In 2003 a campaign for the relief of Argentina’s dishonourable debt was founded in the UK, following the disastrous effects of the collapse of the Peso. This article, in the 24 November 2004 Morning Star, explained the basis for the campaign.
Change course on Argentinian debt, say campaigners
A new campaign, headed up by the successor to the immensely influential Jubilee 2000, seeks trade union support to change Chancellor Gordon Brown’s hard-line stance on Argentina’s debt.
For many British people, Argentina is a far-off country that went to war with Thatcher and then vanished from the political map. But at stake is the future of the world’s indebted countries, the IMF itself, the corrupt practices of the world’s bankers, and the pensions of nearly half a million European small savers and trade unionists.
Argentina owes nearly a sixth of the IMF’s debt. The IMF’s own independent evaluation body has just reported that its policies in Argentina were severely at fault – a rare admission. And the same banks that helped create the crisis unloaded nearly $100 million in unpayable debt onto Italian, Japanese and German pensioners.
If Argentina stands up to the IMF it stands a good chance of putting paid to the banking practices that led to this scandal. If it fails, it will unleash a wave of poverty, social division and political instability and a renewed cycle of violence and repression, and give carte blanche to the unregulated sharp practice that dominates private international lending.
In November 2002, Argentina’s currency collapsed leaving a government debt of $180 billion. It has been in default ever since. Much is held by ‘bonistas’ who bought it from big banks like HSBC, Deutsche Bank and Banca Italia, or ‘vulture funds’ who buy up risky debt at bargain prices, and sue the countries that can least afford to pay it.
‘Economic Justice for Argentina’ says the banks and the IMF should share responsibility for the debt they created. In September last year, under the direction of Gordon Brown, chair of the IMF’s powerful Monetary and Finance Committee and highly influential within it, Britain joined only seven ‘hardline’ countries who refused to back proposals from Argentine president Nestor Kirchner. These restricted debt payments to 3 per cent of government income and imposed a ‘haircut’ – a cut in repayments – of 75 per cent on its private debt. The IMF extended a provisional ‘rollover’ loan to Argentina but demanded a better offer to private debtors. Now the loan is up for review in September, and the stand-off has already led to a postponement of the scheduled meeting.
Kirchner’s original proposal conformed to two principles of the joint Brasilian-Argentinian ‘declaration of Copacabana’: priority should go to the welfare of an indebted country’s people, and debt payments should take second place to the economic investment needed to secure future growth.
If a ‘solidarity front of the debtors’ can turn these principles into actions it will change the political relation of forces worldwide against those who for twenty-five years have endorsed crippling and poverty-producing neoliberal policies, believing there is no alternative. It will open the way to a new political regime in the treatment of debt.
But the declaration is so far only words – which makes Argentina is the key. Many Argentinians believe that even the existing proposal – since modified – will endanger the government’s drive to save millions of Argentina’s poor from destitution. Seven million are ‘indigent’ which means that they cannot afford a meal every day. 43 per cent are below the poverty line. Inequality, in a society that prided itself on its social justice and solidarity, has reached its highest levels ever.
A petition from nearly fifty Argentine MPs, headed by veteran anti-debt campaigner Mario Cafiero, who visits Britain on September 21st, says Argentina should not be held responsible for the debt. A quarter of it was contracted by the military government. A third was the fault of the IMF, for whom Argentina was its ‘model economy’. The Washington-based Centre for Economic Policy calculates that privatising the country’s pension scheme alone added $80billion to the debt. The government kept on paying its pensioners, but the privatised companies never gave them a penny.
And as Argentina’s currency collapsed, the world’s banks embarked on an orgy of usurious lending adding a further $50 billion to the debt. Argentina’s currency was pegged to the dollar – egged on by the IMF well beyond the sustainability of such a policy, as it now admits. To keep its reserves, discredited ex-Finance Minister Cavallo borrowed billions at discount rates as high as 40 per cent and interest rates up to 18 per cent. These ‘high-yield sure thing’ bonds were dumped on unsuspecting pensioners, with no warning against a crash which the banks knew perfectly well was coming.
EJA’s petition calls for a fair, independent and transparent judicial process to resolve the situation and goes on to say that “until and unless one is put in place we call upon you, both as UK Chancellor and as Chair of the IMFC, to ensure that Argentina is not pressurized by the IMF to settle an unsustainable debt burden with its creditors, including those payments due to the Fund itself.”
The campaign can be contacted at www.economc-justice.net, where the petition can be downloaded.