Fw: WHO SHOT ARGENTINA? THE FINGER PRINTS ON THE SMOKING GUN READ 'I.M.F.'

["Nello Margiotta" <animarg at tin.it>]

WHO SHOT ARGENTINA?
THE FINGER PRINTS ON THE SMOKING GUN READ 'I.M.F.'
Inside Corporate America
Greg Palast
Guardian (London) August 11, 2001


And news this week in South America is that Argentina died, or at least its
economy.   One in six workers were unemployed even before the beginning of
this grim austral winter.  Millions more have lost work as industrial
production, already down 25% for the year, fell into a coma induced by
interest rates which, by one measure, have jumped to over 90% on
dollar-denominated borrowings.

This is an easy case to crack.  Next to the still warm corpse of
Argentina's economy, the killer had left a smoking gun with his
fingerprints all over it.

The murder weapon is called, "Technical Memorandum of Understanding," dated
September 5, 2000.  It signed by Pedro Pou, President of the Central Bank
of Argentina for transmission to Horst Kohler, Managing Director of the
International Monetary Fund.

'Inside Corporate America' received a complete copy of the 'Understanding'
along with attachments and a companion letter from the Argentine Economics
Ministry to the IMF from ... well, let's just say the envelope had no
return address.

Close inspection leaves no doubt that this 'Understanding' fired fatal
bullets into Argentina's defenseless body.

To begin with, the Understanding requires Argentina cut the government
budget deficit from US$5.3 billion in 2000 to $4.1 billion in 2001.  Think
about that.   Last September, Argentina was already on the cliff-edge of a
deep recession.  Even the half-baked economists at the IMF should know that
holding back government spending in a contracting economy is like turning
off the engines on an airplane in stall.  Cut the deficit?  As my 4-year
old daughter would say, "That's stooopid."

The IMF is never wrong without being cruel as well.  And so we read, under
the boldface heading, "improving the conditions of the poor," agreement to
drop salaries under the government's emergency employment program by 20%,
from $200 a month to $160.

But you can't save much by taking $40 a month from the poor.  For further
savings, the Understanding also promised, "a 12-15 percent cut in salaries"
of civil servants and "rationalization of certain privileged pension
benefits."

In case you haven't a clue what the IMF means by "rationalization" - it
means cutting payments to the aged by 13% under both public and private
plans.  Cut, cut, cut in the midst of a recession.  Stooopid.

Salted in with the IMF's bone head recommendations and mean-spirited plans
for pensioners and the poor are economic forecasts which border on the
delusional.  In the Understanding, the globalization geniuses project that,
if Argentina carries out their plans to snuff consumer spending power,
somehow the nation's economic production will leap by 3.7% and unemployment
decline.   In fact, by the end of March, the nation's GDP had already
dropped 2.1% below the year earlier mark, and nosedived since.

What on Earth would induce Argentina to embrace the IMF's goofy
program?  The payoff, if Argentina does as it's told, is that this week the
IMF lend $1.2 billion in aid.  This is part of an emergency loan package of
$26 billion for 2001 put together by the IMF, World Bank and private
lenders announced at the end of last year.

But there is less to this generosity than meets the eye.  The Understanding
also assumes Argentina will "peg" its currency, the peso, to the dollar at
an exchange rate of one to one.  The currency peg doesn't come
cheap.  American banks and speculators are charging a whopping 16% risk
premium above normal in return for the dollars needed to back this currency
scheme.

Now do the arithmetic.  On Argentina's $128 billion in debt, normal
interest plus the 16% surcharge by lenders comes to about $27 billion a
year.  In other words, Argentina's people don't net one penny from the $26
million loan package.  Little of the bail-out money escapes New York where
it lingers to pay interest to US creditors holding the debt, big fish like
Citibank and little biters like Steve Hanke.

Hanke is President of Toronto Trust Argentina, an 'emerging market fund'
which loaded up 100% on Argentine bonds during the last currency panic, in
1995.  Cry not for Steve, Argentina.  His annual return that year of 79.25%
put the speculator's trust at the top of the speculation league
table.  This year he'll do it again.

Hanke profits by betting on the failure of the IMF's policies.  But
'vulture' investing is merely Hanke's avocation.  In his day job as
professor of economics at Johns Hopkins University, Maryland, he freely
offers straightforward advice to end Argentina's woe, advice which would
put him out of the speculation game: "Abolish the IMF."

To begin with, Hanke would do away with the 'peg' - that
one-peso-for-one-dollar exchange rate - which has proven a meat-hook on
which the IMF hangs the Argentina's finances.

It's not the peg itself that skewers Argentina - but the peg combined with
the Four Horsemen of IMF neoliberal policy: liberalized financial markets,
free trade, mass privatization, and government surpluses.

'Liberalizing' financial markets means allowing capital to flow freely
across a nation's borders. Indeed, after liberalization five years ago, the
capital has flowed freely, with a vengeance.  Argentina's panicked rich
have dumped their pesos for dollars and sent the hard loot to investment
havens abroad.  Last month alone, Argentine's withdrew 6% of all bank
deposits.

Once upon a time, government-owned national and provincial banks supported
the nation's debts.  But in the mid 1990s, the government of Carlos Menem
sold these off to Citibank of New York, Fleet Bank of Boston and other
foreign operators.

Charles Calomiris, a former World Bank advisor, describes these bank
privatizations as a "really wonderful story."   Wonderful for
whom?  Argentina has bled out as much as three-quarters of a billion
dollars a day in hard currency holdings.

There's more cheer for creditors in the Understanding, including 'reform of
the revenue sharing system.'  This is the kinder, gentler way of stating
that the US banks will be paid by siphoning off tax receipts earmarked for
education and other provincial services.  The Understanding also finds cash
in "reforming" the nation's health insurance system (cut cut cut).

But when cut cut cut isn't enough to pay the debt holders, one can always
sell 'la joyas de me abuela,' grandma's jewels, as journalist Mario del
Carvil describes his nation's privatization scheme.  The French picked up a
big hunk of the water system and promptly raised charges in some provinces
by 400%.

The Understanding's final bullet is imposition of "an open trade
policy."    This requires Argentina's exporters, with their products priced
via the 'peg' in US dollars, into a pathetic, losing competion against
Brazilian goods priced in a devaluing currency.   Stooopid.

Still, the IMF's scheme could work.  All, that is required is 'flexible'
workforce, willing to bend to lower pensions, lower wages or no wages at
all.  But, to the dismay of Argentina's elite, the worker bees are proving
inflexibly obstinate in agreeing to their own impoverishment.  One
inflexible worker, Anibal Verón, a 37-year-old father of five, lost his job
as a bus driver; his company owes him 9 months pay.

Verón joined the 'piqueros,' the angry unemployed who blockade roads (39
blockades began just this week).  In clearing a blockade in November, the
military police allegedly killed him with a bullet to the head.

The death in Genoa of anti-globalization protestor Carlo Guiliani was Page
One news in the US and Europe.  Verón's death was page zero.  Nor did you
read about Carlos Santillán, 27 nor Oscar Barrios, 17, gunned down in a
church courtyard in Salta Province when the police fired on a protest
against the IMF austerity plan.

Globalization boosters like Tony Blair prefer to portray resistence as a
lark of pampered Western youth curing their ennui by "indulging in protest,
misguided" by naive notions.   The media plays to this theme, focussing on
the few thousand marching in Genoa, but not the 80,000 in the streets of
Buenos Aires last May, nor the general strike honored by 7 million
Argentine workers last June.

In Argentina, President Fernando de la Rua blames violence on the
protesters.  But the Peace and Justice Service (SERPAJ) charges de la Rua's
government with using hunger and terror to impose the IMF plans.  SERPAJ
leader Adolfo Pérez Esquivel told me he is documenting cases of torture of
protesters by police in the town where Santillán and Barrios died.  To
Pérez Esquivel who won the Nobel Peace Prize in 1980 repression and
liberalization are handmaidens.  He told the Observer he has just filed a
complaint charging police with recruiting children as young as 5 years old
into paramilitary squads, an operation he compares to the Hitler Youth.

But Pérez Esquivel, who led protests against the Free Trade Agreement of
the Americas, doesn't agree with my verdict against the IMF in Argentina's
death.  He notes that the economically fatal 'reforms' are embraced with
enthusiasm by the nation's finance minister, Domingo Cavallo, best
remembered as the head of the central bank during the military
dictatorship.  For the aging pacifist, that suggests that the untimely
demise of the nation's economy wasn't murder, but suicide.

Award-winning investigative reporter Greg Palast writes, Inside Corporate
America, fortnightly in the Observer (London), Sunday paper of Britain's
Guardian.
At http://www.GregPalast.com you can read and subscribe to Greg Palast's
columns.