[Marxism] FT booms against Argentina

Marvin Gandall marvgandall at rogers.com
Wed Feb 4 12:24:38 MST 2004

From: "Nestor Gorojovsky" <nestorgoro at fibertel.com.ar>

...there has appeared an important article on the Financial Times
requesting the G7 to "stop cuddling" the Arg. administration and to
require it to deliver the pound of flesh, with blood included if
possible...could someone send me the FT article, if available on the


Time to say no to Argentina
Financial Times editorial
February 2 2004

A cheer apiece is due to the UK, Italy and Japan. Last week, they broke
ranks with the rest of the Group of Seven nations, joined the brave band
of existing dissenters on the board of the International Monetary Fund
and said to Argentina: enough is enough.

The vote in the IMF's board, on the latest tranche of lending to the
fund's most troublesome borrower, went through anyway. That was a pity.
When the next disbursement comes up for consideration, the fund's
management and the rest of its shareholder countries must insist first
on real progress with restructuring Argentina's defaulted sovereign

This is not to take the side of Argentina's foreign bondholders, who
made an ambitious opening bid that the face value of their bonds should
be cut by just 35 per cent. No-one buying bonds from a government that
operated a currency board but repeatedly failed to balance its budget
should complain when that bet goes sour. Investors will take big losses,
and they deserve it.

The vital principle is that Argentina must negotiate fairly and openly
with all the players whose co-operation is needed to turn the economy's
dead-cat bounce into a sustained recovery: international and domestic
bondholders, foreign-owned utility companies whose prices have been
frozen by government decree, and the IMF itself.

Instead, the Argentines have chosen to cling to their initial bid to
foreign bondholders of a reduction of more than 90 per cent in net
present value, and to deny the legitimacy of bondholders' groups
attempting to negotiate. They have also refused to allow utility prices
to rise. The habit of flinging personal insults from Buenos Aires when
such tactics meet inevitable resistance does not give the impression of
a government negotiating, as IMF rules require, in good faith.

The US must also stand up to Argentina. It has not done so yet. For
whatever motive - probably a mix of strategic expediency and
election-year politics - it is sitting idly by while moral hazard is
being created. Any crisis-hit country of sufficient size and importance
could conclude from this episode that it should choose foot-stamping
defiance to the IMF over painful but necessary reform.

Small wonder dissent is rising within the G7. Along with applauding
itself for stabilising currencies in Iraq and Afghanistan, the US should
put Argentina high up the agenda of next weekend's G7 meeting in

Saying no to Argentina will not be easy. If the Argentines respond by
defaulting to the IMF itself, the costs for other, blameless borrowers
will go up. The G7 must think of a way to offset this. Standing up to a
blackmailer means being prepared to call its bluff, and the G7 needs a
credible financing plan for offsetting a potential Argentine default to
the fund.

That will not be cheap. But it is better than bumbling on in the forlorn
hope that a recidivist government will choose suddenly to go straight.

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