Argentina’s new right-wing president, Mauricio Macri, pledged to put an end to the country’s sovereignty, and on that he has been true to his word. The capitalist principal that windfall profits for speculators is the raison d’état for the world’s governments has been upheld.
Or, to put it in a different way, the government of Argentina will again be allowed to borrow on international financial markets — so that it can borrow money for the sole purpose of paying billions of dollars to speculators.
Argentina had been one of the few countries that refused to bleed its population to pay off odious debt under the 12-year husband and wife rule of Néstor Kirchner and Cristina Fernández. Their left-wing populism has been overstated — they left capitalist relations untouched and at best merely tolerated the movement of recovered factories — but they did consistently put the interests of Argentine working people ahead of international financiers. The election of the right-wing President Macri has put an end to that, along with his introducing the repression that austerity requires.
Argentina’s difficulties have a long history. The fascistic military dictatorship of 1976 to 1983 laid waste to the Argentine economy while unleashing horrific human rights abuses, and subsequent civilian governments sold off state enterprises at fire-sale prices while imposing austerity until the economy crashed at the end of 2001. Upon assuming office, President Kirchner suspended debt payments that would have impoverished the country. He offered to negotiate with bond holders, 93 percent of whom ultimately agreed to accept 30 percent of their bonds’ face value.
There were holdouts, most notably two hedge funds that waged a 15-year battle to extract the full value of the bonds, even though they bought them from the original holders for a fraction of the price. These two funds leading the holdouts were NML Capital, a subsidiary of Paul Singer’s Elliot Capital Management, and another hedge fund, Aurelius Capital Management. Mr. Singer, the type of character for which the term “vulture capitalist” was coined, is notorious for his scorched-earth tactics. At different points, he had an Argentine naval training ship seized in Ghana and attempted to seize Argentina’s presidential plane. His dedication to extracting every possible dollar regardless of cost to others was nicely summarized in 2011 by investigative journalist Greg Palast:
“Singer’s modus operandi is to find some forgotten tiny debt owed by a very poor nation (Peru and Congo were on his menu). He waits for the United States and European taxpayers to forgive the poor nations’ debts, then waits a bit longer for offers of food aid, medicine and investment loans. Then Singer pounces, legally grabbing at every resource and all the money going to the desperate country. Trade stops, funds freeze and an entire economy is effectively held hostage.
Singer then demands aid-giving nations pay monstrous ransoms to let trade resume. … Singer demanded $400 million from the Congo for a debt he picked up for less than $10 million. If he doesn’t get his 4,000 percent profit, he can effectively starve the nation. I don’t mean that figuratively — I mean starve as in no food. In Congo-Brazzaville last year, one-fourth of all deaths of children under five were caused by malnutrition.”
Buy low, demand very high
He’ll make a windfall profit off Argentina as well. The “special master” who presided over negotiations between the holdouts and the Argentine government — a veteran corporate lawyer who specializes in representing financiers and banks opposed to regulation — announced that NML Capital, Aurelius Capital and two other big hedge funds will receive 75 percent of the full principal and interest demanded by the holdouts. How big of a profit will this be? Only the funds themselves know for certain, but the lowest public estimate is a profit of nearly 400 percent.
Even that lowest estimate likely understates the profit. Bloomberg News reports that Mr. Singer will be paid $2.3 billion, or close to four times the $617 million in principal his firm holds. But as he likely paid only a small fraction of that principal, his profit is likely far greater. A Columbia University researcher estimates that NML Capital will receive $620 million for a portion of bonds for which it paid $48 million in 2008. That’s nearly a 13-fold profit in six years! As former President Fernández remarked when refusing to pay anything more than the 30 percent to which the other bondholders agreed, “I don’t even think that in organized crime there is a return rate of 1,608 per cent in such a short time,” adding that Argentina would not “submit to such extortion.”
President Fernández was referring to the profit Mr. Singer would have reaped had she given in to his full demands. She was speaking in a national address following two U.S. Supreme Court decisions in 2014 that upheld U.S. District Judge Thomas Griesa’s ruling that Argentina is not allowed to continue to pay the bondholders who agreed to accept 30 percent (or “haircuts” in financial parlance) until it reached an agreement with the holdouts. The Supreme Court also ruled that federal courts in the U.S. can order sovereign countries to hand over information on their assets to speculators. In other words, U.S. law, wielded to generate windfall profits for the most greedy, was decreed to apply to other countries, as if they are not sovereign.
The Kirchner-Fernández governments refused to yield their country’s sovereignty, but President Macri took office promising to pay off the vulture capitalists. Not only was Argentina’s ability to determine its own policy at risk, but the very concept of debt relief has been put in danger. The bondholders who agreed to take 30 percent made the calculation that something is better than nothing, and it enabled Argentina to recover from a severe economic crisis. The Kirchner-Fernández governments consistently offered the same deal to the holdouts. But now that the holdouts extracted so much more, will those who accepted the earlier deal now demand the same 75 percent given to the holdout funds? If they do, will they seek to enforce that after-the-fact better deal in the courtroom of Judge Griesa, who consistently showed himself biased in favor of the vulture capitalists?
Consider the assessment of two United Nations officials, Juan Pablo Bohoslavsky, the U.N. independent expert on the effects of foreign debt on human rights, and Alfred de Zayas, the the independent expert on the promotion of a democratic and equitable international order:
“A settlement would validate the type of predatory litigation that has been on the increase during the last decade. Such deals will make it more difficult to solve debt crises in a fair, timely and efficient manner by emboldening and rewarding the behavior of those who refuse to participate in debt restructuring efforts. These are no good news for attempts to solve debt crises in a timely and human rights sensitive manner.”
Paying debt through taking on more debt
The Macri government has now committed itself to paying $6.4 billion to the holdouts. How will it pay for that? By borrowing. Argentina had been blocked from borrowing in international credit markets, and as part of the deal will be allowed to borrow in those markets again. Judge Griesa’s injunction against resuming payments to the 93 percent of bondholders is also to be lifted. (That was enforceable because Argentina paid its debts to those bondholders through the Bank of New York, which was prohibited by the judge to pass through those payments under pain of legal penalties. Alternative routes through non-U.S. banks are difficult to use because of U.S. control over the global financial system.)
The deal also requires that the Argentine parliament reverse a law that blocks the country from offering any deal to holdouts better than terms agreed to by others. President Macri’s Let’s Change bloc does not hold a majority in the Chamber of Deputies, but picked up votes from the Peronist opposition to effect the necessary legal reversal this week. The Senate must still vote, but the expectation has been that the bill would have an easier time there.
Why is President Macri ceding his country’s sovereignty? Right-wing ideology of course plays a significant role here, but it is also self-interest. While the military dictatorship was conducting a reign of terror against Argentines that ultimately led to hundreds of thousands murdered, “disappeared,” tortured, kidnapped, arrested or forced to flee into exile, Mauricio Macri and his family were adding to their wealth. (Remember that this régime had the approval of Henry Kissinger and was blessed by David Rockefeller, whose loans financed it, with his infamous statement that “I have the impression that Argentina has a regime which understands the private enterprise system.”)
The Macri Society, or Socma, the family business, had close ties to the dictatorship. TeleSUR English reports that Socma “directly benefited” from the dictatorship:
“In 1973, prior to the 1976 military coup that ousted the civilian Peronist government of President Maria Estela de Peron and installed a dictatorship, Socma owned seven companies. When the dictatorship ended 10 years later, in 1983, the Socma corporate empire had expanded to 46 companies. Among Socma’s dozens of companies were various businesses that benefited the Macri family economically by providing services to the dictatorship regime.”
The new president, a director of the family conglomerate from a young age, is opposed to an Argentine parliamentary decision to launch an investigation of people and businesses that participated in the military dictatorship’s crimes, TeleSUR reports. La Nacion, a conservative Buenos Aires newspaper that backed President Macri, the day after the election published an editorial calling for an end of efforts to seek justice for the dictatorship’s victims, denouncing the quest for justice as a “culture of revenge.” Perhaps to emphasize this, the president has appointed as the new secretary for religious affairs Santiago Manuel de Estrada, who served as secretary for social security during the military dictatorship, which presided over severe reductions in wages and living conditions to go along with its death squads and torture facilities.
A monopoly for press backers, repression for opponents
Argentina’s biggest media conglomerate, Clarín, also backs President Macri, and no wonder: He has already moved to eliminate Argentina’s anti-monopoly law, which restricts the number of TV, cable and radio licenses a company can hold at one time, so that a handful of corporations can completely control the mass media. Such laws have precedent; for example, U.S. communications law long restricted anyone from owning more than 14 radio stations and seven television stations until overturned during the Reagan era. The Macri government is moving swiftly to silence opposition — it has forced a popular radio broadcaster, Victor Morales, off the air. According to the Buenos Aires Herald:
“ ‘I’m being kicked out because this company needs government advertising … No radio in Argentina can survive without government ads. They can’t mess with Macri,’ said the journalist.”
Demonstrations against these developments have already taken place, as have a public-sector strike against massive layoffs, demonstrations against the new government’s anti-protest law and protests against the imprisonment of Indigenous leader Milagro Sala. A total of 25,000 public workers have been dismissed as part of the Macri government’s austerity policies, and a new “security protocol” enables indiscriminate arrests and restricts the press’ ability to cover such events, opponents say. A coalition organizing against these new repressive policies states:
“The new protocol implies that every protest is now a criminal offense, and empowers the Security Forces — the same forces that played an active role in Argentina’s last military dictatorship — to allow or forbid any protests. The criminalization of protests violates several judicial decisions that state the right to demonstrate supersedes any occasional traffic problems that may be caused.
This year, on the 40th anniversary of the military coup in Argentina, the Mauricio Macri government has begun a campaign to eliminate an essential human right — the fundamental right to protest and demonstrate. With this new protocol, the government will try to prevent workers from protesting against redundancies or demanding salary increases, or mobilize against power outages and mining projects. This protocol openly defies the constitutional rights of the Argentine people as well as international treaties on human rights.”
Ms. Sala, imprisoned for the past two months, was arrested after protesting the policies of a provincial governor aligned with the president. She was acting in support of an organization she heads that provides social services. Parliamentarians, civil organizations and human rights campaigners across South America have denounced her arrest as political, and the United Nations has called for an explanation of her continued detention. The Buenos Aires Provincial Commission for Memory has issued this statement:
“Organizing collective action does not mean ‘inciting crimes,’ a massive demonstration is not ‘public disturbance’ and to oppose a government decision is not ‘an act of sedition.’ They are all democratic freedoms.”
They should be. But not when a right-wing government is determined to impose the rule of capital, or, in the case of the Macri government, to be a willing subaltern of international capital. The logic of the rule of financiers can only lead to not only intensified austerity, but increased repression.