An Imaginary Bestiary

What is a vulture in nature? These days it is easy to find out. All you need to do is to Google Wikipedia. Then one reads: “Vulture is the name given to two groups of convergently evolved, usually scavenging birds of prey: the New World vultures […] and the Old World vultures, including the birds that are seen scavenging on carcasses of dead animals on African plains. A particular characteristic of many vultures is a bald head, devoid of normal feathers. Although, it has been historically believed to help keep the head clean when feeding, research has shown that the bare skin may play an important role in thermoregulation. Vultures have been observed to hunch their bodies and tuck in their heads in the cold, and open their wings and
stretch their necks in the heat.”<img153|center>

Vulture head

What is a vulture in the financial world? It is the nickname of a fund that buys securities in distressed investments, such as high-yield bonds in or near default, or equities that are in or near bankruptcy. Even highly leveraged firms may be targeted if there is a chance that the owners will not be able to make all required debt payments. As the name implies, these funds are like circling vultures patiently waiting to pick over the remains of a rapidly weakening company. The goal is high returns at bargain prices. Some people have looked down upon hedge funds that operate like vulture funds, which have preyed on the cheap debt of struggling companies and forced these companies to pay it back, plus interest.

But it is not only weakening companies that vulture funds prey on; they prey on distressed national economies as well. In the latter case, these rapacious creatures are poised to attack sovereign nations. That has precisely been the case between some nominally New York-based funds (but conveniently with subsidiaries in the Cayman Islands and other tax havens) and Argentina.

These vulture funds purchased the debt of a minority of holdouts in the restructuring of Argentine debt 13 years ago, in the hope of “bottom feeding”, that is, buying debt at distressed prices and trying subsequently to force a settlement, trying to get Argentina to pay back the debt back in full and with the accrued interest. They have relied on courts in the US and friendly courts abroad to rule in their favor, and to seize Argentine sovereign assets, like the training tall ship Libertad, in a third country.

Two logics operate in these maneuvers: one is the logic of international financial negotiations, involving the biggest banks as principal actors or intermediaries, as well as multilateral organizations like the IMF. The majority settlement after the Argentine default of 2001-2 was negotiated with such intermediation with an agreed-upon steep “haircut” on the debt owed to investors. The largest and most powerful financial institutions in the world –both private banks and multilateral institutions—can properly be called the lions in the bestiary of our financialized global ecosystem. Once again, I read in Wikipedia:

“The lion (Panthera leo) is one of the four big cats in the genus Panthera and a member of the family Felidae. With some males exceeding 250 kg (550 lb) in weight, it is the second-largest living cat after the tiger. Until the late Pleistocene, about 10,000 years ago, the lion was the most widespread large land mammal after humans. They were found in most of Africa, across Eurasia from western Europe to India, and in the Americas from the Yukon to Peru.”


The second logic in this conflict–that of the “vulture funds”—has been to continue to hold out and use the courts of one country to force the debtor nation to pay up. This logic, carried to the extreme, has negatively affected the majority of early debt settlers, and by preventing them from continue to collect on the originally agreed bonds, threatens to paralyze the large intermediary banks as well.

In Aesopian language, this means that the “vultures” are also threatening the “lions” of Wall Street and global financial arrangements. In short, the “vultures” and their supporting American judges, in my opinion, have taken a step too far.

Therefore, I would not be surprised if the main international financiers put pressure not just on Argentina, but on the vultures themselves, not to go over the brink, and in case this threshold is crossed, as it has happened, to continue indirect private negotiations for an exit from default. Why?
In the language of my bestiary, “vulture” is a misnomer for the behavior of the funds that pursue Argentina in the name of the holdout investors from whom they bought unredeemed bonds at bargain prices. In the ecosystem of the savannah, there is another animal –this time a mammal
—that benefits from the lions’ hunt and drives away all other scavengers, like the vultures, from the carcass of dead prey. This animal has an even worse reputation than the vultures. It is the hyena. Once again I consult my trusted Wikipedia:

“Although phylogenetically close to felines and viverrids, hyenas are behaviorally and morphologically similar to canines in several aspects. […] Although long reputed to be cowardly scavengers, hyenas, especially spotted hyenas, kill much of the food they eat, and have been known to drive off leopards or lionesses from their kills. […] Hyenas feature prominently in the folklore and mythology of human cultures. Hyenas are mostly viewed with fear and contempt, as well as being associated with witchcraft, as their body parts are used as ingredients in traditional medicine. Among the beliefs held by some cultures, hyenas are thought to influence people’s spirits, rob graves, and steal livestock and children.”
Because hyenas let the lions do the heavy work of hunting and killing, and then try to steal the prey, their behavior has been called cryptoparasitic.
Therefore, I propose a new name for the hitherto labeled “vulture funds.”

The more appropriate term would be “Hyena funds.”

The hyenas and their allies and spokepersons maintain that the newest default will be “disastrous” for Argentina, with such consequences like a further exile of the country from capital markets, higher borrowing costs, an increase in inflation (which is already high), and a delay in the development of the national energy sector, in particular the rich reserves of natural gas in Patagonia. But they forget one thing: They will have cut their noses to spite their face. The game has changed, and the effects are not very dramatic or visible.


During more than a decade Argentina has survived the first default and has managed to self-finance. In the case of the second default, it may very well find other sources of finance in a world where the power of the dollar as the international reserve currency is being eroded, and in which the geopolitical balance of power is shifting to the East. New alliances are emerging, in some cases bypassing the United States, and new multilateral financial organizations are being born, especially among the BRICS.

In the current game of chicken Argentina did not blink, and the consequences are uncertain for all parties concerned. Some observers have stated that, like Samson, Argentina is letting the temple fall down on herself, but it will bury her rivals in the rubble as well.


Vulpes vulpes: International lawyers are happy no matter what.

A third logic may in the end prevail, in which the holdouts may be forced to compromise. That would depend on whether or not the “foxes” (skilled international negotiators, especially international lawyers) will intervene and package a face-saving solution. At the moment, international lawyers are quite happy, since they stand to reap huge fees in the quiet (fox-like) negotiations that will take place at least until January of 2015, in which some of the unacceptable consequences for the country will have been superseded.

Finally, dear reader, there is another reason why I have traded the name “vulture” for “hyena” in my imaginary bestiary. Our condor, a majestic vulture, which roams above the highest mountain peaks, can fly as high as 7,000 meters, and is the largest bird of all, is an Andean, and also Argentinean, symbol of sovereignty and pride.

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