Voltures want their piece of flesh
paredon
defaults of seven trillion bucks. Maybe Mexico will get Aztlan back after
all!
Argentina Still Can't Pay
Rhetoric aside, President Kirchner has, in fact, never seriously considered
breaking with the IMF. On Sept. 10, his government struck an 11th hour deal
with the Fund, under which Argentina agreed to pay $2.9 billion it owed the
IMF. That amount had come due on Sept. 9, and for one day, Kirchner went
into technical default against the IMF, in search of more "lenient" terms
under which Argentina was to be raped by its creditors.
"We were in default for more than 24 hours," Kirchner reportedly told his
closest advisors during a plane ride to New York on Sept. 22. "I could have
fallen, but had that happened, the whole IMF would have fallen with me," he
blustered.
Kirchner was referring to the widely known fact that a default against the
IMF or the World Bank, as opposed to a mere private lender, is capable of
bringing down the entire international financial system. Such a default
could prove contagious with other countries, including neighboring Brazil,
which has a public debt about twice the size of Argentina's. As an Argentine
Finance Ministry source told La Nación newspaper, the possibility of an
eventual Brazilian debt default "is on a lot of people's minds." Any such
sovereign default against the IMF would likely lead to a downgrading of its
credit rating, and that could mean the effective bankruptcy of the IMF
itself, and of the entire IMF system.
On Sept. 10, Kirchner chose to defend that system, and struck a deal with
the IMF, which, he was told, was a prerequisite for negotiating a write-down
of the $94.3 billion in privately held government bonds. The IMF, in turn,
was pressured by the Bush Administration to be "lenient" with Argentina,
since the stability of the entire global system was considered a higher
priority than collecting every penny-at least for now. As an unnamed Bush
Administration source soberly told the daily Clarín: "Nobody wanted
Argentina to again go into default with an international institution."
The IMF thus agreed to Argentina producing a 2004 Primary Budget Surplus, or
PBS (with which to pay the public debt) of "only" 3% of GDP-whereas the
country's more rapacious creditors had been demanding Brazil-style levels of
5%. The international financial media then ridiculously characterized the
deal by saying that "the IMF blinked" in the face of Kirchner's "tough"
negotiating stance. A manic George Bush further stroked the Argentine
President's ego at a Sept. 23 reception at the United Nations, by greeting
him from across the room in a loud voice: "Here comes the man who conquered
the IMF!"
The vulture funds, for their part, were furious at how "lenient" the IMF had
been with Argentina. As a Bloomberg wire reported, the Italian Mauro Sandri
and other vulture bondholders "said they were outraged after Argentina
reached an accord with the IMF two weeks ago, that ensures the government
pays back multinational lenders while forcing losses on investors."
IMF spokesman Thomas Dawson defended their deal with Argentina by arguing
that it "will lead to a sustainable debt position"-which is a lie. As one
Buenos Aires economist told the Financial Times: "It's doubtful Argentina
can even service its performing debt with that [a 3% PBS], let alone
defaulted loans."
The reality is that Argentina is not going to be able to service its public
debt, even after the 75% write-down. On top of the $94.3 billion in
defaulted bonds-now to be written down to some $24 billion face
value-Argentina has another $85 billion in supposedly performing public
debt. Of that, about $70 billion is classified as "Senior debt," meaning
that it is paid first, before the renegotiated defaulted debt. This "Senior
debt" includes some $25 billion in new government bonds, that were issued
after the December 2001 default.
So, even with massive write-offs, Argentina is staring down the barrel of a
gun at well over $100 billion in public debt that it has to pay-an
impossibility, given the ongoing destruction of its physical economy.
To achieve even a "low" PBS of 3% in 2004, the government is going to have
to impose further massive cuts in government spending on wages for teachers,
doctors, and others, as well as in pension payments. This is on top of the
11% plunge in national economic activity in 2002, which, coupled with a 70%
forced devaluation of the peso that year, has meant that Argentina's
dollar-denominated GDP plummeted from $264 billion in 2001, to $120 billion
in 2002-a 55% drop! As a result, over half of Argentina's 38 million people
now live below the poverty line, and unemployment is over 20%.
There is no amount of achievable looting that can make Argentina's debt
perform. Analysts estimate that, for Argentina to be able to pay, even after
a 75% write-off, it would have to generate a PBS not of 3%, but of 4.5%; and
not for one year or two, but for the next 15 years!
This is fascism and lunacy, as LaRouche stated. If adopted, such policies
will leave Argentina, and the rest of the developing sector economies that
follow it, as a carcass picked over by vultures. And then the debt will be
defaulted on, anyway.
cindys
"paredon" <pinksp...@earthlink.net> wrote in message
news:NmJgb.5416$mQ2....@newsread1.news.atl.earthlink.net...
This is yet another example of Alex's inability to spell properly.
Best regards,
---Cindy S.