Title: ARGENTINE EXTERNAL DEBT: a leading case for indebtness countries'
1ARGENTINE EXTERNAL DEBTa leading case for
indebtness countries.
- Mario Cafiero National RepresentativeSeptember
2004
2How can we explain that in Argentina?
- MORE DEBT, MORE POVERTY
- MORE DEBT, LESS DEVELOPMENT
- MORE DEBT, LESS DEMOCRACY
the answer is the corruption in the external
debt system.
3THE SYSTEM OF THE ARGENTINE EXTERNAL DEBT
- ORIGIN, CHARACTERISTICS AND DEFAULT.
- ANALYSIS OF THE CURRENT RESTRUCTURING.
- GUIDELINES FOR AN ALTERNATIVE PROPOSAL.
4A country is poor,
Theoretical background of External Debts
because it is poor.
5External debtincreases domestic savings
EXTERNAL DEBT
6Corruption in the external debt system
EXTERNAL DEBT 180,000 M US
CAPITAL FLIGHT
150,000 M US
7DUHALDE KIRCHNER
ALFONSIN
MENEM
MILITARY
DE LA RUA
8GDP per inhabitant Pesos 2003 per year
1974 10.828
PRODUCT DECREASE
POVERTY INCREASE
Income of the richer 20 over income of the
poorer 20 Times
2003 9.738
External Debt Thousand Million US
-
-
1974 6
2003 21
1974 7
2003 180
-
-
1974 8
DEBT INCREASE
CAPITAL FLIGHT
2003 150
Capital Flight Thousand Million US
9External Debt
GDP
Fiscal Balance
Trade Balance
10WEALTH TRANSFERBY THE DEBT SYSTEM
WINNERS
LOSERS
- SALARIED AND UNEMPLOYED PERSONS
- RETIRED PERSONS
- NATIONAL SMALL AND MEDIUM SIZE COMPANIES
- CIVIL SERVANTS
- PROVINCES AND MUNICIPALITIES
-
- LOCAL CAPITAL GROUPS
- INTERNATIONAL BANKING
- TRANSNATIONAL COMPANIES
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12Violation humans rights. A dirty war.
- Violation economic humans rights
- A dirty debt.
1313) Bonex Plan. 14) Brady Plan. 15)
Privatizations 16) Retirement pensions
privatizations 17 ) IDB and World Bank
Loans. 18) IMF Loans Conditions 19) Bonds
exchange operations.
26) Transfer to the State of the banking crisis
cost in 2001 27) Pesification of banking
liabilities. 28) Repeal Economic Subversion Act.
29) IMF secret conditions for duties increase
and compensation to banks. 30) Current
Restructuring.
1) Odious Debt 2) 477 irregular operations
(Olmos Case) 3) Jurisdiction extension 4)
Co-responsibility ofl IMF and G7. 5) Unilateral
interests increase. 6) Financial frauds and
private banking break-down. 7) Exchante
insurance and guarantees to the private sector 8)
Capital flight and self-loans
- 9) Violation of Act 23.062/84 on legal nullity of
rules and actions of de facto authorities. - 10) Research invalidation and fraudulent debt
acknowledgement - 11) Debt capitalization
- 12) Debt restructuring with the IMF and the
international banks.
20) Brady bonds exchange. 21) Financial
Assistance Package from the IMF 22) Megaswap
23) Banking reserves replacement. 24)IMF loans
25)Secured loans
14Debt dynamics
- An insolvency problem has been treated as
liquidity shortage. - A Ponzi or usurious system has been implemented.
- Lack of parliamentary control.
- External auditors incompetence (IMF)
- Domestic groups benefit through devaluation risk
statization. - Economic and political external groups benefit
through loans conditions and political
conditions. - Lack of transparency and information assymetry in
the international capital markets - Managed by a small group of national officials
and international banks.
15OFFICIALS RESPONSIBLE FOR THE EXTERNAL DEBT
1990/01
16Banks share in external debt issues 1990/01
17CURRENT RESTRUCTURING ANALYSIS.
- Differencies between Dubai and post Dubai.
- Characteristics and consequences of bonds linked
to growth. - Current value of bonds in default
- Fiscal pressure and surplus
- Impact of the new debt to be contracted
18CURRENT RESTRUCTURING ANALYSIS
POST-DUBAI
DUBAI
- Market solution.
- Banking committee.
- Interests acknowledgement.
- Rates increase.
- Bonds linked to GDP growth.
- Sovereign decision of debt reduction consistent
with growth. - 75 relief.
- Ambiguity of the proposal.
19DUBAI AND POSTDUBAI REESTRUCTURING
20Payment variation according to GDP growth
21Bond linked to growth
- The first 3 GDP growth shall be assigned to the
debt payment. - Besides, 10 of any amount over such 3 shall be
assigned as bonus. - In any scenario, the interest rate proposed by
the Argentine Ministry of the Treasury shall
double the expected GDP growth rate and, at
least, it shall be over 6 per year. - Certificates of share in the Argentine product
growth. - Background Dawes plan of 1924 for Germany and
Borenstein proposal(IMF).
22Current values of the debt to be
restructuredCapital Amount restructured debt
81,199 million us
23Current market value does not exceed us M
24,000
24AN UNEQUAL CAPITAL HAIRCUT
25TOTAL DEBT SOLVENCY AND LIQUIDITY INDICATORS
26TOTAL DEBT Liabilities amount is greater than 3
of GDP
27DEBT PAYMENT PROFILE IN GDP (ANNUAL 3,6 GROWTH)
Debt to be restructured
Performing Debt
28What does 3 of Primary Surplus mean in terms of
Public Services?
29A problem without solution
- ON ONE HAND
- Minimum interest rate proposed by the Argentine
Ministry of the Treasury 6 - Debt stock is equivalent to 107 of GDP
- Therefore, MINIMUM payment of debt services 6
of GDP
- ON THE OTHER HAND
- It is announced that Argentina shall not pay more
than 3 of GDP for the debt.
30ARGENTINE REPUBLIC
31The myth of Foreign Direct Investments
32ARGENTINE REPUBLIC
4 GDP
4 GDP
??? GDP
SERVICES OF THE NEW DEBT
33Balance of payments impact Pessimistic
hypothesis annual 12 capital cost
34Balance of payment impact Optimistic hypothesis
annual 7 capital cost
35Debt payments in GDP according to GDP growth
(optimistic hypothesis of annual 7)
GDP Payments
36Drafts to foreign countries
37PRINCIPLES OF AN ALTERNATIVE OF AN ALTERNATIVE
PROPOSAL
- Respect for the Debtor State Sovereignty
- Primacy of the State function to guarantee human
rights - Transparency and equitable treatment of creditors
- Co-responsibility of participants in the
indebtedness process
38GUIDELINES FOR AN ALTERNATIVE PROPOUSAL
- MORATORY OF EXTERNAL PAYMENTS UP TO SOCIAL
INDICATORS THRESHOLD - CO-RESPONSIBILITY DETERMINATION OF DEBT INVESTING
BANKS. - CO-RESPONSIBILITY DETERMINATION OF CREDITOR
COUNTRIES AND MULTILATERAL AGENCIES
39Social Debt (indicators 2003)
40Basic Social Indicators Evolution
41Evolution Indicators in case of applying internal
resources to social debt
42EXTERNAL DEBT MORATORY
FISCAL COMMERCIAL SURPLUS
CREDITORS REGISTRATION AND CATEGORIZATION
PRODUCTIVE SOCIAL INVESTMENT
DISTRIBUTION
CO-RESPONSIBILITY OF INVESTING BANKS AND
MULTILATERAL AGENCIES
CAPITAL FLIGHT AUDIT
43AT THE NATIONAL LEVEL
- CREATION OF THE NATIONAL CONGRESS INVESTIGATING
COMMITTEE FOR THE DETERMINATION OF UNLAWFUL ACTS
AND IRREGULARITIES - REGISTRATION AND CATEGORIZATION OF NATIONAL AND
FOREIGN CREDITORS - CAPITAL FLIGHT AUDIT
44At The International Level
- CREATION OF A PARLIAMENTARY COMMITTEE FOR THE
DETERMINATION OF RESPONSIBILITIES IN THE
ARGENTINE INDEBTEDNESS. - Balanced Score Card DETERMINATION OF THE
CORRESPONSABILITY OF THE IMF AND OTHER
MULTILATERAL INSTITUTIONS. DEBT ISSUING BANKS.
RISK RATING AGENCIES OF CREDITOR COUNTRIES.
45SECOND STAGE
- DEBT SWAP BY INVESTMENT OF MULTILATERAL
INSTITUTIONS. - TAX REFORM BASED ON CAPITAL FLIGHT AUDIT
- PAYMENT TO PRIVILEGED CREDITOS WITH THE
ASSISTANCE OF G7 - CO-RESPONSIBILITY BONDS OF ISSUING BANKS
- FINANCIAL PLAN WITH POPULAR CONSULTATION
46ARGENTINE EXTERNAL DEBTa leading case for
indebtness countries.
- Mario Cafiero National RepresentativeSeptember
2004
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