United States Judge Loretta Preska asked the Government of Javier Milei to report where the gold from the Central Bank reserves that it mobilized abroad last year is. The judge responds in favor of the request of the hedge funds that have been litigating against Argentina for years and intend to collect a multi-million dollar amount in the trial for the nationalization of the oil company YPF.
This is a new chapter in the litigation that confronts Argentina with vulture funds such as Burford and Eton Capital for the expropriation of 51% of the shares of Yacimientos Petrolófilos Fiscales (YPF) in 2012, under the presidency of Cristina Fernández de Kirchner, when its majority partner was Repsol. In the decade before nationalization, Repsol’s profits grew exponentially and allowed the firm to expand its international assets, while gas and oil reserves declined rapidly, according to the center-left Peronist government.
The Burford fund, based in London, sued the Argentine State after acquiring the rights to Petersen Energía Inversora and Petersen Energía, from the Argentine Eskenazi family.
At the request of the Kirchners, that family had bought 25% of the shares of Repsol, in a failed project to promote Argentine control of the oil company. The Eskenazis went into debt with Repsol for the purchase, and, after nationalization, they went bankrupt.
Judge Preska, of the Southern District of New York, handed down a first-instance ruling last year in which she determined that Argentina violated the oil company’s statute when the nationalization was carried out and harmed the minority shareholders. Therefore, it ordered the country to pay compensation of $16.1 billion plus interest to Burford, but exempted YPF from responsibilities.
The ruling was appealed, since the Argentine State wants the sentence to be reviewed and the plaintiffs – the Burford and Capital funds – ask that YPF be included as guilty of the nationalization. The three parties (Argentina, YPF and the funds) have already presented the requested briefs and are now waiting for a first hearing by the Court of Appeals.
Meanwhile, the funds seek to collect compensation in advance. As plaintiffs, they can request information about the defendant’s assets, so that seizable assets can be identified. Thus, they will obtain the data on the gold bars that came out of the Central Bank vault last year and that the Milei Executive refused to explain to the Argentine public opinion in the face of repeated requests for information.
According to market estimates, the far-right government shipped 6 tons of gold abroad. It is estimated that around 60% of the entity’s gold reserves would be found outside the country, having initially been sent to the financial center of London.
The Minister of Economy, Luis Caputo, at that time limited himself to confirming that he had sent the ingots abroad without detailing how many or where. “Today you have gold in the Central Bank, which is as if you had a property inside, which you cannot use for anything. On the other hand, if you have that outside, you can get a return,” he said, justifying the measure to gain profitability.
The Argentine defense argued to the US justice system that the gold is property of the Central Bank and not the national government. But Judge Preska noted that, regardless of whether the gold reserves are in the custody of the Central Bank or not, Argentina has the obligation to provide any documentation in its possession regarding these assets. This requirement underscores the need to comply with US court orders. The judge issued a warning to Argentina: “More time and money has been invested in discussing the delivery of these documents than in producing and delivering them.”
Economist Horacio Rovelli points out to elDiario.es that the Argentine Executive should have informed Congress about the departure of the gold abroad: “The government should never have taken the gold from the reserves of the Central Bank, much less say it happily as the minister did. of Economy, Luis Caputo. Congress should have been informed, because the management of international reserves is a legislative power. The Banking Association had shown that there were several trips, for a total equivalent to about 2.5 billion dollars that they took out in gold bars. Now Caputo has to inform Judge Preska where he sent that money and I believe it could be seized, because it is outside the Treasury of the Central Bank and subject to the judge’s interpretation.”
Seizable?
One of the biggest threats that some economists like Rovelli see is the danger of gold being embargoed abroad. Now, under United States regulations that scenario is restricted. There are three requirements: that the property must belong to the defendant himself, in this case the Argentine Government; that the asset that is intended to be seized must be within the United States and the third, that the National State uses that asset for a commercial activity.
The vulture funds They are waiting for any advantage they can get from the oil company’s shares. One of the plaintiffs’ objectives is to demonstrate that Argentina uses sovereign assets for commercial activities, which could make them seizable. This includes consular properties, bank accounts and also gold reserves.
Observations on the integrity of the documents delivered by Argentina so far were included in Preska’s ruling. The requested papers are related to the country’s strategic assets, which generate high international interest. The funds request that the country provide information to verify that certain entities managed by Argentina are extensions of the State and that they can be part of the execution of the sentence. The case for the nationalization of YPF is considered one of the most relevant disputes between a sovereign State and international creditors.
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