Aligning With Washington Is Bad News for Argentina
BY
ANDREW STOUGHTON
Argentina’s biggest trade partners are Brazil and China, but President Javier Milei is making them into enemies. Desperate to suck up to US interests, Milei’s Cold Warrior foreign policy is an ideological relic, out of touch with a multipolar world.
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Argentina runs the risk of repeating the same mistakes it did in its first century of economic development.
Washington was directly responsible for the rise of the country’s last military dictatorship, through Operation Condor. The junta, infamous for torturing and disappearing thirty thousand Argentinians, liberalized Argentina’s financial markets and acquired massive amounts of foreign debt, both of which would lead in part to the hyperinflation of the 1980s and 1990s and the eventual default in 2001. Though the country’s economic woes are manifold in kind and source, this American interference played an integral role in setting the country on its current path.
Since then, the US courts and financial systems have been further sources of Argentine penury. Argentina has long had to depend on the American legal and financial system to issue bonds. (The country had already been issuing bonds from New York since 1976, the same year the dictatorship rose to power.) This created grave problems for Argentina, specifically with “vulture funds” — hedge funds and other financial institutions that buy distressed bonds and then sue to receive full payment on those bonds.
In 2005, Argentina restructured its defaulted debt and made deals with its bondholders in order to pay some rather than all of the amounts owed through the bonds it had previously issued. Though most bondholders had accepted reduced settlements, these vultures secured court rulings in the United States that forced Argentina to repay them at the full price of the bonds. As a result, Argentina could not make repayments on previous settlements without also paying the holdouts (7 percent of bondholders) in full. Moreover, if it did repay the holdouts at face value, the other 93 percent of debtholders would then have the right to sue for that same bond price, which would require a $100 billion outlay on Argentina’s part. The difficulties limited Argentina’s access to foreign credit outside of the IMF and World Bank for a decade.
By the time the right-leaning neoliberal administration of Mauricio Macri settled with these holdouts, the government had to take out a new IMF loan to finance its debts — a situation exacerbated by limited economic growth due to a lack of access to credit. This was the largest loan in IMF history. Given that the IMF itself found deep flaws in both its own and Argentina’s management of IMF loans throughout the 1990s, you may guess that the IMF would have structured the loan to avoid the mistakes of the past. But you’d guess wrong. Eighty-three percent of the funds from this “development loan” went to servicing external debt, creating a brand-new debt problem with the IMF that left Argentina with 211.4 percent annual inflation in 2023.
More:
https://jacobin.com/2024/03/argentina-economy-debt-us-hegemony/
= new reply since forum marked as read
Why? Because said regimes - besides always being bigoted and repressive - always open the door to massive heists by the country's own elites against their own people.
The resulting calamity always then becomes a major foreign policy liability for Washington - and the more closely the U.S. can be tied by its adversaries (mainly China) to said Argentine regimes, the more of a PR burden they become.
As we speak, Milei is pulling all the stops to charm the Biden administration into lending them $15 billion - which they will then use to finance capital flight (leaving everyone else the tab).
Since like all Latin American right-wingers, Milei's people (especially Caputo, the money-laundering Econ minister) see Americans as gullible and easily flattered, they pretty much assume they'll get the money - smiles and all.
But it's worth recalling that the last time Caputo got away with such a swindle (the $45 billion Macri bailout, which Trump coerced the IMF into coughing up), the result was nothing but trouble.
Thanks as always, Judi, for keeping up with the hijinks in Argentina - and elsewhere. 