So Argentina is in the final of the FIFA World Cup, much to the chagrin, one would imagine, of their host, fellow South American Brazil, which is not. Sports fans in the home of football will also be in difficulties, I guess, uncertain which team they least want to see win.
I’m pretty neutral on this one, though there are reasons why I’ll be tempted to support the Latinos on Sunday. The first is that I have been impressed for some years by the success their sportsmen and women have achieved in world competitions, and I’m not just talking about the so-called ‘beautiful game’ here.
I’m a keen follower of tennis, and I can’t help noticing how often Argentinian players feature in the later rounds of top tournaments: Juan Martin del Potro is currently ranked No 8 in the world (he has been higher) and there are several others in the top 50 – as well as recently retired stars like David Nalbandian and Guillermo Coria. Another sport I take an interest in is field hockey, where my own country always has aspirations for glory. The Argentinian women’s team sits at No 3 in world rankings, and the men’s team took the bronze medal at this year’s World Cup.
Rugby football is, of course, the number one passion in New Zealand, and the Argentinian guys have yet to notch up a victory against the All Blacks. Nevertheless, they have a world ranking of 8 and have earned the right to be taken seriously by all teams in what is a pretty exclusive club. Certainly you can go a long way with natural sporting talent – but to achieve consistent results across several sports suggests that administrators in Argentina have figured out something important in terms of player coaching and development.
So what’s the bad news? Of course, it’s the economy, st—d! I probably would have come up with that, if I’d been pushed for an answer – but it was brought to my attention by a headline in our local newspaper the other day. Being in Turkish, it probably had less immediate impact on me, and it was only after I’d passed the page that the words registered in my brain, and I decided to look back at the article: ‘Akbabalar Arjantin’e Üşüştü’ – ‘The Vultures are Gathering Around Argentina’
There was a time when I took a serious interest in the dismal science of economics, and I actually thought I had a handle on what it was all about – but I have to tell you now, the world of finance has moved into realms of virtual reality and unreality way beyond my ken, and I have been left floundering in the swamp of primordial innocence.
You will laugh at me, I know, but I actually thought that headline was a metaphor; a Turkish sub editor with literary aspirations was letting his fancy fly free. It was only after reading the text and engaging in a little background research that I understood the headline was 100 percent literal . . . or at least the metaphorical reference was once removed – comparable to referring to the ‘Roller’ in your garage as your Phantom.
Now, I know that there are, in fact, entities in the real world called vulture funds. According to Argentina’s Foreign Affairs Minister, Hector Timmerman, these things were invented by a Jewish-American finance wizard, Paul Elliott Singer. Whether that’s true or not, I can’t say, but it’s a pretty slick idea, and it seems that Mr Singer’s business, the Elliott Management Corporation, has done rather well on it, turning a regular average annual profit of fourteen percent. Wouldn’t you like to get that return on your retirement savings!
So what’s the scheme? As you know, borrowing money is a risky business. Most of us do it reluctantly in the belief that things will go well for us and we’ll be able to repay the debt on the way to owning a house, a new car, or whatever. It doesn’t always work out, sad to say, and even the lender may end up out of pocket. Enter the Singer Corporation. They offer to purchase that potential bad debt for a fraction of its actual value. The lender agrees, on the principle that it’s better to get something than nothing. The new owner of the debt, however, takes the case to court, suing the debtor, and often recoups substantially more than his purchasing price. These days, in our globalized world, it’s not just individuals and companies that get sued for bad debt – the lucrative enterprise of vulture funding knows no national boundaries. In 1996 Elliott Corp bought defaulted Peruvian debt at a cost of $11.4 million. Four years later, after one or two landmark legal decisions, they walked away with a $58 million judgment.
And here’s where the metaphor comes in. Some bleeding heart liberals accuse Singer and his ilk of ‘preying on debtors in financial distress’ – in the manner of those maligned birds feasting on dead or dying animals. There are actually one or two organizations in the USA arguing that this activity is having a disastrous impact on the economies of the world’s poorer countries. They cite cases like that of the Republic of Congo. Apparently Singer’s Elliott Corp purchased a $400 million debt for $10 million – then used the courts to force payment of $127 million. Not a bad return, even if you allow for legal expenses. So far deals like this have propelled Paul Singer to No 1,172 on the Forbes rich list with a net worth of $1.5 billion. Modest enough, but not bad, depending on how you look at it.
The guy seems to wield a fair amount of political clout too, though less so, perhaps under a Democrat administration. According to Wikipedia, he was a big contributor to George W Bush’s election campaigns – and Dubya apparently took him along to Israel’s big 60th anniversary bash in 2008. More recently Mr Singer put his weight behind Mitt Romney in 2012 – backing a losing horse that time, but I imagine he can still pull a string or two when necessary. Very likely his support for gay marriage will win the hearts of liberal Democrats and maybe persuade them to support Singer’s main interest, which is removing government regulations on the finance sector. God save America!
Anyway, as you may understand from reference above to the thoughts of Argentina’s Foreign Minister, that gentleman’s country also has reason to be upset with Mr Singer and his vulturous wheeling and dealing. As far as I can understand, the Argentinian economy got into serious trouble around the turn of the century, and actually defaulted on its debt in 2002, offering to pay 30c in the dollar. Most creditors accepted the deal, but not the Singer team. They held $182 million of debt, which Singer now considered to be worth $2.3 billion. Like Shakespeare’s Shylock, the corporate debt-collectors were inexorable, pursuing the matter through courts in America and abroad, even managing to have authorities in Ghana commandeer an Argentinian naval vessel. Finally it seems that Argentina has exhausted its avenues of appeal through the United States justice system, and has been ordered to pay $1.3 billion to the Elliott Corporation – a chunk of financial flesh that Argentina can ill afford.
Wednesday July 9, according to reports, was the 198th anniversary of Argentina’s independence in 1816. As part of their commemoration celebration, the office of the President took out a full-page advertisement in the Washington Post (what does that say about freedom of the press?) slamming the vulture fund-ers. What will happen from here on will be interesting to watch. Certainly the football match on Sunday is only a temporary distraction from a much larger challenge facing the South American nation. I don’t know if Paul Elliott Singer practices the religion of his ancestors, but I can’t help wondering if he understands the damage he is doing to the reputation of other good souls who do.