Friends and comrades, I am forwarding a version in English of a document drafted by the Argentinian politician Juan Gabriel Labaké at request of the Foro de los Argentinos and of the Foro Argentino de la Deuda Externa, explaining the main points of the recent ruling by Judge Ballestero on the Argentinian foreign debt. This is the same document I recently forwarded in Spanish. Not all the political opinions of Labaké are acceptable, but the amount of information and of evidence that the sentence by Ballestero has produced made it advisable to post this precis by a clever lawyer and political militant. I am also sure that PEN-L subbers will find the material here very interesting. I.- INTRODUCTION We Argentinians owe today some 200 billion dollars to foreign banks, the IMF, the World Bank and other international organizations. 150 billion are of public debt, to be paid directly by the State (all of us, that is). The remaining 50 billion must be paid, in theory, by private firms. But they need dollars to do so, and it is the Argentinian State who must provide them with those dollars, (through the Central Bank) at an exchange rate of one peso = one dollar. In the end, it will be all of us who will eventually have to pay for the consequences of that indebtedness. It is an easy calculation Argentinians number 37 million people. Each one of us (newborns included) is indebted with the foreign banks, the IMF and the World Bank in 5,045 dollars: 4,054 belong to the public debt, and 1,351 to the debt of private companies. A standard family in Argentina is composed of two adults and two children, so that the head or heads of each household will have to work in order to obtain the 21,620 dollars the standard family owes. A fortune! Something else, however: at the current interest rates, we shall have to honor yearly payments of 9,5 billion dollars in interests for the public debt, and 3 billion dollars for the debt of private firms, that is a sum total of 12,5 billion dollars every year, which makes around 1.042 billion dollar every month. In the end, this implies that during his or her full lifetime each and every one of the 37 million inhabitants of Argentina will have to pay a monthly installment of u$s 28.-- (or more, if interest rates rise) for the interests (not the principal) of this monstruous debt. Thus, the average head of standard household is ALREADY paying 112 dollars each month in concept of interests of the foreign debt. And this is not just playing with words and figures, it is simply the crudest reality. The tax rise produced by the current government in december, 1999, as well as the wage reductions for state employees (may 2000) were designed with the only objective of paying the 9,5 billion dollars of interests of the foreign debt. It should be noted that the fiscal budget has a deficit of 5,5 billion dollars, so that if we were not forced to pay those 9,5 billions of interests, there would be a superavit of 4 billions in the treasury, and the tax rise of december or the wage cuts of may would have been unnecessary. Much to the contrary, with that money we would have been able to build schools and hospitals, to raise retirement pensions, to help the unemployed (the amount would allow to pay an unemployment fund of slightly more than 1800 pesos (dollars) every year to the 2,200,000 unemployed: the "Trabajar" plans that the government is currently administrating is of exactly the same amount per person, and reaches just 70,000 people instead of 2.2 million, and so on. We shall still have to pass through new tax rises and wage reductions, not only this year, but for many years more, in order to pay for those 9.5 billion dollars Economists in the national camp, on the other hand, have computed that during the last 10 or 12 years real wages have fallen at least 25%. This means that a worker who is now earning $ 400 each month should be earning $530 to keep the already miserable levels of 1988. Summing up: the average worker is earning, today, $130 less than in 1988, and the burden of interests of the foreign debt amounts to $112. Isn't this a coincidence?! This coincidence has nothing to do with chance, in fact. Wages have been pushed down intentionally by governments during all these years, through the payment of the debt and through the whole economic policy, thus achieving a concentration of the wealth of the country in very few hands: * about ten local economic groups * foreign banks * large multinational corporations.which became owners of almost every publicly owned company or utility (all the large ones, and most middle sized ones) in Argentina. At the same time that they hoarded those riches, these groups requested from the Central Bank dollars, which were used to remit (evade) the largest share of their profits abroad. We shall see, below, that a careful indagation of different industries and sectors in the Argentinian economy reveals that most of our debt must be attributed to that flight of capitals. Another large part fled the country through the "financial bycicle" (mechanism that was typical of Argentina after Martínez de Hoz, where credits were contracted to pay for previous credits and make a difference with a predictable exchange rate and runaway inflation) The above is enough to show how wage cuts, concentration of wealth and foreign debt are related; all this can be summed up as follows: $ 112 out every $ 130 lost by each worker every month go to payment of debt interests (a debt that was basically created by flight of capitals), while the remaining $ 18 are, in fact, the share of wealth that has been concentrated and has not fled... yet. And this is the most treacherous side of this history: we are all paying for the debt, but it was contracted for the exclusive benefit of a handful of large domestic and foreign companies that fled their benefits abroad. Nothing, but the debt, remains with us. II.- SHOULD WE PAY THE DEBT? In order to adequately answer this question, we have to previously consider four issues: 1.- Was the debt legitimately contracted? 2.- Can we pay the debt without brutally harming our economy and our people? 3.- Do we really still owe something? 4.- Are our creditors innocent, or they share some guilt in this tragedy that affects us? Let us consider each one separately. 1.- Was the debt legitimately contracted? 1.1.- The denunciation by Dr. Alejandro Olmos Exactly 18 years ago, on August 1982, Dr. Alejandro Olmos made a criminal denunciation at the Federal Court Nr. 2, requesting an investigation on the origin of the debt (by those times, of "only" 37 billion dollars while in March 1976, when the military government begun, it was of just 7,5 billion). Dr. Olmos was a honest man, who never wanted to belong to any political party, and never took public office at any level, although he dedicated his life to work on questions that benefitted all the Argentinians. He died on April 2000, few months before his denunciation bore fruit. Sentence was passed by Judge Jorge Ballestero on July 15, 2000. Similar denunciations were added to the one by Olmos afterwards. They were made by Jorge Eduardo Solá, José Alberto Deheza, José Manuel Marino, Carlos Alberto Hours, Walter Beveraggi Allende, Carlos Saúl Menem (in 1984, as a political move when he was just a Governor of the poor La Rioja province) and Osvaldo Destéfani. Along the 18 years that took the trial generated by the Olmos denunciation, more than 6 000 sheets with analyses by experts, declarations by witnesses, and other legal evidence and red tape accumulated. 457 lines of credit approved by the Central Bank, as well as 20 wrongly awarded indorsements of the Banco de la Nación and the then still existing National Bank for Development (BANADE), were probed in full detail. The main foreign banks benefitted by those credits were the Bank of America, Republic Bank of Dallas, Citibank, Bank of Boston, Chase Manhatann Bank, Lloyds Bank, Wells Fargo Bank, Citicorp, Marine Midland Bank, Banco Mundial, Union of Arab and French Banks, Bank of the European Financial Society, D.G. Bank, European Credit Bank, Swiss Bank Union, Banco di Roma, and the Banco de la Nación Argentina. This was a very "heavy" trial, because the powerful and actual owners of our country were the culprits: big foreign banks, IMF, World Bank, large multinational corporations, 10 enormous domestic economic groups, and a very populated group of high officials of the 1976-1983 regime. This is why the trial took so long. No judge dared to pass sentence without the most complete certainty of what she or he was going to do. And this is also why the judges did not remain content with the investigations made by the team of accountants and economists of the Houses of Justice (which are many and able), but they also asked the most prestigious institutions of Economic Sciences in Argentina to suggest the names of first rate professional economists who would act as special experts. A total of 30 experts of the highest capacities and honesty took part of the judgement, among whom Dr. Sabatino Fiorino, of the College of Economic Sciences at the University of Buenos Aires; Dr. Alberto Tandurella, of the Professional Council In Economic Sciences of the City of Buenos Aires; Dr. William Leslie Chapman, of the National Academy of Economic Sciences (which was chaired, by those times, by Dr. Guillermo Walter Klein, father of the economist of same name who was being investigated by the judges); Drs. Héctor Valle and Osvaldo Trocca, of the Foundation for Research in Economic Development; Dr. José Alberto Deheza, former State Prosecutor and Minister of Defense; Dr. Nicolás Argentato, President in those times of the Catholic University of La Plata, and Dr. Enrique García Vázquez, who was later to become President of the Central Bank. The high professional and ethic level of the experts backs their conclusions to the point that they cannot put to doubt. Many of them were even supporters of the general principles of economic policies that were held during the 1976-1983 regime. Drs. Valle, Trocca, Deheza, Argentato and García Vázquez investigated the economic policies followed between March 24, 1976 (when the military coup against the constitutional government was given) and December 10, 1983, when the so called "Proceso Militar" (Junta Regime outside Argentina) came to an end. Now, it is the debt contracted after 1983 that has to be investigated. The remaining experts investigated the technical and banking procedures employed by the regime in order to contract the debt. 29 witnesses were interrogated, besides, and 20 written reports were asked from 20 high officials.. 1.2.- The economic policies The military regime that took power on March 24, 1976, installed Dr. José Alfredo Martínez de Hoz at the Ministry of Economics. He constituted his team with economists who were almost to the last one Chicago University graduates. All of them, up to that moment, had been acting as counselors and executives in foreign banks and firms. Martínez de Hoz himself was (and still is) a member of the International Consulting Council of the Chase Manhattan Bank owned by DAvid Rockefeller and his family Martínez de Hoz postulated, immediately after the military took power, that his economic policies would have to basic aims: * ellimination of inflation * modernization ("deconstruction") of domestic manufacture. Please note that these are exactly the same two objectives proclaimed by Drs. Carlos Menem and Domingo Cavallo en 1989 and 1991. “Deconstruction” of our manufacture, according to Martínez de Hoz and his team, meant "to destroy the existing manufacturing structure, because it was inefficient, so that a new one, modern and efficient, could be substituted in its stead, in order to accede to international competition”. What was decided, in order to attain these two central objectives (win over inflation and "modernize" manufacture) after 1976? Monetary emission from the Central Bank was drastically strangled. Public service utilities (state owned in those times) were not allowed to raise their rates and tariffs. The economy was "opened up" to the commercial currents (commodity export and import), by means of cuts in import taxes; this measure was intended to force down the prices of domestic production. Freedom of movement for international financial capitals was decreed (any foreign currency could be introduced to or extracted from Argentina without any impediment) It is not necessary to be an economist to realize that: Since local currency emission was drastically reduced, each time that the State would face a fiscal budget deficit, the only way to cover it was to contract a foreign loan. There was no other way out, because Argentinians did not have enough savings in pesos that could be lent to the State. Since the public utilities were not allowed to compensate for higher costs due to inflation (which did not stop at all) through rises in their prices, the then State owned firms were forced to contract loans outside Argentina to settle their accounts. Brutally low customs tariffs turned commodities imported from coutries with lower wages or with more advanced technologies into a tidal wave that swept domestic production from the market, thus forcing local companies to ask for loans outside Argentina or default. Finally, the decree that declared free the entrance and exit of foreign capital would be particularly appealing to the short term speculative capitals ("swallow" capitals): these come here, do a swift speculation, and leave "freely" fleeing away with their benefits. Summing up: an economic policy was intentionally adopted that pushed the way towards an increase of foreign indebtedness, with or without necessity. This policy also sought that the ensuing necessities of foreign loans that would cover for these artificially generated debts were covered by means of speculative, short term, capital. With the pretext that he would thus make inflation fall down, Martínez de Hoz adopted the so called "foreign exchange little table": this was a table that allowed everyone to know, many months in advance, at which price was the Central Bank forcing itself to trade dollars every week. Of course, as it could have been easily imagined, the interest rates cashed by banks in Argentina were substantially higher than those in the developed countries. This is a very well known economic phenomenon, that no economist ignores. Argentinian inflation (either open or repressed) and the weakness of our economy "scare" investors (speculative investors in particular), so that they claim for higher interest rates when they lend their dollars. A Mammooth sized "financial bicycle" was thus born, as we shall see. Let us for a second watch the similitudes between the situation then and the situation now. The only "technical" difference lies in that in the times of Martínez de Hoz speculators were ensured to enjoy a fixed exchange rate through the "little table", and that this is obtained today through the "one to one" peso-dollar convertible parity. Back to the origin of the debt: the situation not only enticed, but forced, whoever wanted to obtain a loan to look for it in a foreign country. Things were made worse for State-owned companies, because Martínez de Hoz and his team not only did not allow them to raise their prices as a way to compensate for inflation, but they also forced the companies to contract loans outside Argentina, even when these loans were unnecessary. When the dollars reached Argentina, the Central Bank (the mandatory entrance door) was ordered by the Ministry of Economy that they would not deliver the dollars to the state company that had asked for the loan; these would have to receive the dollars at the artificially low official exchange rate (which was many times lower than the "free market" exchange rate) The Central Bank, however, was allowed to keep those dollars in its own vaults or to deposit them in a foreign bank: they were thus magically transformed into "international reserves"; The Bank was also allowed to sell those dollars "in the market" (that is, to particulars and private companies that would want them; they were almost always used in the "financial bicycle"); this allowed to keep the "little exchange rate table" unmodified (the greatest part of the dollars was wasted in this). No state owned company escaped this Catch 22: YPF (the National Oilfields), YCF (the National Coalfields), SEGBA (Light & Power of the Greater Buenos Aires), OSN (National Sewage), Aerolíneas Argentinas (the national airway), ELMA (the national overseas fleet), and so on. Each and every one of them. All of them. As a result, our state owned companies took unnecessary debt, but never saw the dollars. The Central Bank gave devaluated pesos to them. When the credits had to be paid for, the state owned companies asked from the Central Bank to, at least, sell them the dollars at the official exchange rate (which, we repeat, was much cheaper than the "free market"dollar). This was denied to them by the Bank, although the private companies, as we shall see, _did_ obtain their dollars at the official exchange rate because in 1981 Dr. Domingo Cavallo had granted them what was called an "exchange insurance", to be guaranteed by the state (later on, Cavallo became the Minister of Economy of Menem, creator of the currency board scheme that now strangles Argentina, and "dollarization consultant" for Ecuador today). The public companies, much to the contrary, were forced to buy expensive, brutally expensive, dollars, at "market" prices, in order to honor the payment of foreign credit that they had not needed to contract, and the dollars of which they had never been allowed to cash. The experts determined that, for example, the National Oilfields YPF company was forced to contract this kind of a debt for a sum total of 6 billion dollars. Between february 1979 and march 1980, YPF was forced to accept 153 foreign loans, most of them with terms of less than six months The ban on price rises for public utilities, by decree from Martínez de Hoz in spite of spiralling inflation was, together with this unbelievable trick, the main reason why public utilities began to display an increasing deficit. This is why Dr. Jorge Ballestero states in his ruling on the trial that began with the denunciation of Alejandro Olmos that this artificial (actually "concocted") debt of the state companies made it possible that when Menem and Cavallo turned them private afterwards, they were sold out at a price that was much below their actual value. The dollars that were forced into the country through the public companies were, at the same time, put in the "market" by the Central Bank. They were used by large domestic and foreign firms, as well as by petty local speculators, to obtain impunished benefit from the "financial bicycle" that the economic policy fostered. Those cheap dollars were purchased by an "investor" (Argentinian or not), they were exchanged for pesos, and the pesos were invested at fixed term, harvesting interest rates of between 9% and 25% according to the moment in time, for dollars that would have never obtained more than 3 to 7% outside Argentina. There were even many who took a loan abroad, at low interest rates, brought them here, exchanged them for pesos, and invested them at fixed term with high interests. After six months or one year, they cashed the fixed term loan, turned the pesos into dollars, paid for the loan obtained outside Argentina, and kept a juicy profit which, of course, was extracted from the country. The whole schema was made all the easier and safer, let us recall this, by the "little table", which allowed the "investor" to have a cheap dollar, with an exchange rate that was known beforehand, as well as by the freedom for capital flow, which ensured free entrance and exit.. Sure, there were petty investors (speculators themselves) who managed to organize their own little "bicycles" for some thousands of dollars. But the billions we lost were originated by gigantic "bicycles" of economic groups with an overwhelmign power, most usually in intimate vinculation with the highest economic officials of the regime. Dr. Enrique García Vázquez, on this particular point, furnished the Justice with this information of the greatest importance: Between 1978 and 1981, unjustified remittances of dollars abroad (that is, fled capitals) surpassed the amount of 38.5 billion dollars Our foreign debt, by the end of 1981, was of slightly less than 31.8 billion dollars. Simply put: if the profits that large domestic and foreign companies and speculators obtained through concentration of wealth and "financial bicycles", had not been fled away, not only we would not have had any foreign debt in December 1981, we would have had a surplus of more than 6.7 billion dollars. Dr. José Alberto Deheza, for a period quite similar to that investigated by Dr. Vázquez, reaches almost the same conclusions. Between 1976 and 1981, our debt grew in almost 27.6 billions, but our account current deficit (exports against imports, plus deficits in the line "interests, services, insurance, 'royalties', etc.), _the only one that truly generates a need for foreign loans_, was of 5.6 billion only. That is, there is an indebtedness surplus of 22 billion dollars that can only be explained by the gigantic flight of capitals that the government itself fostered. These are the broad strokes of the economic policy that produced Argentinian indebtedness up to 1983, a policy that is still in practice and thus puts us in further and Mammooth sized debt. Up to this moment in our exposition, we have only given attention to the analyses by the experts who worked for Judge Ballestero. Let us turn to an investigation by Lic. Eduardo Basualdo, at the Instituto de Estudio sobre Estado y Participación (IDEP), who performed the following computation (not included in the ruling by Judge Ballestero): The concentration of wealth has given businessmen in Argentina an extra profit of 70.4 billion dollars during the 1991-1998 period against the 1970-1975 average (the date for comparison is very important, since those were the last years of "normal" Argentina, before the financial gang of robbers took the lead). At the same time, that is during 1991-1998, dollars were extracted from Argentina for an amount of approximately 63.4 billion. A highly striking similitude of amounts... Néstor Miguel Gorojovsky [EMAIL PROTECTED] _______________________________________________ Leninist-International mailing list [EMAIL PROTECTED] To change your options or unsubscribe go to: http://lists.wwpublish.com/mailman/listinfo/leninist-international