An IMF bailout for Argentina?

Nestor Miguel Gorojovsky Gorojovsky at
Tue Nov 7 04:20:51 MST 2000

En relación a An IMF bailout for Argentina?,
el 5 Nov 00, a las 10:11, Louis Proyect dijo:

> NY Times, November 5, 2000
> Argentina, a Fiscal Angel That Fell From Grace
> One of Argentina's top money men showed up in New York last week with
> a confession.
> Daniel Marx, the secretary of finance, told worried investors at the
> Council of the Americas about the erratic performance of financial
> markets lately. "We acknowledge that there is an Argentine component
> to this uncertainty," Mr. Marx said flatly.

Ah, yes, always begin by blaming the victim! That is, uncertainty has
nothing to do with the built-in senselessness of capitalism, but with
stupid behavior of some Third World country or another. By the way,
what is left of "risk taking" if you do not have "uncertainty"? These
financial capitalists seem to want to have both the pig and the
machine to do sausages (as we say in Argentina) before they decide on
some "risky" operation...

> At that moment, he sounded less like a government official and more
> like the investment banker he had been until December. Many in the
> audience already knew him, and had come for reassurance that
> Argentina's problems would not explode into the century's first
> economic prairie fire.

Daniel Marx is one of the "negotiators", on the Argentinian side, of
the Brady agreement that generated the conditions for our current
situation. The NYT's scribbler conveniently forgets that Mr. Marx, a
Nobody before he arranged that monstrous outcome to the debt crisis
that had been contracted by the Martínez de Hoz clique, became a
partner to Mr. Nicholas Brady immediately afterwards. So that, there
you have, ass-lickers become "investment bankers" if they help
destroy and subject their own country. The fact that Marx has been
appointed by the current Government as "secretary of finance" shows
the depth of the demoralization of our political elites. In a serious
country, such as say France, Mr. Marx would have been shot as a

> Their minds were not set at ease. Their foremost worry is the nearly
> $20 billion in debt that Argentina has to refinance next year. That
> won't be easy, given the sorry state of investor confidence in the
> country. Two years after a brutal recession ended, Argentina's economy
> is still struggling — growth of just 1 percent is expected this year —
> and no one knows when the besieged Argentine government will be able
> to put together a budget.

False. Argentina is still on recession. The government is desperately
looking for "good news" to spread confidence among the investors, but
they hardly find any. We have even witnessed a monetary deflation
that has lasted many months. In the meanwhile, people have begun to
cut roads again, in demand of jobs.

> The dollar-pegged peso is hurting exports
> and may be too overvalued to sustain. The country's $123.5 billion in
> federal debt is also a growing headache, and last week, Standard &
> Poor's put Argentina on a credit watch, with a negative outlook.

The consolidated debt is well above u$s 200 billion, as the article I
recently posted explains. And please note the delicacy of the wording
in the NYT article:  "the dollar-pegged peso is hurting exports and
may be too overvalued to sustain".  So that while the peg hurted
domestic market, while the peg hurted and deadly wounded Argentine
industry, while the peg forced us to buy cheaper foreign commodities
than locally produced ones, everything was OK. Now, the peg is
already hurting "exports", which means that wages cannot be
reasonably lowered more (this is a way the bourgeois preferes when it
comes to get hard money in a semicolonial country) and even
agricultural production or oil cannot be sold at competitive prices.
In other words, it means that the peg is beginning to force Argentina
to declare itself unable to pay debts except by contracting new debts
(we do not "produce" hard currency, so that whatever currency we need
we must purchase with exports). If exports are in danger, the
capacity of Argentina to pay debts is also in danger, and thus the
whole cardboard building falls down. The destruction of the domestic
market, which was intentionally fostered in order to reorient our
economy towards exports, has not been enough. The country has simply
been bled dry.

> On top of all that, a political crisis is roiling Buenos Aires. Carlos
> Alvarez, the vice president, resigned a few weeks ago over a bribery
> scandal that is threatening to unravel the ruling alliance that
> Fernando de la Rua cobbled together when he became president in
> December.

The political crisis is not "rolling on top of all that". It is in
fact a consequence. The alliance (the last hope for imperialists and
financial robber barons) was broken by the economic measures adopted,
which found final expression in Chacho resigning his post. He could
do nothing else. What the financial pundits should be worrying about
is the opposition that their policies find even among the higher and
better to do layers of the middle classes in Argentina. Can't squeeze
a lemon without crushing it, and in order to crush a society you need
to Fujimorize yourself. Fujimorization is not on view here, at least
for the next months. So, the NYT journalist becomes nervous.

> The turmoil in Argentina has set off rumors that the United States
> Treasury Department and the International Monetary Fund are working on
> a financial bailout to keep Argentina from defaulting on its loans.
> Both agencies deny the rumors. The fund already has arranged a $7.4
> billion line of credit, of which $2 billion is available for use. But
> Tom Dawson, the fund's director of external affairs, said there had
> not been any discussion of additional credit.

Well, but all this would be just a slender bridge to cross over the
turbulent waters of Summer, when the harvest has not been cashed yet.
It is unbelievable, but Argentina has been pushed back a hundred
years, when people depended on the results of a harvest, albeit
without the good level of living that many layers enjoyed in those

> As always, Lawrence Summers, the Treasury secretary who was the
> American official most involved in the 1995 bailout of Mexico, is
> keeping his cards close to the vest. He declined to comment on the
> rumors, but he acknowledged that he was watching Argentina carefully.
> "Argentina is a country that has a strong record of reform during the
> 1990's, and that should serve it well," Mr. Summers said after a
> recent meeting in Montreal.

"Serve it well"?  More appropiate: "serve us well".  Domingo Cavallo
has recently proposed that the post of Vice President should be
covered by a special election, and he offered his own name for the
post. At the same time, Raúl Alfonsín declared on a very popular TV
show that "a couple of years of grace in debt payments would give us
enough air to take the country ahead again" (a most conservative
proposition, in fact) and a storm began on his declarations.
Alfonsín, the ex-President, is at the same time the President of the
UCR, the Radical party of President de la Rúa.

> That record of economic reform is part of what makes Argentina's
> sudden volatility so hard to ignore. For most of the last decade,
> Argentina was a symbol for American- style, market-oriented economics.
> Under the guiding hand of Domingo Cavallo, a former minister of the
> economy, Argentina transformed itself into an exemplar of a developing
> nation.

Pity we did not notice here.

> But when things were going well, Argentina went off its fiscal diet.
> It overspent, racking up serious deficits and borrowing heavily. The
> current government inherited a seriously weakened economy, and efforts
> to restore confidence have backfired.

Ah, yes, blame the victim again! Argentina went off its fiscal diet
to subsidize the newly "private" enterprises, and to give some
shameful comfort to the local victims of the privatizations. Graft,
bribery and corruption implicit in foreign capital were a minor
issue. The American owned railroad companies of Buenos Aires City,
for example are subsidized with a billion dollars each year.

> Despite Mr. Marx's assurance that everything is under control, many
> economists fear that Argentina's troubles could prompt a regional
> disaster, or worse. Argentina represents anywhere from one-quarter to
> one-third of benchmark emerging-markets indexes like the one put out
> by J. P. Morgan. If Argentina has trouble refinancing its debt or goes
> into default, the entire region could be hurt, as happened after the
> Mexican crisis in 1995 and Brazil's currency devaluation in 1999.

Well, thank _you_, NYT, this is a good club in our hands. Good to be
aware of this. Because most journalists in Argentina (and of course
every statu quo economist, either left or right wing in their
political predilections) argue that our economy is so tiny and so
nonconsequential that no move by us would generate a single problem
elsewhere, thus, TINA...

> American investors and banks have a big stake in Argentina, and a
> default could leave them holding billions of dollars in bad loans.

I remember something that happened, a decade ago, while I was
traversing May Square. The country had been put to sale at auction
prices by Menem and Cavallo. A local yuppie was walking on the
opposite direction, talking to an obviously American would-be
investor in the newly spawned business of privatization in Argentina.

They were also obviously going to have an interview with Menem (these
interviews, the interviews where bribes were arranged... remind me to
tell you a story an Israeli investor told me once). And the "native"
yuppie was all praise to our President. The investor, then, asked,
"what kind of man is he?", a very apt question indeed. The yuppie
then recited what was by those times the usual verse "ah, a very
interesting man, he was a prisoner during the military dictatorship.
He is a Peronist and counts on full popular support, so that he has a
right to arrange our economy along modern lines..."
I thought it was the moment to make my personal addition to the
portrait: "Yes", I rather unwantedly interjected, "and when he was in
prison he learnt the lesson the military taught all too well: you
will be able to do a good investment if you dare. But remember, you
are putting the hanging rope around your neck if you do, because
neither Argentinians will support this sell-out of the country nor
will it be of any use."

The local yuppie stood staring at me, fearing his commission would
vanish, and I do not know if this investor followed my advice or not.
Well, I tried. Now he may be a little wary. El que avisa no es
traidor, Míster Monies. We warned you.


> Leonardo Leiderman, head of Latin American research at Deutsche Bank,
> is one of the few economists willing to predict that Argentina will
> pull through. "Our call is that Argentina will not default on its
> obligations next year," Mr. Leiderman said. "But it's going to take a
> strong stomach to get through the weeks ahead."

Maybe this guy is the yuppie I met that day? But Leiderman may be
talking from a different vintage point, that of the Europeans who did
not invest heavily in finance here, but in public utilities. A crisis
will not deprive them of their investment. Only a revolution will,
and this gives some sense of ease.

> During his recent visit to New York, Mr. Marx also acknowledged that
> difficult times could increase the temptation to use economics for
> political gain, which wary investors would probably rather not have
> heard.
> "We have to turn back to basics," he said, and not give in to
> political pressures "that might distract us so that we do not act like
> rational human beings."

Isn't this wonderful?  On a couple of sentences, the whole Credo of
the sepoy. If economics is used for political gain (that is, to
further the interests of voters) then it is wrong. The only problem
with all this is that in order to impose Marx's program we need a

There was another Marx. We need to impose a different dictatorship to
impose _his_  program. Sooner or later, we shall. There is no way
ahead unless we do.

Néstor Miguel Gorojovsky
gorojovsky at

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