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ARGENTINE EXTERNAL DEBT: a leading case for indebtness countries'

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17 ) IDB and World Bank Loans. 18) IMF Loans Conditions. 19) Bonds exchange operations. ... political external groups benefit through loans conditions and ... – PowerPoint PPT presentation

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Title: ARGENTINE EXTERNAL DEBT: a leading case for indebtness countries'


1
ARGENTINE EXTERNAL DEBTa leading case for
indebtness countries.
  • Mario Cafiero National RepresentativeSeptember
    2004

2
How 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.
3
THE SYSTEM OF THE ARGENTINE EXTERNAL DEBT
  • ORIGIN, CHARACTERISTICS AND DEFAULT.
  • ANALYSIS OF THE CURRENT RESTRUCTURING.
  • GUIDELINES FOR AN ALTERNATIVE PROPOSAL.

4
A country is poor,
Theoretical background of External Debts
because it is poor.
5
External debtincreases domestic savings
EXTERNAL DEBT
6
Corruption in the external debt system
EXTERNAL DEBT 180,000 M US
CAPITAL FLIGHT
150,000 M US
7
DUHALDE KIRCHNER
ALFONSIN
MENEM
MILITARY
DE LA RUA
8
GDP 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
9
External Debt
GDP
Fiscal Balance
Trade Balance
10
WEALTH 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

11
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12
Violation humans rights. A dirty war.
  • Violation economic humans rights
  • A dirty debt.

13



13) 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
14
Debt 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.

15
OFFICIALS RESPONSIBLE FOR THE EXTERNAL DEBT
1990/01
16
Banks share in external debt issues 1990/01
17
CURRENT 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

18
CURRENT 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.

19
DUBAI AND POSTDUBAI REESTRUCTURING
20
Payment variation according to GDP growth
21
Bond 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).

22
Current values of the debt to be
restructuredCapital Amount restructured debt
81,199 million us
23
Current market value does not exceed us M
24,000
24
AN UNEQUAL CAPITAL HAIRCUT
25
TOTAL DEBT SOLVENCY AND LIQUIDITY INDICATORS
26
TOTAL DEBT Liabilities amount is greater than 3
of GDP
27
DEBT PAYMENT PROFILE IN GDP (ANNUAL 3,6 GROWTH)
Debt to be restructured
Performing Debt
28
What does 3 of Primary Surplus mean in terms of
Public Services?
29
A 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.

30
ARGENTINE REPUBLIC
31
The myth of Foreign Direct Investments
32
ARGENTINE REPUBLIC
4 GDP
4 GDP
??? GDP
SERVICES OF THE NEW DEBT
33
Balance of payments impact Pessimistic
hypothesis annual 12 capital cost
34
Balance of payment impact Optimistic hypothesis
annual 7 capital cost
35
Debt payments in GDP according to GDP growth
(optimistic hypothesis of annual 7)
GDP Payments
36
Drafts to foreign countries
37
PRINCIPLES 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

38
GUIDELINES 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

39
Social Debt (indicators 2003)
40
Basic Social Indicators Evolution
41
Evolution Indicators in case of applying internal
resources to social debt
42
EXTERNAL DEBT MORATORY
FISCAL COMMERCIAL SURPLUS
CREDITORS REGISTRATION AND CATEGORIZATION
PRODUCTIVE SOCIAL INVESTMENT
DISTRIBUTION
CO-RESPONSIBILITY OF INVESTING BANKS AND
MULTILATERAL AGENCIES
CAPITAL FLIGHT AUDIT
43
AT 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

44
At 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.

45
SECOND 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

46
ARGENTINE EXTERNAL DEBTa leading case for
indebtness countries.
  • Mario Cafiero National RepresentativeSeptember
    2004

47
(No Transcript)
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