This triggered some immediate — wishful — conclusions about Argentina being invited to join the club. There was an immediate dismissal of such notion, directly from Putin. In Brazil, Dilma Rouseff followed suit. And then — perhaps at Dilma’s behest — came the reality check, when the seat at the exclusive top dinner table, was quickly downgraded to a place at the common table of a BRICS-UNASUR meeting which took place in Brasilia following the Summit in Fortaleza. In addition, CFK’s vehement speech against the vultures and Judge Griesa attracted laudatory words from the usual (UNASUR) suspects, but not a single mention in the BRICS’ final statement.

This might put some of the most centre-right wing opposition’s fears to rest. Argentina is not — for the time being — abandoning forever the Western world. In fact those fears can rest side by side with some Kirchnerites’ illusions of — finally — moving away from a world order where the US is, still, primus inter pares.

But the BRICS meeting hampered other expectations as well. The announced creation of a development and an emergency reserve fund rekindled hopes of a financial alternative to the World Bank and the IMF, the latter being the Kirchnerites’ demon of choice. The announcement that the Development Bank will be a “members only” club and the diplomatic vagueness about a possible financial help to Argentina’s dwindled reserves, should be useful to wake up to reality from that particular dream. And the other side can rest assured that, in spite of the narrative, and however grudgingly and — perhaps — ineffectively, the government will try arranging with its Griesa-related creditors, along lines similar to the deals with the Paris Club, the Wold Bank’s ICSID rulings and the Repsol arrangement. It would be ideal if this also encourages a reality check from some of the more rabid opposition commentators, so they can ease up on their daily gloom and doom predictions.

The Chinese president’s visit also triggered a barrage of contradictory reactions and perceptions.

Undoubtedly the jewel that crowned the visit was the US$11 billion yuan/peso swap agreement. In the views of the pro-government camp, this is proof of the confidence that a world power like China has in Argentina as well s its willingness to help the country with its problems. For the other side, the swap agreement is nothing more than a gimmick because the yuan is not an internationally traded currency. This is only partially true and — push come to shove — the yuans can be exchanged for US dollars. But, even if this is not the case, it should be noted that Argentina’s imports from China reached US$11.39 billion in 2013. And the trade deficit was of about US$5 billion. The truth is that, with the swap agreement, those funds do not necessarily have to come from reserves.

Periodically, the current confrontation in Judge Griesa’s New York Court brings up the issue of having resigned the sovereignty of Argentine courts at the time of negotiating or restructuring foreign debt. This brings a “more patriotic than thou” contest between both sides. It is quite ironic that the swap agreement established that any disagreements will be dealt with, in first instance, by the courts in London. And that, if this does not work, then Argentina and China will accept the authority of the Paris-based International Chamber of Commerce. A new reality check for both sides. The problem — even with the Chinese “strategically integrated partners” — seems to be one of international practice or — perhaps — the lack of credibility of Argentina’s judiciary. And not the subservient attitude form any side of the political divide.

Finally, soccer. The German team’s celebration in Berlin had some nasty references to Argentina. Some delicate people might have felt a touch of imbedded racism as well as the — eternal — temptation of self-victimization. It was the turn of the Argentine players (deservedly at a peak of their prestige) to offer the reality check. They reminded the public about the less than complimentary lyrics about Brazil sung in Argentina to the music of Clearance Clearwater Revival. And suggested that the aggressive creativity of Argentine soccer fans would have been at full steam, should the World Cup have ended in Buenos Aires.

@andresfederman

CREDITS: BUENOS AIRES HERALD

BIZARRE VISIT

On July 10, Ms Nancy Soderberg and Mr Robert J. Shapiro arrived in Argentina on a lobbying mission on behalf of ATFA, which stands for American Task Force Argentina. The group claims to pursue a “just and fair reconciliation of the Argentine government’s 2001 debt default and subsequent restructuring.” To this end, AFTA is very active in the US, lobbying Government, Congress and the press, putting forward the case of what some call “holdouts” and others “vulture funds”.

Last week’s visit to Argentina seems to have been ATFA’s attempt to “put a pike in Flanders”. Both Soderberg and Schapiro have very impressive credentials. Undoubtedly their lobbying efforts in the US seem to have been successful. But one wonders if such skills are exportable. In fact, what happened last Thursday seems to be a checklist of what not to do when lobbying in a foreign country. This does not necessarily mean that the Argentine government’s communications in the US were much better. In fact, over and above the legal, financial and political intricacies of Argentina’s debt situation, one wonders if bad communications on all sides have not contributed to make matters worse.

But, back to our visitors. The curtain raiser was a paid advertisement published in some — but not all-national dailies. None of them support the government. First mistake. Rather than preaching to what they think is a converted readership, the money would have been more usefully invested in trying to deliver the message, also, to a pro-government readership.

The second mistake was — to put it bluntly — not limiting the communications effort to the paid advertisement. The objectives of the personal visit are far from clear. Especially because it was limited to having lunch with journalists from the same dailies in which the adds had been published. (By the way, they lost the chance to speak to the pro government and the independent media. This daily included in the second category.) They were not able to meet business or opposition political leaders. Even those who publicly advocate for a quick settlement of the problem, and criticize the government's management of the issue, do so because they want Argentina to avoid the risks of a default. Not out of any sympathy with those creditors. Even if they call them “holdouts” instead of “vultures”. Consequently, nobody wanted a photograph with the visitors. Apparently, those who planned the visit were — parochially — unaware of this.

Third mistake: the outcome, in terms of press coverage, seems equally disappointing. Both visitors are players of certain calibre. However, the press coverage of their meeting with the journalists was far from prominent. Perhaps, even slightly reluctant. The reason might be that the interviewees pre-empted the newsworthiness of their statements by publishing them in the paid advertisements. Argentine editors shy away from duplicating — not too new — messages two days in a row.

The fourth mistake was that the visitors seem not to have planned their key messages too well. Rather than sticking to one or two main points, the message delivered to the journalists over lunch included matters like criticising Kicillof's qualifications or stressing that he needs to get his advisors to accompany him to the meetings. Kicillof's style might be an interesting chit-chat subject. But it does not seem useful to deal with this, when there are more relevant topics at hand.

But beyond the operational issues. There were a number of -more strategic -mistakes. Strangely, the membership of AFTA includes a long list of US organizations linked to the cattle raising business. And — fifth mistake — AFTA chose last week to launch a protectionist campaign in the US Congress against Argentine beef imports. A far cry from its stated mission regarding debt settlement. And a God given opportunity for the Argentine government to claim that AFTA wants to harm Argentina, not to protect unfortunate creditors’ interests.

But perhaps, the “mother” of all these mistakes is that the AFTA people seem to have confused their role as lobbyists with that of politicians. Criticizing Kicillof in public might be useful — locally — at the time of attracting votes and followers. But it does not go far at the time of convincing the Argentine government during a negotiation. Much to the contrary, it might be a setback in as much as nobody in politics likes to be seen as acting under pressure. And, perhaps, this — sixth — mistake is the most serious one. Negotiations between private parties and a government, however tough, are more likely to be successful if carried forward discreetly. True, the Argentine government from the president down, has been less than kind to Judge Griesa, the holdout or vulture creditors and even the US authorities. But, sadly, that is their role, or — if you wish — their prerogative as politicians. They have something to gain or .at least, a loss to avoid, in being vocal. To quote The Godfather: “It is business, not personal”. In the case of the creditors, irritating the other side does not seem to be useful. And if this was a retaliation because they do not like to be called names, then perhaps they are in the wrong business.

A final comment. Perhaps all the AFTA vs. Kicillof confrontation is an elaborate charade in order for both sides to be able to negotiate quietly. If that is the case, the author is more than happy about being of help by taking the whole issue seriously.

@andresfederman

CREDITS: BUENOS AIRES HERALD

NUCLEAR BOTNIA

Meet Diokitec S.A. The company is owned 99% by Argentina’s National Atomic Energy Commission (CNEA) and 1% by the Mendoza province government. According to its self-description, its mission is to “guarantee the supply of uranium dioxide for the nuclear fuels used in the Atucha I and Embalse nuclear power plants.”

The plant is based — up to now — in Córdoba. But as many of its kin, it is not a welcome neighbour. So much so, that there are plans to move it quite soon to the northern province of Formosa.

Diokitec S.A. is a textbook case of the NIMOBY effect. The acronym stands for “not in my own back yard,” the kind of things with which we do not necessarily disagree, provided they are placed far from where we live or work. True, nuclear power plants, are quite controversial. But the controversy gets more philosophical and less urgent the further away these facilities are from us.

Predictably, the planned move has already triggered protests in Formosa from concerned neighbours and from national environmentalist NGOs. Moreover, Greenpeace has already gone public, albeit in the context of its well-known views against this source of energy. But what makes this case even more interesting is that the protests are starting to come from across the border. There is increasing talk in Paraguay, about the environmental hazards associated with such a neighbour placed near the frontier.

The word Botnia immediately springs to mind. But — on this occasion — it would be Argentina playing the villain’s role. In any case, a new example of cross-border environmentalism in the region. And, perhaps, the chance to start building more cooperative mechanisms and processes to deal with this kind of issues. Although a final decision about locating Diokitec in Formosa has not been reached, there is still a public hearing to take place on July 15, the odds are that the plans will go ahead.

The very bad news is that there will be no way of avoiding negative reactions on both sides of the border. Nuclear energy generation was, is, and will be a sensitive issue. The question is if something can be done to avoid it becoming a permanent thorn on the side of the bilateral relation.

Some of the Argentine government’s moves seem to be pointing in the right direction. Last week, the head of the CNEA, Ms Norma Boero, headed a delegation that visited Paraguay to inform the authorities about the plans. And three months ago, she hosted a delegation headed by her Paraguayan counterpart with a similar objective.

According to the information provided by the CNEA, they arranged on a (much needed?) update of the 1967 bilateral agreement on the peaceful use of atomic energy as well as on personnel exchanges. Perhaps more important, they started to discuss bilateral cooperation on regulatory matters. If both sides are serious, is the best way of offering safeguards to Formosa’s neighbours.

On a more pessimistic note, there are some awkward news. A bill is working its way through the Paraguayan Senate asking President Cartes to state his government’s opposition to this project. And it seems to have cross-party consensus.

Even more awkward, the Paraguayan Senators Arnoldo Wiens (Partido Colorado), Fernando Silva Facetti (Partido Liberal) and Arnaldo Giuzzo (Partido Democrático Progresista) visited Argentina to discuss the issue with their local counterparts. They met with five opposition Senators: Luis Naidenoff, Alfredo Martínez, Eugenio Artaza, Roberto Basualdo and Norma Morandini There were no Victory Front (FpV) senators there. It is worrying if they were not invited to the meeting. And equally worrying if they were invited but declined to attend.

The obvious risk is that an issue, which is sensitive per-se, becomes part of a toxic blend of foreign and domestic politics in which things are likely to get out of control quite quickly. And in terms of foreign policy this transcends the bilateral relation with Paraguay. The bilateral aspect is likely to be noisiest. Not least because it happens at a time when there are other Mercosur and non Mercosur issues straining the bilateral relation. Trade and Yaciretá are two of the contentious problems.

But it should be noted that matters related to nuclear power generation are the subject of close international scrutiny and regulation. Argentina has a good reputation as an international supplier of this kind of sensitive technology which it wants and needs to protect. It would be a pity to see petty domestic political squabbles find their way into the broader international agenda.

If one has to go by what the senators from both countries said, Argentina’s Foreign Affairs Ministry has failed to comply with their requests for information. If that is the case, the Ministry has the chance of fixing its mistake quite quickly. And if the fault lands on its Paraguay counterpart’s doorstep, the fact remains that it is in Argentina’s best interest to be seen to act transparently. And make sure the information gets to all those who request it, including the press, the politicians and — vital in this case — civil society organizations.

Nobody should have any illusions that a nuclear fuels plant can be installed without controversy. But common sense indicates that all efforts should be made to limit as much as possible the usage of the issue to further non-related political agendas. And the way of doing this, is for the Argentine government to engage all possible audiences, on the other side of the border, with clear and credible information.

Expect no miracles. This will not be pain-free. But a proactive approach might help everybody to limit the risk of having a second Botnia in Mercosur.

@andresfederman

CREDITS: BUENOS AIRES HERALD