Argentina: Academic but high-voltage exchange on the crisis

Gorojovsky Gorojovsky at
Wed Dec 5 07:04:57 MST 2001

An interesting exchange on the current crisis in Argentina. Answer by Jorge 
Marchini first, original post by Javier Lindemboim second. Both are very 
important members of the academic community in Buenos Aires. None of them a 
revolutionary, but "progressive", that is "liberal" in the American sense. So 
that what is said in my clumsy translation is more important than it seems.

Cavallo may well be unleashing on us a crisis that will make the 30s look like 
Paradise (how will I plant potatoes without a garden is a mistery to me...), 
but his brutality (which is imperialist brutality) begins to paint the whole 
society red. Ah, if we only had an organisation!
------- Forwarded message follows -------

Date sent:      	Wed, 05 Dec 2001 08:20:15 -0300 
From:           	Jorge R Marchini <marchini at> 
To:              	Javier Lindenboim <jlinden at>, eco-pol at, 
  	                   e-critica at, pol-cien at 
Subject:       	pol-cien : Argentina crisis y bancos 


IMHO, the propositions by Prof. Javier Lindemboin point to central aspects that 
should be the focus of our attention and debate as regards the critical 
situation of Argentina, the perspectives and alternatives to overcome it.

1)  Banks, local as well as international, are technically bankrupt. The 
"megaswap" [one of the most recent swindles by Cavallo, NG] has allowed, true, 
to perform the trick of inflating the value of the bonds of public debt, by 
accepting them in their nominal [as opposed to market, NG] value. But this does 
not hide away reality: their assets (gigantic loads of uncollectable loans, 
bonds that cannot be realized in the market).  And to think that very shortly 
ago they chattered on the strength of the system!

We must stress that foreign analysts use to bring out in their reports to 
investors that this that is happening must be blamed on the "lack of 
seriousness of the Latins", but they keep silent to the fact that their own
"serious" banks back and adopt without a blush these alchemies of concealment 
that, of course, run against anything stated in the famous Basle Agreements 
(international regulations of capital for commercial banks).  
2) International banks are not giving support to their Argentinean 
subsidiaries. Again, we must point out that the recent measures which "freeze 
deposits" managed to prevent them from covering liquidity with funds from their 
foreign headquarters, under the pressure of the owners of the deposits. ( for 
example, whoever put dollars in the Argentinean Citibank gave them to the bank, 
which afterwards put the dollars to work in loans or investments). Cavallo had 
already allowede them to break the forceful liquid sockets (by allowing the 
banks to substitute bonds for cash), but now he simply allows them not to keep 
their obligations towards the owners of savings accounts in the banks. Simply a 
swindle, for whoever might have imagined that these were "serious banks". It is 
not a matter of chance that his speakers admit that "these are not the best 
measures, but there was no other alternative at hand". Yes, yes, ladies and 
gentlemen: they were forced to BRING MONEY IN and keep their obligations 

3) Remittances abroad:  Restrictions are certainly not complete, since 
remittances are allowed for foreign trade and payment of  credit cards, as well 
as taking US dollars 1,000 per person. To this, one must add the authority that 
has been invested on the Central Bank to regulate and authorise other ways of 
exit. Then, my question:  How can such a discretionary power be invested on a 
Central Bank that has allowed (and allows) so many blunders in Argentina? The 
first thing to require is transparency: Who, whom, how much, money is taken 
abroad, and exactly where to?. WARNING :These are most dangerous people, there 
is a lot to think and do from now onwards.

Jorge Marchini 
marchini at 
jmarchini at 

Javier Lindenboim wrote: 

I share Marchini's opinion that the only intention of the authorities is to 
benefit the creditors and the Great Electors of the financial sectors. I would 
just add two questions:  
1) the main knot to be undone may be, not so much the one that Jorge has shown, 
but the fact that behind the issues now at stake (restrictions to usage of 
cash, and so on) lies in darkness the situation where the "swap" of bonds has 
been actually made: no cutting in principal, or so it seems --not even a 
minimal reduction. And, IMHO, the implicancies of this fact for the present and 
the future are of the greatest importance. 

 2)  I don't know if the regulations will say something clearer on remittances 
abroad: up to now the restrictions seem to be general. If this were the case, 
then we should  take up the point as a starting place to stop the drainage 
("legitimate" or not) of hard currency abroad. It has been most pernicious for 
the country that no clasps have been put on this flow up to now. This may 
provide us with an interesting opportunity to alert the public opinion in the 
sense that the restrictions must be honored no matter what. If this could be 
done, it would mean a strong coup against the financial sector. That this is 
not coherent with the general line of economic policies is a problem --for 
Minister Cavallo.


Javier Lindenboim 
Director del CEPED 
Av. Córdoba 2122 1er.piso 
C1120AAQ Buenos Aires Argentina 

------- End of forwarded message -------

Néstor Miguel Gorojovsky
gorojovsky at

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