The Geneva-based United Nations Human Rights Council passed a resolution on Sept. 26 condemning "the activities of vulture funds" and regretting the effect payments to the funds could have "on the capacity of governments to fulfill their human rights obligations." The resolution was presented by Argentina, which was forced into technical default on July 30 after US district judge Thomas Griesa in New York blocked the country from paying interest to its bondholders unless it settled with US two hedge funds, NML Capital and Aurelius Capital Management; the two companies are known as "vulture funds," investment groups that try to profit by buying weak debt the debtors are likely to default on. Argentina's effort in Geneva was backed by Algeria, Brazil, Russia and Venezuela. The Human Rights Council approved the resolution in a 33-5 vote, with nine countries abstaining; the opposing votes came from the US, UK, Czech Republic, Germany and Japan. "Vulture funds aren't just an economic problem," said Argentine foreign minister Héctor Timerman, who was in Geneva for the vote. "They represent a political, social problem that affects the lives of all the citizens" in many countries since they deprive governments of resources they could use for social services.

The vote in Geneva was Argentina's second success in international diplomacy during the month. At a plenary meeting in New York on Sept. 9 the United Nations General Assembly adopted a resolution promoted by Argentina entitled "Towards the establishment of a multilateral legal framework for sovereign debt restructuring processes." Currently countries have to negotiate debt restructuring deals with their creditors when they are unable to meet their debt obligations; the resolution seeks to set up an international system for countries similar to bankruptcy proceedings for companies and individuals. Argentina's present default resulted from NML Capital and Aurelius Capital Management's refusal to join with the other creditors in a settlement Argentina had worked out for its massive 2002 default. The General Assembly resolution was sponsored by the Group of 77 (G77), joined by China; 124 countries voted for the measure, while 11 voted against it and 41 abstained. (United Nations, Sept. 10; BBC, Sept. 26; Adital, Brazil, Sept. 30)

Meanwhile, Argentina is trying to circumvent Judge Griesa's decision blocking interest payments to the bondholders that have settled with the country. In September Argentina's Congress passed legislation allowing the bondholders to be paid in Argentina rather than New York, taking the issue out of the judge's jurisdiction. An obviously irritated Griesa declared Argentina in contempt of court during a hearing on Sept. 29. It is not clear what effect the judge's contempt declaration will have. "We are in uncharted waters," Arturo Porzecanski, an economist at American University's School of International Service, told the New York Times. (NYT, Sept. 29)

From Weekly News Update on the Americas, October 5.