Argentina: Facing Another Debt Crisis

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A Socialist Project e-bulletin ... No. 1976 ... January 14, 2020

Argentina: Facing Another Debt Crisis

Éric Toussaint

After four years of brutal neoliberal policies under Mauricio Macri as President, Argentina is again facing a major debt crisis.

Let us remember that when Macri started his mandate in December 2015 he accepted all the injunctions formulated by a New York magistrate, who had ruled in the favor of vulture funds against Argentina. This has made it possible for those investment funds specializing in repurchasing sovereign securities at cut prices to garner $4.6-billion, a 300% profit. To compensate these vulture funds, Mauricio Macri borrowed on the financial markets. He claimed that everything would be fine since implementing neoliberal policies would make Argentina more attractive to foreign investors and lenders. International mainstream media supported him. When invited to comment experts in economics presented Macri’s Argentina as a success story. Issuing in 2017 bonds that would come to maturity one hundred years later (2117), was hailed as the ultimate proof of Macri’s pro-market neoliberal success.

In fact, the success of those bonds had a completely different explanation:... the interest rate every year for one hundred years is 7.25% (with an actual return on the initial purchase price of 7.917% for the bonds were sold at a cut price to attract investors). At the same time in early June 2017, bankers could borrow at 0% from the European Central Bank (ECB), the Bank of Japan and the Swiss National Bank, at 0.25% from the Bank of England and at 1.00% from the Federal Reserve in the US, while investment funds had huge amounts of cash and return on public debt securities in the North was very low or even negative, Argentine bonds at 7.25% over one hundred years was a godsend. Their success was thus in no way evidence of the Argentine economy’s good health. There is such a huge amount of capital intended for speculation (and not for productive investment) that any State that issues sovereign securities with a return that is higher than average is likely to find takers.

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