About BdLs gold & whether it is at risk if the Govt defaults 👇🏽. I’ve been thinking & writing about this topic since early Dec before pretty much anyone. I’ve put a ton of thought & research into it. Let me tell you how I got comfortable w/ the gold risk. Disclaimer: not a lawyer
1/ I identified what I perceived to be the most likely path for creditors to try to claim the gold, 2 months before anyone was talking about it (Law No 42).But further research convinced me the gold wld be immune despite Law 42 b/c it’s not used for a commercial purpose 
2/ Let’s back up. US law (FSIA) specifically provides for immunity of central bank reserve assets (like gold), incl in the event of a Govt default. Central Banks get SPECIAL legal treatment.They are not treated like a state-owned company. Ignore examples involving State companies
3/ One exception to this immunity is if the asset is used for commercial purposes. The gold is clearly not used for commercial purposes. Its a reserve asset held in BdLs own account. See point 1 above. Can’t use for commercial purpose if Law No 42 doesn’t even allow you to use it
4/ Another exception is if the central bank is an “alter ego” of the State. What does that mean? The law says it means that its day to day operations are controlled by the Govt. Does the Ministry of Finance control BdL? No.Even if it did, reserve assets like gold are STILL immune
The law also says that the buying and selling of Govt debt, including Eurobonds, as BdL routinely does, is not considered to be a part of what defines “control of day to day operations”. Paying debt on behalf of the Govt also does not constitute day to day control.
👇🏽 BCRA, Argentina’s central bank, was arguably directly controlled by the State, and creditors still failed to get a judgement against its assets.
5/ It’s not only US law that grants central bank reserve assets immunity. It’s also international treaty, which has the force of law. “2004 United Nations Convention on the Jurisdictional Immunities of States and Their Property”
6/ The global trend towards greater central bank immunity is clear.
7/ Creditors can only *try* to go after the gold if they vote to “accelerate” their debt. It takes 50% of bondholders of each series to withdraw any acceleration. Local banks own 50%+ of every series except Mar20, which is $1.2 bn plus interest...
The Govt has leverage over local banks and can encourage them to withdraw the acceleration. So only the Mar20 creditors can go after the gold. We are planning to pay them ANYWAY. So if they try, what’s the worst that can happen? We pay them what we’re planning to pay them ANYWAY.
Note: Creditors can’t go after you for MORE than you owe them. The maximum liability is always what you originally owed them plus interest and maybe legal costs. So it’s not like they can take $4 bn in gold when we only owe them $1.2 billion.
8/ ~ 1/3 of the’s gold is in NY (~$4 billion) so risk is capped. It takes many many months to get a legal judgement against an asset. That’s a long time. If Govt finds that the gold is at risk, it can just bring it back to Leb. All assets in Leb are immune. Argentine did similar
9/ NY courts have interpreted the FSIA to strictly defend central bank immunity b/c NY is a financial capital & the US has an incredibly important interest in maintaining its role. Exposing central bank assets to creditors would fundamentally change the global financial system
10/ MEA planes?Most are leased so not owned by MEA.Doubt they cld be impounded. MEA bank accts & ability to transact could be affected.This one needs more work, but I can’t think of an ex where even a Govt (not central bank) owned airline had planes impounded. Wldnt be worth much
The Govt clearly should get its own legal opinion from a reputable NY law firm. Twitter and the press is fun for commentating but it’s NOT LEGAL ADVICE. HIRE A LAW FIRM AND FINANCIAL ADVISOR ALREADY
I’ll say it again and again as I’ve been saying for two months. The way we lose the gold is when the country gets into such bad shape that the decision-makers decide its time to sell the gold for use internally, for imports or reserves or to recapitalize the banks.
