Traverse City Record-Eagle

July 25, 2013

IMF will not file for Argentina in debt case

MARJORIE OLSTER
Associated Press

---- — WASHINGTON (AP) — The International Monetary Fund said Wednesday it had dropped a proposal to back Argentina in its legal battle with holdout investors who refused to take losses on debts in the country’s $100 billion default in 2001.

But the international lending agency said it remains concerned the case could set a precedent that would make it hard for other countries in financial distress to get relief on overwhelming debts and return to financial stability.

The IMF said it was wary of taking sides in a U.S. court case after the American government said it would not support the move. Without that support, the IMF could leave itself open to criticism from Congress that it is interfering in the American legal system. The IMF also said it does not want to be seen as taking sides in a dispute over financial claims involving its member governments.

Managing Director Christine Lagarde had been expected to recommend the IMF executive board file an unprecedented “amicus” or friend-of-the-court brief this week with the U.S. Supreme Court supporting Argentina’s petition to reverse lower court rulings in the case brought by NML Capital Ltd. Elliot Management, the parent firm of NML, had no immediate comment.

The lower courts are seeking to force Argentina to pay $1.3 billion owed to investment funds trying to collect on bonds rendered nearly worthless in the default.

The IMF said Lagarde had decided against recommending the filing after the U.S. made clear it opposed it.

The U.S., while critical of Argentina’s handling of its debt, backed it earlier in the legal process because like the IMF, it was concerned about the precedent the case could set. There was some expectation it would do so again and file a brief in the Supreme Court.

However, the Treasury said Wednesday that in line with its usual practice, the Department of Justice has decided not to file an amicus brief in the Supreme Court at this time.

“We understand that the IMF has serious concerns about the impact of the ruling on its ability to meet some of its core responsibilities,” a Treasury statement said. “We do not think that the IMF should file a brief with the Supreme Court at this time. “

The Treasury said the U.S. will continue to consider whether and when to participate in this litigation and may express its views if the Supreme Court invites it to do so.

The IMF and the U.S. have been critical of Argentina on a number of fronts. The Treasury said it strongly disagreed with Argentina’s actions in the international financial arena. In particular, the U.S. has repeatedly expressed concern about Argentina’s failure to honor its international obligations to the IMF and others and its failure to pay past due sums to the United States.

The IMF censured Argentina earlier this year for issuing inaccurate inflation data.

Argentina is awaiting the decision of the appeals court in the case.