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Chavez's bonds were the detonator
La Nacion
September 04, 2008

Chavez's bonds were the detonator

by Mariana Vern

The decision was taken last Thursday afternoon. But it was the best kept secret under lock and key within the walls of Olivos. Only Cristina and Nestor Kirchner knew about it.

The order to cancel the complete debt with the Paris Club came down in the last four days only to a handful of ministers. The story had begun three weeks ago, during a crisis meeting of the economic committee that was formed after the plunge in Argentine bonds after the decision of Hugo Ch vez to dump the bonds he'd bought at a rate of 14.9% after 24 hours.

It was a Sunday. Together were the President, Cabinet Chief Sergio Massa, Economy Minister Carlos Fern ndez, Central Bank President Martin Redrado, and Finance Secretary Hern n Lorenzino. In that meeting held urgently it was decided to put in motion a plan to repurchase bonds to recover their value and generate confidence that the market had lost. But among the immediate issues that the head of state considered necessary was that Fern ndez and Redrado get to work on the necessary technical aspects to cancel the debt with the Paris Club. Those two were those who put forth in the intimacy of that meeting the need to pay off the debt as part of a plan to recover calm in the international world, in the midst of the rise in country risk and the lowering of the country's debt rating by Standard & Poor's.

According to what LA NACION heard from high official sources, the order was clear: "Work on it, but in silence," Cristina Kirchner asked. The cabinet chief had to assume the position then of denying any news on the issue to the media. "When you're talking about decisions of State, nothing can leak," argued one source to justify the silence.

The finance secretary, in fact, worked until the night before last with Massa on the plan, but it only came out at noon that it would be put in place, when the national televised event began and the President opted to make the announcement herself.

Most of the ministers were completely in the dark about the decision. It was only legal and technical secretary Carlos Zannini, the legal brain in the government, and the secretary general of the Presidency, Oscar Parrilli, who last Friday began to send out the invitations for the event at the Casa Rosada. He asked for perfect attendance.

The President arrived with the news at the Casa Rosada last Thursday afternoon. From that time until the day before yesterday she spoke with the presidents of countries involved, said an official to LA NACION. She spoke with her counterparts in France (Nicolas Sarkozy), Germany (Angela Merkel) and Spain (Jos Luis Rodr guez Zapatero), despite the tension with the latter country after a report from the Spanish Central Bank found Argentina to be a country at "elevated risk" for investment. "This is the new direct diplomacy, Massa argued to LA NACION.

But it was the United States that got an idea of the most secret idea for the next step that the government would take. The receiver: assistant secretary of State for Hemispheric Affairs, Thomas Shannon. According to the government, the official from George W. Bush's government for the region "left with an idea that something was going to be done" by the President immediately to solve the debt. It was after meeting with her last Wednesday. Still there was no date for the announcement.

The President opted to celebrate the news on Industry Day, which was yesterday. Her decision, according to official sources, follow three goals. First, and most urgent, to send a clear signal that her government "has not only the will but the capacity to pay" in the words of a top official. She weighed, at the same time, the idea of getting past the political crisis after the fight with the farm sector and to resolve one of the big promises of her campaign: to reinsert Argentina into the world, after the absolute dependence on Chavez in the area of international financing.

The third objective was, on this line, to generate investments in the country and open up the world for local businessmen.

After the change in direction taken by the President, in the official offices they heard only one sentence: "This is as far as we go. Our limit is the holdouts," Cristina told her ministers. Those who fell outside the debt swap set in motion by ex-President Nestor Kirchner will have to be patient.