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Argentina vs the international financial system

The extended legal fallout of Argentina's default in 2001 is reaching a crucial stage, with realism now at a premium.

Argentines are used to the story. The country is threatened by familiar arch-enemies: American imperialism, international financiers, and “vulture funds” (or “holdouts” as they are called outside Argentina). The story also features domestic enemies - those accused of working in the service of international interests, or at least putting the latter ahead of the interests of Argentines.

This narrative sees the fate of the country as something decided abroad, specifically in the United States.  The US supreme court has written the first chapter by mandating that Argentina is obliged to pay both the holdouts and the holders of restructured debt. The holdouts are those speculative hedge-funds that bought Argentine bonds for pennies right after Argentina’s critical default in 2001 (it defaulted on approximately $100 billion), then refused to enter debt restructuring and now stand to make millions. The holders are the large majority of creditors (92%) that agreed to be paid a fraction of the debt after the country’s default.

Now is the time for the second chapter of the story to be written, this time by Judge Thomas P Griesa in New York City. In NYC itself Mr Griesa is almost wholly unknown, but in Argentine media his name and face are everywhere - as much as those of the Argentine football team's captain and star player, Lionel Messi. But while Messi is often presented as a national saviour (which has so far been proved correct as far as soccer is concerned), Griesa represents the country’s impending doom. But why is Argentina facing this situation?

Those embracing the longstanding traditions of Argentine nationalism see Griesa as representing the new face of American imperialism. But this is not the only view in Argentina; and of course, the history of debt crises and their international implications (as opposed to the story made of them) is much more complicated. For example, several governments - France, Brazil and even the US, as well as the International Monetary Fund - supported the Argentine position at the supreme court, while the Argentine administration of Cristina Fernández de Kirchner defined the court's rulings as an “extortion” and an example of imperialism at work (though more recently Argentine officialdom has recognised that Argentina needs to negotiate.)

This week representatives of the Argentina will be negotiating with Griesa and the holdouts. As a whole, this is without doubt a bad situation for Argentina. By paying the holdouts, Argentina risks being ordered to pay the holders and thus considerably depleting its central bank's reserves. If it does not pay them, it will enter a technical default. To be sure, it is true that it sounds unfair to let the speculative funds “win”. But should Argentina engage in a lonely fight against the structural injustices of the international financial system; should Argentina become a scapegoat of those rulings that are putting at risk the future of sovereign-debt restructuring for the global south?

These are important questions. But Argentina should neither be providing the answers alone, nor using the arguments of anti-imperialism and nationalism to quixotically reject their consequences. These arguments do not represent the most responsible way to defend the interests of an Argentine society that would be severely damaged by another default. The current context calls for a more realistic take that avoids the language of heroes and villains.

About the authors

Fabián Bosoer is an editor of the op-ed section of the Argentine newspaper Clarin. His books include Braden o Peron: La Historia Oculta (El Ateneo, 2011). He contributes to the New York Times and other publications

Federico Finchelstein is professor of history at the New School in New York City. His new book is From Fascism to Populism in History (University of California Press, 2017). His earlier books include Transatlantic Fascism: Ideology, Violence and the Sacred in Argentina and Italy, 1919-1945 (Duke University Press, 2010) and The Ideological Origins of the Dirty War: Fascism, Populism, and Dictatorship in Twentieth Century Argentina (Oxford University Press, 2014). He contributes to Clarin, the New York Times and other publications


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