The war of words between Argentina and a group of hedge funds is getting more interesting.
Today, it was the hedge funds’ turn to take a full-page newspaper ad to make its case, answering recent claims by Argentina – and demonstrating that the dispute is reaching a critical stage.
The ad is a good example of an effective campaign statement: clear, direct and sharply worded. It’s a stark contrast to the ad offered by Argentina last week, which was densely written, legalistic and hard to comprehend. It looks like the lawyers were in charge of writing Argentina’s ad copy – that’s never a good idea.
The hedge funds avoided that problem. Their ad made effective use of several communication techniques:
1. It used comments from authoritative, independent sources to support its points, using excerpts from Moody’s Investors Service, Reuters, CNN and the Wall Street Journal.
2. It used a familiar style to frame its argument, structuring the ad as a series of “myths and facts” – a device commonly used in many issue campaigns that’s easy for readers to grasp.
3. Above all, the ad relied on a single, simple message – that Argentina should negotiate to avoid a “catastrophic default.”
But the ad also has an effect that the hedge funds probably didn’t intend: it shows how eager they are to negotiate with Argentina to avoid a default. If Argentina goes over the cliff and defaults, the hedge funds lose their leverage. They’ll have to get in line with everyone else in a new restructuring. A fantastic trade a decade in the making will turn to dust overnight.
So the funds are not doing Argentina a favor by stating their willingness to negotiate. A negotiated deal is the only way they’re likely to get paid.
The ad comes a day after the head of NML Capital, one of the funds leading the legal challenge, said in an op-ed in the Financial Times that it was open to a compromise if Argentina would negotiate in good faith. The funds are skillfully using all available channels to get its message out and ratchet up the pressure on Argentina.
It’s a fascinating game of chicken. Expect more skirmishes – dueling advertisements, open letters and media appearances – from both sides in the days to come.