Litigation ‘tsunami’ breaks over Argentina’s President Javier Milei - FT

[Finance Prof]

I wonder how Argentina will pay all of the billions it owes. The interest keeps building up on it. Article from FT.

Litigation ‘tsunami’ breaks over Argentina’s President Javier Milei

Billions of dollars of judgments and claims in international courts pressure cash-strapped libertarian government

www.ft.com

Archived: https://archive.ph/UpNi6

 

[Betsy Ross]

I wonder how Argentina will pay all of the billions it owes. The interest keeps building up on it. Article from FT.

Litigation ‘tsunami’ breaks over Argentina’s President Javier Milei

Billions of dollars of judgments and claims in international courts pressure cash-strapped libertarian government

www.ft.com

Archived: https://archive.ph/UpNi6

I also wonder how this will be factored in the exchange rate once the currency is floating free without intervention. Or will Argentina never stop intervening in the exchange rate? Milei is adamant these debts will be paid off but they still have the billions to pay back to the IMF. Does anyone know how much interest builds up on these funds that are owed from the lawsuit?

 

[BuySellBA]

I also wonder how this will be factored in the exchange rate once the currency is floating free without intervention. Or will Argentina never stop intervening in the exchange rate? Milei is adamant these debts will be paid off but they still have the billions to pay back to the IMF. Does anyone know how much interest builds up on these funds that are owed from the lawsuit?

The total judgment amount ordered by U.S. District Judge Loretta Preska on September 8, 2023, was approximately $16.1 billion
This amount includes both damages and interest:

• For Petersen Energía:
  • $7.533 billion in damages
  • $6.85 billion in interest (8% simple interest)
    https://www.batimes.com.ar/news/eco...o-pay-us161-billionfor-ypfexpropriation.phtml
• For Eton Park Capital:
  • $897 million in damages
  • $816 million in interest
    https://www.batimes.com.ar/news/eco...o-pay-us161-billionfor-ypfexpropriation.phtml

The interest keeps building up and Argentina will eventually have to pay. The judge also ruled that the two companies are entitled to receive post-judgment interest of 5.42% per annum until the ruling is complied with

This means that interest continues to build up on the total judgment amount at this rate.

​

1. The interest component makes up a substantial portion of the total judgment, nearly matching the damages in some cases.
2. The 8% simple interest rate applied to the pre-judgment period was the highest rate considered by the court, based on Professor Daniel R. Fischel's testimony about the economic theory of prejudgment interest
   https://www.compasslexecon.com/case...victory-in-suit-against-republic-of-argentina
3. The court rejected Argentina's arguments for a lower interest rate, noting that it would "offend, not serve, equity" to allow Argentina to pay a reduced rate after forcing the plaintiffs to be involuntary creditors for a decade
   https://www.compasslexecon.com/case...victory-in-suit-against-republic-of-argentina

It's important to note that Argentina has appealed this ruling, and the appeal process could potentially affect the final interest amount. However, as it stands, the interest component is a significant part of the judgment and continues to grow as long as the payment remains unsettled.

 

[DaisyM]

It's a tough situation for Argentina. With interest piling up on the debt, it’s almost like a snowball effect, each delay makes it harder to pay down the principal, and the economy just can’t keep up. If Milei doesn’t find a way to either renegotiate or cut spending drastically, the country might face an even bigger financial crisis. Restructuring could help, but it’s not an easy path with so many legal and financial hurdles ahead. I just wish him the best of luck; hopefully, he can achieve a good negotiation.