Argentinian election excites reaction

On 22 November Mauricio Macri, mayor of Buenos Aires, won the presidential election under the ‘Cambiemos’ (‘Let’s Change’) coalition party flag, with 51.4% of votes. Macri narrowly defeated Daniel Scioli, the ‘Peronist’ Justicialista Party (in its ‘Front for Victory’ alliance) candidate, who got 48.6% of the votes, in the first run off in Argentine political history. Macri is only the fourth non-Peronist president elected over the past half century, and is outvoted in the Lower House with 91 of the 257 seats. He takes power on 10 December, promising a return to neoliberalism.

Scioli was outgoing President Cristina Fernandez de Kirchner’s chosen replacement and Macri’s surprising victory followed Scioli’s better performance in the first round. The result plunges the country into a period of uncertainty dressed in business optimism. Macri is from a wealthy construction company family, who promised to fight crime, and reduce inflation, around 20%, and youth unemployment, over 20%, by bowing to the conditions set by international capital markets. Sergio Massa’s United for a New Alternative movement, with 21.39% of the votes, has promised to support Macri. Scioli’sFront for Victory party also lacks a majority in the lower chamber and needs to seek alliances if it is to block Macri.

International banks supported Macri: JPMorgan lowered Argentina's risk index by 16% on the day following the election, to levels not seen since 2011, so rewarding bond holders, and Moody’s raised its ‘outlook’ for investors. To curry favour with the US, Macri immediately demanded that Venezuela be suspended from the Mercosur trading bloc for ‘human rights abuses’, a shameful repetition of criminal slanders directed against the Maduro government, confirming the standards to be expected from Macri’s social class.

Alvaro Michaels

Argentina?US venture capitalist attack dogs

On 30 July Argentina was forced into technical default on its renegotiated international debts (FRFI 240). A US court blocked Argentine funds of $539m held at the Bank of New York Mellon for interest payments; Citibank was stopped from paying creditors through its Argentine office. The US court is backing US hedge funds NML Capital and Aurelius Capital Management, which aim to extort 100% face value from secondhand state bonds bought at knock down prices. Argentina cannot service its restructured debt until it settles its $1.3bn dispute with the companies, which threatens Argentina’s economy.

These hedge funds are a strike force for all US banks that can’t tolerate any escape from their nets of debt. Argentina is now locked out of the international capital markets. Argentina’s economy minister Axel Kicillof explained these vultures’ five-point plan: ‘an attack on the currency to force devaluation, personal attacks on the president, stopping the payment of upcoming debt obligations, blocking financing and waiting until [a new president is in place in] 2016.’ The economy is already expected to shrink by 0.5% to 2% with inflation running at 37% this year.

The debt problems go back to Argentina’s 1976-1983 US-backed military dictatorship, which oversaw a 465% explosion in state debt. Argentina defaulted in 2002, and lenders agreed to reduce their claims in 2005 and 2010. Restructuring debts became central to Argentinian political life.

If the vultures’ demands are met before the end of 2014, all the other creditors who had accepted reduced terms must get the same treatment. That bill could reach $15bn. Argentina’s foreign currency reserves are $28bn. Payment would send Argentina into recession or force the country into bankruptcy.

NML Capital, part of billionaire Paul Singer’s $17bn Elliot Management Corporation, bought $48m worth of the debt. Now he wants to wring $1.3bn out of Argentina with it. He spent $20m in 1995 on defaulted debt from Peru, suing for $58m. He acquired some of Congo-Brazzaville’s debt for $30m, and was ‘awarded’ over $100m interest in 2002 and 2003.

Argentina’s response

Argentina had deposited around $1bn with bond trustees – including the Bank of New York Mellon and Citibank Argentina – to pay its creditors. Citibank acts on the bonds under Argentine not US law and appealed against the block on making payments, arguing that it couldn’t comply with the US court rulings and Argentine law. Citibank faces civil and criminal sanctions, including the possible nationalisation of Citibank Argentina, if it fails to make interest payments to holders of $8.4bn. Argentina must pay $200m to bondholders on 30 September to prevent the default spreading to other bonds, raising the risk of other investors calling for immediate payment on all their bonds.

On 11 September Argentina’s Congress removed Bank of New York Mellon as its agent and proposed Nación Fideicomisos, a unit of state-owned Banco Nación, as a replacement, so the government could make interest payments on an estimated $29bn in foreign-held bonds either in Argentina or elsewhere out of US jurisdiction.

On 19 September, the Federal Appeals Court US dismissed an appeal by Citibank and Argentina to let the country make payments, sending the appellants back to New York District Court. Meanwhile, the peso fell against the dollar.

To allow the venture capitalists free reign, the US government has refused to allow the case to be heard before the International Court of Justice of the United Nations. The lesson is clear, the imposition of debt remains a fundamental trap by which imperialism extorts surplus value from other states, without which it cannot live and so cannot ever forgive.

Alvaro Michaels

Fight Racism! Fight Imperialism! 241 October/November 2014

Argentina: Imperialism’s financial grip

Fight Racism! Fight Imperialism! 240 August/September 2014

Central to the export of capital by imperialism is the imposition of debt on weaker states. Debt interest payments have to be enforced if the rich are to prosper and a domestic middle class be paid off. After Argentina’s default on its $100bn debt in 2001, including $81bn of international debt, its ruling class has tried to weaken the hold the EU and US’s financial elite have on the country. Default was Argentina’s only option in the face of a 2001 state debt of 160% of GDP, a 10% fall in GDP from 1998, unemployment around 25% and over half the population in poverty. However the ruling class needs access to foreign capital. Some accommodation to its creditors is essential. Alvaro Michaels reports.

Read more ...

Argentina and Bolivia: Renationalisations anger imperialists / FRFI 227 June/July 2012

Fight Racism! Fight Imperialism! 227 June/July 2012

On 16 April and 1 May respectively Argentina and Bolivia reclaimed ownership of energy companies privatised by Spanish corporations during the neoliberal assault of the 1990s. Sharp reactions from the Spanish state and the European Union underline the conflict of interest between those exploited for their resources and labour, and imperialism, which lives off this plunder.

Bolivia and Argentina have distinct histories, but both have long been trapped in the web of financial dealings woven by the imperialist powers. In their national struggles to throw off these parasitic ties, the clash of nationalisation versus privatisation of the main industries has been key. Nationalisation immediately places the surpluses of these industries at the disposal of the state, but provokes intense hostility from domestic and transnational capital which battle to repossess the property or demand huge compensation.

Argentina and Bolivia have dramatically different histories, populations and standards of living. Argentina has the second highest average GDP per capita in purchasing power terms in Latin America after Chile, yet at $14,700 it has fallen from near the top of global rankings in the 1930s to 51st in the world today. Bolivia has an average per capita income of only $4,789, and lies in 120th place. Two thirds of Bolivians live in poverty. Argentina is highly urbanised and predominantly populated by peoples of European origin, Bolivia has a majority of indigenous peoples. Argentina depends on agricultural products in its trade, Bolivia on minerals extracted. Bolivia has an external debt of $6,164bn, and is currently assessing the lawfulness of its foreign debt. Argentina defaulted on its $95bn debt in 2001, forcing new agreements on all but $6bn worth of creditors.

At the turn of the century the democratic movements of the Latin American poor and indigenous people, dramatically turned the tide against the ‘neoliberal’ assault of the 1990s. The determination of Hugo Chavez in Venezuela to base political and economic development on the needs of the masses was central to this change.

Argentina

In April the government announced renationalisation of a majority of Repsol’s shares in the YPF oil and gas company, first privatised in 1993. Repsol bought its 57.4% stake in 1999, leaving the government with no control over its energy resources. Repsol repatriated profits to overseas shareholders. Despite incentives to promote oil and gas exploration and production, between 1999 and 2011, its oil reserves contracted 40.5% and its gas reserves 47.1%. Its oil production dropped 38.3% and its gas production 25.4 %. Its net exploration wells fell to record-low levels. Its net investment was only $3.6bn. Consequently Argentina spent $9.4bn on fuel imports last year. In December 2011 Repsol defensively announced a find of one billion barrels of shale oil. Argentina consequently ranks third in the world in terms of potentially recoverable resources behind China and the US. Central government will now take 51% of YPF shares, leaving Repsol with 6%.

The Argentinian government renationalised Aerolíneas Argentinas in 2008. These policies are pushed by La Cámpora, a ‘social democratic/Keynesian’ group within the ruling Justicialista Party. The struggle for power inside the Justicialista Party is between open pro-imperialists and Kirchner’s bourgeois nationalists.

Bolivia

Bolivia’s first indigenous President, Morales, won the 2005 elections campaigning for the nationalisation of the gas and oil industries ‘with the cooperation of foreign investors’. On 1 May 2006 it renationalised Yacimientos Petroliferos Fiscales Bolivianos (YPFB) hydrocarbons (entirely privatised by 1997), followed by the renationalisation of electricity in 2006, Entel telecommunications in 2007, and the smelter Vinto (among others) in 2007. In 2007 the government announced its intention to renationalise the National Railway Company (LENF) privatised in 1996, and created Boliviana de Aviación (BoA) to replace Lloyd Aéreo Boliviano as its flag carrier.

Now TDE (Transportadora de Electricidad), the electricity transmitter privatised in 2002, has been recovered. It had been bought by the Spanish state transmissions monopoly Red Electrica of Spain: 20% Spanish government-owned. Now the Bolivian state controls most of the country’s electricity supply chain, and will obtain profits for the state budget.

These nationalisations are national reforms within a state dominated by imperialism. They weaken the multinationals involved. They are aimed at stimulating local business and local markets. Any consequent amelioration of the miserable poverty under which the mass of the population live, and so any reduction in the political threat this represents, is a bonus for the national bourgeoisie. These reforms cannot alone create the conditions for a firm step toward socialism without a political programme that presents an alternative economic and social plan for the democratic development of the country. Communists support the nationalisations because they obstruct the capacity of imperialism to dominate such countries, but we demand a complete change to the purposes and management of the operations of these companies.

Reactionary forces in the east of Bolivia control agriculture and so food supplies, while private capital dominates other mineral extraction. Lacking funds, YPFB, the state energy company, has been unable to increase its shareholdings to 51% in the industry’s principal exploration and production units. These stay with Brazil’s Petrobras, the sector’s biggest investor, and Spain’s Repsol YPF. The Bolivian government is encouraging Bolivian business to participate in mining, as well as manufacturing, construction, agriculture and housing. It also seeks alternative international sources of development. Private corporations such as the US Franklin Mining and Russia’s Gazprom are involved, seeking to impose their own agenda. Splits are provoked between the government and its indigenous support base by international commercial interests, for example the conflict over the proposed construction of the Villa Tunari to San Ignacio de Moxos highway, which would have cut through the Isiboro Sécure National Park.

Threats by imperialism

Repsol is now suing Argentina in the US for $10.5bn, and has cancelled a contract to provide liquefied natural gas. Argentina imports natural gas to meet 20-30% of its consumption. It will now take gas from Bolivia and YPF will produce more.

In Latin America the poor have intensified their protests, pushing aside the most slavish of servants of imperialism, giving room to a new breed of pragmatic politicians sympathetic to the poor, or compelled to respond to popular demands. However, the national bourgeoisie are anxious to seize new markets and capital resources elsewhere, such as in Asia, for themselves. In this changing scenario the working class and poor peasantry must impose their will. New and uncompromising political programmes are essential for the working classes internationally. In Bolivia the indigenous majority and urban poor are defending the natural environment and demanding policies to deal with global pollution and to meet their social and economic needs in opposition to big business. In Argentina the highly-organised Unemployed Workers Movement has won successes in basic social security conditions. These movements require our support. All power and resources to the people!

Alvaro Michaels

Argentina: turning the screw

FRFI 163 October / November 2001

Capital valued at $8 billion fled Argentina between July and August. The country cannot sustain payments on its $128bn external debts which amounted to 52.8% of the GDP in 2000. Export earnings have fallen, whilst interest payments on foreign debt have tripled since 1992. Treasury bills offer 14% and the state is virtually without credit. Speculators are hoping for devaluation so they can later buy pesos at a cheaper rate, so making a fast buck. International capital fears not only that it will not get its interest and dividends, but for its own safety. The UK has $4bn invested in Argentina. Small wonder British prime minister Tony Blair was keen, during his July visit, to support President de la Rua’s new plans for austerity, not least to prevent a subsequent collapse in the Brazilian economy. Not to be outdone by the Europeans, the deputy secretary of the US Treasury flew in the next day to promise $1.2bn from the IMF for September if the Argentinian government did ‘what was necessary’.

Read more ...