Connect with us

Hi, what are you looking for?

Bulletin Issue5 February?March 2002

Argentina Explodes!

During the “December Days” at the end of 2001, Argentina was convulsed by strikes and street protests which brought down two governments in one week.

During the “December Days” at the end of 2001, Argentina was convulsed by strikes and street protests which brought down two governments in one week.

During the “December Days” at the end of 2001, Argentina was convulsed by strikes and street protests which brought down two governments in one week.

Outside Argentina, the liberal media focussed on the participation of wide layers of the middle class in these protests, yet this important development should not hide the even bigger and more sustained mobilisations, with youth and unemployed workers often at the forefront. This reached a crescendo in December, but has been on a rising curve for the past half-decade, and has featured highway blockades, occupied factories and government buildings, and eight one-day nationwide general strikes since autumn 1999.

The looting of Argentina

Argentina’s economy didn’t just collapse, it was pushed. In early December 2001, the US government decided the IMF should block delivery of an already-scheduled loan ¯ in the full knowledge that this would force Argentina into default. (The stated reason: Argentina’s government had failed to cut a further $4bn from public spending. The IMF is now demanding cuts of $8bn!)

Withdrawing Argentina’s lines of credit was like stopping blood transfusion to a patient, while doing nothing to staunch the haemorrhage.

Argentina’s government hung on to the dollar-peso peg for four more weeks, taking extreme measures such as seizing the pension funds of millions of workers and freezing the deposits of small investors. These actions brought millions of enraged citizens into the streets, but they also bought time for foreign and local capitalists to turn more of their capital into cash and whisk it out of the country.

On January 6th, Argentina’s missed its first debt repayment. The biggest debt default in history became formal. The sundering of the dollar peg and a huge devaluation of the peso followed a few days later. The economy suffered a double heart attack, brought on by local capitalists and foreign investors moving their private wealth out en masse.


Argentina’s Debt Crisis

Argentina’s total public debt (owed by central and provincial governments), as of September 2001, stood at $160.2bn, as much as Brazil but with a fifth of the population (35 million).

According to Clarin, the Buenos Aires daily, public and private debt together amounts to more than $211bn, or $6000 for each person.

Argentina paid $12bn in debt servicing during 2001; from the fourth quarter of 2001 to the first quarter of 2003, Argentina is supposed to pay $75.3bn to foreign banks and bondholders.

Argentinian bonds can now be bought for 20% of their face value, implying losses of over $100bn spread across the world financial system.

“Once the maximum politically feasible pain has been imposed on residents, the rest of it must logically be borne by foreign creditors” said FT economist Martin Wolf. The problem is, the rival owners of capital do not behave logically when their assets are being destroyed.

Before hungry mobs smashed the first shop window Argentina had already been looted on a truly awesome scale. But when they go on a looting spree, capitalists have more sophisticated tools than sledgehammers and shopping trolleys. Many were dumbfounded by the reaction of Argentina’s stock market to Washington’s decision to cut off credit: it shot upwards! But there was a simple explanation: unable to withdraw their deposits as cash, owners of savings accounts (the big money had already gone) purchased shares on Buenos Aires’ Merval market and simultaneously sold them in New York.

Foreign and local capitalists used these and other techniques to transfer colossal quantities of wealth out of Argentina. Imperialist banks like the UK’s HSBC and Lloyds helped organise the theft.

The IMF helped, by disbursing around $30bn of $48bn in scheduled loans, enabling Argentina to pay its debts and replace flight capital. Yet, by 2 January, only $14bn of liquid reserves were available to cover $66bn in small savers’ bank deposits.

The looting frenzy of the past few months merely accelerated a long-running trend. During the 1990s, wealthy Argentinians removed an estimated $130bn to the care of the banks in the US and other imperialist countries. 1 An even larger fortune was harvested by foreign investors lending money to the Argentinian government or from their investments in newly-privatised state assets.

Meanwhile, unemployment and poverty increased rapidly among the working population; and the ranks of the dispossessed were swelled by many new arrivals. Half of those defined as poor on the eve of the December crash were classified as middle class just five years ago.


The Debt and the Generals

Between March 1976, when the generals seized power, and October 1983, when they abandoned it, 30,000 Argentines were brutally murdered, and many tortured to death, in an operation closely supervised by the US government. Under military dictatorship Argentina’s debt increased from £7.8bn to $46bn. Before the generals slunk back to their barracks, they destroyed all records and documents concerning the debt.

An eighteen-year court case, (led by the late Alejandro Olmos), has helped to reveal how Argentina’s military rulers and European and US investors stole tens of billions of dollars from the Argentinian people, with Barclays Bank and other western banks providing the getaway cars. Foreign subsidiaries of European and North American companies borrowed money from western banks, debts that were then ¯ clandestinely – nationalised and merged into the public debt. Among the household names that benefited from such swindles were IBM, Ford, Mercedes, Deutsche Bank, Chase Manhattan, and all four of the UK’s High Street banks. In July 2000, the court decided ‘criminal court case 14.467’ to be proved, and ordered Argentina’s legislature to “adopt appropriate measures” to renegotiate fraudulent and illegitimate public debt. See “It takes two to tango”, published by Jubilee Plus.

Argentina: an oppressed, exploited, Third World nation

Washington used to parade Argentina as a model pupil that had gone the furthest of any country in implementing IMF doctrine—wholesale privatisation, and the removal of all restrictions on the two-way flow of commodities and capital. However, Argentina’s foreign trade remained stagnant at 10% of GDP, not enough to support its huge public debt. Between 1994 and 1998 Argentina’s debt service ratio (principal and interest payments vs. total exports) rose from 25.4% to 58.2%2.

The US government and IMF are now seeking to shift the blame. Argentina’s stagnant exports, they say, is due to its failure to sufficiently reduce wages and cut social spending. It’s a “home grown” problem, says IMF director Horst Köhler. Argentina “must get her house in order… they’ve got a lot of work to do” said President Bush.

Argentina is famed for its beef industry. The presence of foot and mouth disease in Argentina’s national herd is used as a pretext to ban all beef imports into the US and EU. This is despite there being no evidence that a single Argentinian adult or child has suffered death or illness because of the presence of this mild ailment.

The UK’s foot and mouth crisis had nothing to do with public health and everything to do with protecting the UK’s capitalist beef export industry against competition from countries like Argentina.

Argentina faces discrimination in international markets for wheat, steel and other products even though it has obediently removed restrictions on imports into its domestic market!

Debt, trade and the events of the past few weeks provide many insights into what imperialist economic domination means in today’s world.

Governments in the imperialist countries are now attempting to counter recession by stimulating the economy with lower interest rates, reduce taxes and expand deficit spending. But these options are not available to the government of Argentina, facing a recession now in its fourth year. In fact, it has been forced to implement diametrically opposite policies.

Diverting ever more money to debt servicing, the government has increased taxes and savagely cut public spending. In a vain attempt to persuade private capital to stay, it has permitted interest rates to rise to astronomical levels.

Intensifying Argentina’s recession and touching off a popular rebellion were just unfortunate side effects of policies designed to please foreign investors and the wealthy Argentinians who have joined them in New York, London and Madrid.

Imperialists blame Argentina, demand even more austerity

The newly installed Duhalde regime attempted to cushion the devastating effects of the economic implosion on the middle classes and on the upper layers of the working class. It instituted a two-tier exchange rate in an attempt to limit the effect on small businesses of the peso’s fall. It proposed a new bankruptcy law to partially protected enterprises from their creditors. It promised to cushion the effects of devaluation on the middle class and small businesses by devaluing debts but not deposits. Implementing the last of these would mean that no bank could survive unless it received an injection of capital from the parent company, government or IMF.

Intense pressure from foreign companies, banks and governments has forced Duhalde to back down. The IMF demands the reversal of each of these measures before it will restore Argentina’s lines of credit. Duhalde is now co-operating with the IMF in drawing up a ‘stabilisation plan’, due to be announced in early February.

Meanwhile, people have nothing to eat, millions of workers haven’t received their wages , bank accounts remain frozen.

In a January 10 statement, the government of Cuba denounced “the governments of certain developed countries that are now pressuring in defence of the interests” of “enterprises and banks that obtained juicy profits from the sweat and sacrifice” of the people of Argentina, “the speculators and thieves who plundered that nation’s heritage and brought the country to bankruptcy.”


Collapsing currencies, exploding debt

Effects of a Third World currency collapse:

  • it magnifies all debts denominated in hard currency.
  • it makes all assets in the devaluing country cheaper to possessors of hard currency.
  • it results in an export boom, as exporters purchase labour and materials at local prices while selling for dollars…
  • … and a collapse in imports, all of which become suddenly much more expensive.

A period of price inflation caused by the increase in the cost of imports partially reverses the effect of the devaluation. The ultimate success of devaluation is determined by how far real wages and peasants incomes have been left behind once this process works through. As a Financial Times editorial on 26 December put it: “The chief aim of a new currency must be to permit a … reduction in the dollar value of wages and salaries.”

The Peronists and institionalised political parties have lost legitimacy and may prove too weak to impose the extreme austerity measures that are being demanded by the imperialists.

President Duhalde assumed office despite being the trounced Peronist candidate the last time there was an election for President. He is widely despised as an epitome of corruption and thuggery, as he himself admitted in what the FT described on 2nd Jan as “an unusually candid statement”: “The political leadership [of Argentina] is shit and, of course, I include myself in that,” he said.

The debacle of bourgeois democracy threatens the return of military dictatorship. However, the recent experience of military rule has dispelled illusions in the neutrality of Argentina’s armed forces.

In marked contrast to establishment political parties, the Mothers of the Plaza de Mayo have enormous respect amongst the youth and have been a key link between relatives of the disappeared and the new generation of popular resistance.

Argentina’s continuing crisis poses the question “what government can stand up to imperialist finance capital, and advance the interests of Argentina’s working people?”

John Smith

You May Also Like


Government entities and Carbones del Cerrejón disregard the orders and guidelines of the Constitutional Court for the exploitation and diversion of the Bruno, the...


General Articles     colombia_human_rights_overview1 68.00 Kb. Compiled by Peter Bearder, Jan. 2008. (Format: Word Document)  The Integral Stategy of the Paramilitaries in Colombia’s Magdalena...

Bulletin Issue7 July?September 2002

Existe un problema fundamental en Colombia que se encuentra en el transfondo de todos los acontecimientos políticos: la exclusión de la mayoría de la...


The Colombia Solidarity Campaign campaigns for a socially just and sustainable peace in Colombia based on respect for the sovereignty, human rights and diversity...