rn: Argentina-How much is Owed? + Insider Account + Malaysian recipe for dealing with Debt


Jan Slakov

Dear RN list,

It would seem, from the posting below, that sucking up to NATO & the IMF
does not pay off. There are, of course, other lessons to be learned from
what Argentina is going through as well. Boudewijn Wegerif says:
"And we who live in the first class countries of the North are all of us more
or less party to the usury." I agree, but at the same time, we also face
paying up for the usury just like Argentinians and others. 

all the best, Jan
Date: Fri, 11 Jan 2002 10:14:23 -0500
From: "Boudewijn Wegerif" <•••@••.•••> (by way of Mike Nickerson)

WHAT MATTERS-41                                        --January 11, 2002
Argentina: How much is owed? + A letter from Buenos Aires + Related article
by Margaret Legum, Must We Suffer the Falling Rand?

Dear list members,

In the 500 plus pages of the Christmas Eve edition of the New York Times
there was an article by Joseph Kahn headlined, Plan to Let Nations Declare
Bankruptcy Gains.

The article began:  ìArgentina's chaotic political and financial collapse
has given a strong push to a plan by the International Monetary Fund to
allow nations to declare bankruptcy and seek legal protection from their
creditors, much as people and companies can do, fund officials and private
experts said.

 ìThe governing board of the fund has given a preliminary nod to the plan,
which was floated late last month by Anne Krueger, the No. 2 official . . .
The plan would fill what Ms. Krueger call a ëgaping holeí in the
international financial system. It would establish a formal bankruptcy
process for nations that face severe financial difficulties, allowing them
to stop paying debts while they negotiate with bankers and bondholders.î

It reads so smoothly, this plan to allow ìbankruptî countries to stop paying
debts while they negotiate with bankers and bondholders how to be carved up
to leaner cuts.

And when it comes to Argentina, how much does the government of Argentina
actually owe? And how much of that has actually been lent, and how much is
interest? And how much of the debt is private debt that the smart boys
off-loaded on to the Government during the military dictatorship? In other
words is Argentinaís debt not perhaps an odious debt that the country is
under no moral obligation, or even legal obligation, by precedent, to repay?

        Late extra: In searching for a link to explain ìodious debtî,
        and its illegality, I found  http://www.odiousdebts.org,
        with a section on Argentina.

I had read in one report that Argentina has a debt of over $150 billion. In
another report the figure of $140 billion was given. Well, that difference
of $10 billion represents an average debt burden of almost $300 on every one
of every one of  Argentinaís 36 million people.

So, to get an accurate, breakdown debt figure, if possible, short of going
to a university library, I did a search, through http://www.google.com. Up
came lots of leads to debt management strategies, and one apparently
pro-Argentina lead, subject-lined, ìIt Takes Two To Tangoî. It is a
September 2001 Jubilee Plus report by Ann Pettifor (who heads the Jubilee
2000 campaign), Liana Cisneros and Alejandro Olmos Gaona ñat

There I learnt that ìArgentina has to pay $75.3bn in foreign debt repayments
between now, and the first quarter of 2003. This represents 27% of her GDP;
and 322% of her annual export earnings. To repay these debts Argentina has
to triple exports; halt all imports and divert one quarter of GDP away from
domestic consumption to foreign creditors. As this cannot conceivably be
achieved, Argentina is effectively insolvent.î

Furthermore: ìThe absence of regulation over foreign creditors led, during
the period of military rule (1976-1983) to an increase in Argentina's debt
from $7.8bn in 1975 to $46bn in 1984. That debt now constitutes more than
20% of Argentina's total debt of about $211bn.î

Pause there. Read it again. Does it make sense? Not to me it doesnít; not
unless most of the now colossal September 2001 sum of $211 billion, up from
$49 billion in 1984, as cited, is interest.

So I searched on at the Jubilee 2000 web site and found another report by
Ann Pinnafor, this one datelined December 21, 2001, in which she writes:
ìArgentina's sovereign debt is currently at $132bn, according to Credit
Ratings Agency Standard and Poor's.î

Oh, I say. Thatís a drop of  $79 billion in three months. If somebody got
repaid $79 billion worth of ìdebtî in those three months, they could have
gone on a shopping spree. I havenít seen the equity listings lately, but I
donít think I am far off the mark if I write that they could have bought
Coca Cola and MacDonalds ñ all of both of them ñ for under $55 billion, plus
Swedish Volvo from Ford and Swedish Saab from GM for under $25 billion. With
enough change for buying a bit of the action at Las Vegas, or bombing Syria
or Somalia for a month or so. (I mean I have read that the ìwarî in
Afghanistan has cost $2 billion a month; and I have read elsewhere that it
cost $1 billion a month.)

One can get quite google-eyed on figures. I mean, how invented is Argentinaí
s debt to the banks of the North (and how invented are the figures for the
cost of bombing Afghanistan, still today, as I understand it from a TV news
bulletin this evening, even way past the supposed end of the ìwarî with the
humiliating capitulation of the Taliban) ?

It gets worse, my Argentina enquiry. In the Christmas Eve article in the New
York Times, I went on to read how the IMF plan to allow countries to be
declared bankrupt ìfaces stiff opposition on Wall Streetî. Indeed, yes:
"This is a nuclear-bomb solution that could really backfire," said Charles
H. Dallara, managing director of the Institute of International Finance, who
represents many banks with loans in emerging markets.î

How does a nuclear bomb backfire? And why should this particular nuclear
bomb backfire? The answer given is that ìinvestors will move their money out
of developing countries rather than risk having funds impounded in an
international bankruptcy proceeding.î

Again pause and read carefully. What money are investors going to pull out?
To where are they going to pull the money out? What funds have they got that
can be impounded? I mean, this is one of the worldís top newspapers writing
this crap.

One could laugh dying. Or die laughing. And it isnít funny, not funny at
all. Like it says in the Koran, the usurers are driven mad by Satanís touch.
And we who live in the first class countries of the North are all of us more
or less party to the usury.

*   *  *

ìIn our old bodies rests a new spirit.î

This is from a letter written in Buenos Aires on Christmas Day about the
dramatic events in Argentina. I received the letter from Lowell Manning in
New Zealand, who is on the Spanish Znet list. The letter is by Cristina
FeijoÛ (y Lucio?) and Lucio Salas - translated by JosÈ Luna and reviewed by
Alfred Sola.
I have not done any editing, but have shortened the letter. The excerpt
needs to be read for its raw worth.

ìThe popular uprising that forced the government of the Argentina Alliance
to resign started shortly after the last measures that restricted fund
withdrawals to both business and people were announced by the Economy
Minister --

ìó[The restrictions] caused a huge cash scarcity and its immediate
consequence was to instantly wipe out all the "informal" economic sector,
which represented 40% - 50% of all economic activity.

ìThus, in a couple of weeks poverty transformed into hunger ñ literally ñ as
the people that went out to work in changas, such as cardboard pickers,
street vendors, dog-walkers, electricians, plumbers, etc., in other words,
the workers who were not dependent on a steady job lost their scarce income.

 ìThe "middle classes" (forget all Marxist categories: today in Argentina
"middle class" means someone with a job) had to cope with 250 US dollars per
week that was the limit allowed to withdraw from the banks; with that the
"middle classes" hardly could eat and pay one or another bill from public
services - privatised as the neoliberal dogma demands - that are the most
expensive in the world.

ì[The new measures] provoked an immediate flood from the poorest, from those
marginalized from the formal economy, who arrived to the city from the
suburbs with supermarket trolleys or chang¸itos searching for food, clothes
and diapers in the waste. These groups of the poor - some of them organised,
with an origin in the piquetera practice (to cut off roads and motorways to
demand some coins) - went to ask for food in the supermarkets, forming long
queues in the early hours of the morning. Some supermarkets gave away a few
bags, others none and it was this situation that originated the raids. Poor
people got into supermarkets and pocketed the food. --

ì-- This happened first during the week of the 10th to the 15th of December
in the provinces of the country where poverty is worse. It happened in
several provinces. The people intended to take the food away, something
which was fairly pre-established: not to touch the cash tills, alcohol or
items that were not of first need, and the target was the big supermarket
chains (all of them owned by overseas conglomerates). Very soon these large
supermarkets increased their armed security, some even provided their
employees with clubs to scatter the poor. It was then that people started
raiding small shops, many of them owned by Asian traders who lacked of any
security. The raids gradually went out of control, as there is no leadership
capable of containing millions of people in hunger. They started with food
but soon after they took everything. The raids in some cases took place in
modest shops owned by people also under subsistence incomes, which resulted
in criticism from the "righteous thinkers" and the tragic battle of the poor
against the poor. The Biblical morale keeps working and common people
plainly reject the idea of outright robbery and tend to condemn what they
consider to be vandalism (both the "Church priests" and our gaucho tradition
justify the seizure of food, but the condemnation subsists if that limit is

ìWe do not wish to enter into a sociological analysis of this complex
situation, but provide you with a personal opinion that we have not had the
time to mature. As we can see, in these situations resulting from the
vanishing of the State (that is, the disappearance of the welfare State and
the permanence of the repressive State) and the sheer defencelessness of the
poor, the robberies express on the one hand, the anger of citizens long
withheld who were deprived of their basic rights. They also express their
right to have access to goods considered sumptuous" and that are obscenely
flaunted on TV; goods to which they could never aspire. The system is here
more schizophrenic than in other latitudes for it constantly urges not only
to a consumption that renders stupidity but also to an impossible one.--

ì-- With regards to repression, the same weakness of the government saved
many lives: the Argentinean military, always ready to massacre their own
people, this time categorically refused to participate. The majority of the
deaths (estimated at more than 30) occurred on Thursday 21st, the day
following the great popular uprising. The day before, Wednesday 20th, the
"middle classes" flooded the streets with their pots and pans; more than a
million people  (over 2.7 million people living in the city of Buenos Aires
itself) peacefully taking over the city, demanding the resignation of the
Economy minister, Cavallo (the not long past IMF hero) and of president de
la R™a. --

ì--Amidst the tragedy of the youngsters shot dead, the interesting and
heartening part of this process is that the people have reclaimed their role
as citizens and with this, they have recovered some of their lost dignity. A
few months ago when we met with German [Translator note: German Leyens,
another member of Spanish ZNet] in Buenos Aires, he told us he could not
comprehend why the Argentineans had not rebelled against one of the most
vicious neoliberal experiments on earth: well, that rebellion has now taken
place. As we say here, "people do not chew nails": the general feeling is of
distrust towards these new rulers that went along with this plan of true
plundering of a nation - 150 billion US dollars were transferred out of the
country, the same amount that Argentina owes to her creditors - and now have
turned around their rhetoric to accommodate the demands of those uprising.

ìThe lessons are many, for the failure of neoliberalism is no more than the
failure of the old rotten capitalism in its predominant form. Maybe due to
the unbearable "navel-ism" characteristic of Argentineans we think that our
case is exemplary. We were a relatively important country; up until the
middle of the 20th century, the Argentinean economy was as large as that of
the rest of South America, including Brazil. Apart from grains and cattle,
we reached a medium level of industrialisation leading to imports
substitution, which allowed us to start exporting manufactured goods. We had
a solid social fabric with mutual health companies, unions, co-operatives
and a highly literate population living in their majority in urban centres.

ìWith the last dictatorship the disaster started with privatisations and the
indiscriminate opening of the national economy. And, most interesting, for
the last ten years we were the exemplary student of the IMF, the one who
followed all its recipes, the one who sent soldiers to the Persian Gulf, the
"extra-Nato" ally of the US. Neoliberalism has failed with its
fundamentalist recipes, but what is more, capitalism has failed as an
organiser of social life.

ìThe responsibility of the Argentinean left is large and complex, but the
Argentinean left is weak, highly fragmented and stupid, tied to old dictates
of "socialism" without defining what it means today or how it would solve
the problems of the people. There are in fact some new actors much more
inspiring: the piqueteros of whom we have already spoken, a new union
organisation (the CTA, Central de Trabajadores Argentinos, largely State
employees) and a new Latin-Americans university movement, which has ousted
from the directorship of educational institutions the young officials
associated with the previous government.

ìWe, however, need much international solidarity, urgently. On the one hand,
because those in more need require food now, therefore we need to put
pressure on the Red Cross or whoever so they can be assisted. On the other,
and this is the most important, we need clarity, ideas and that the
"Argentinean case" is made known as it seems to us very illustrative.

ìDear friends, we now end this excessive note. Share our pain for the fallen
ones, but also our pride for the millions who stood up. In our old bodies
nests a new spirit; as Che Guevara said, "If the present is of struggle, the
future is ours".

*  *  *

Now that the Argentina Peso has been delinked from the dollar, and devalued
to 1.40 for $1, the way to check, or at least slow down, a further terrible
drop from there is to follow the measures taken my Malaysia to protect its
currency in September 1998. These are spelt out in an article by Margaret
Legum in South Africa, Must We Suffer the Falling Rand? The article was
written as a SANE-View for the South African New Economics Foundation ñ
http://www.sane.org.za . It is not yet posted at the SANE web site, so
rather than taking an excerpt relating to the Malaysian formula for
countries like Argentina and South Africa, I have reproduced the complete
article below.

As background, one hundred US dollars cost 256 South African rands in 1990,
362 rands in 1995, and 605 rands in 1999. Todayís price for $100 is 1,154
rands. It is also worth noting that whereas the per capita GNP (Gross
National Product) of Argentinaís 36 million people was $8970 in 1998, it was
$2880 for South Africaís 41 million people, according to the World Bankís
Development Report of 1999/2000.

In friendship,

Boudewijn Wegerif
What Matters Programme
Folkhogskola Vardingeby **

By Margaret Legum

How many conventional economists does it take to change a light bulb?
Answer: none, because they all sit in the dark and wait for 'the invisible
hand' of the market to change it.

How long are we to wait for the vagaries of the market's inscrutable but
toxic hand to respond to the remedies it claims to want from us. I refer of
course to the fall of the rand.

It is bad enough that total strangers who don't live here can dictate not
only our fiscal objectives but also our domestic and foreign political
decisions. But they don't stop there. When we follow their prescriptions to
the letter, however depressing for our economy, they continue to punish us
for undefined sins. Like a sadistic head teacher, they hold aloft the whip
their disapproval as we squirm frantically to guess what we have done wrong
this time.

Currently 'experts' ascribe the rand's fall to our 'emerging market' status:
we are being punished for the failings of Argentina, Turkey and any others
now in the dog-box. That we are so vulnerable is due to the free
availability of the rand, which can be used as a kind of international
entrepot currency for dealers.

We now know that South African companies which listed overseas on the basis
that this will give them - and us - access to overseas capital will in fact
have exported  funds to the tune of some R38 billion by this year's end.

The fact is that South Africa's openness to the world market is destroying
our economy. It suits those who recommended it - the developed economies and
their multi-national companies, as well as ours - but not our own national
need for stability and expansion

The argument that currency markets efficiently distribute international
capital is  ludicrous. Over 90% of currency transactions are purely
speculative - related not at all to the financing of trade or investment,
driven by lemming-like guesswork as to what everyone else will do. These
days international capital is not about investment, but about short-term

Speculation with our currency is seriously damaging our economy - raising
the inflation rate, threatening interest rate hikes and undermining
confidence. It is also a painful reminder that our own government is thereby
shackled in its attempts to address our real problems - poverty,
unemployment, rural regeneration, decent health and education - for which it
was elected. What is the point of elections if the government's focus
thereafter is pleasing the currency speculators.

So what can we do about it? Unbelievably, most financial journalists,
briefed by the finance houses, propose we drink even deeper of the bitter
cup offered by global capital. They suggest we completely drop all controls
on the movement of capital in and out of the country - a move they expect to
placate the herd of speculators. They also propose higher interest rates.
All of these will have the effect of throwing good money after bad as well
as further depressing enterprise.

That is exactly the kind of prescription the IMF forced upon the unfortunate
government of Argentina which is now therefore on the point of collapse. The
IMF also turned a crisis into a catastrophe in the Asian economies,
following a similar run on their currencies in the late 1990s. Most are
still trying to recover.

South Africa must now decide to take control of its own economy. There are a
number of 'speed bumps' the government could put in place to slow down the
effect of speculative capital: they have been used by respectable
governments with success. The most extreme was the action taken by Malaysia
at the time of the Asian Crash; and that is why it is now back on track.

On September 1, 1998, Prime Minister Mahathir Mohamed, made a very angry
broadcast. He announced that the ringgit (Malaysia's currency) would no
longer circulate outside the country. The government fixed the exchange
rate, and non-residents had restricted access to the ringgit. Investments
abroad by residents for non-trade purposes required permission. In other
words he put out of bounds speculation in the value of the Malaysian
currency. He also reinforced measures to expand the economy, including
reduced interest rates.

As a solution to Malaysia's problems this was greeted with derision by
Western governments, financial institutions and the pundits. Malaysia's
equally ravaged neighbours - Japan, Korea, Indonesia, Thailand - obediently
followed IMF prescriptions about how to recover: tight fiscal and monetary
controls, and free trade and capital flows. Malaysia had done the same for
the first year after the crash. The result had been continued depreciation
of all their currencies. The ringgit had fallen by 35%, the Kuala Lumpur
Stock Exchange composite index by 52%.

Three years on what has happened? The IMF itself acknowledged, in a 'Public
Information Notice' of September 2000, the following.

The Malaysian economy had recovered from the 'sharp decline' of 1998, in
which domestic demand had fallen by 26%. Real GDP growth was now over 5.5%,
the manufacturing sector growth was 13%. Capacity utilisation in many
industries had reached pre-crisis levels. Inflation was below 2%. Foreign
inward investment had resumed. The Kuala Lumpur Stock Composite Index
recovered by 39% during 1999, and rose further by 10% in 2000, while most
neighbouring countries' indices fell. The Notice concluded: 'Directors
broadly agreed that the regime of capital controls - which was intended by
the authorities to be temporary - had produced more positive results than
many observers had initially expected'.

Malaysia is now re-opening its economy at its own pace. It has fully
regained the confidence of the investing fraternity. This is a major lesson
of this story. Investors of capital on the ground - as opposed to
speculators - are suited by a stable currency and firm government policies
aimed at expanding an economy. There is no evidence that economic growth is
a product of foreign investment - foreign capital goes where the economy is
already working.  The measures taken by the Malaysian authorities provided
that environment while discouraging speculative capital. That is the best of
both worlds.

There is now a groundswell of support, even among conventional economists,
for challenges to the idea that there is a global prescription for all
countries. We must end our dependence on footloose finance capital, so that
we can build our economy to suit ourselves.

Feel free to forward this E-letter to others, with reference please to

** The What Matters Programme is an initiative by Boudewijn Wegerif, to
spread information about what is happening in the world today, and how
things could be, given a schooling at all levels to free the self and the
world from debt/guilt oppression and money madness - a schooling for love.
The trustees of the What Matters Programme are the collegiate of
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