Posted on 20-1-2002

Argentinia's Problem With Banks

A press conference organized by the New Economics Foundation at Southwark
Cathedral in London today (14th January, 2002), was addressed by Ann
Pettifor, Director of the Jubilee Debt Programme at the New Economics
Foundation and Mario Cafiero, Congressman of the Argentine Parliament, and
a member of the ARI (Argentina Por Una Republica de Iguales - Party for a
Republic of Equals in Argentina, Argentina's only opposition party - led by
Elisa Carrio).

Ms Pettifor said: "The crisis in Argentina would have been less lethal if a
framework of justice had been in place to enable the insolvent Argentine
government to declare a standstill on its debt payments. Instead Argentina
is being crucified on the cross of globalisation - and millions of ordinary
Argentines are being denied their human rights. "Today we launch the
"Jubilee Framework" a proposal for an international bankruptcy process,
which would allow Argentina's crisis to be resolved in an orderly, just and
democratic way. We demonstrate that such an ad-hoc framework of arbitration
could be put in place tomorrow - and reject the arguments of Ms Kreuger at
the IMF, that such an international insolvency framework would take more
than two years to establish."

Mr. Cafiero said: "I am in London today, to back the Jubilee Framework for
international insolvency, because I believe that only under such a
framework, can there be a solution to Argentina's crisis; and only under
such a framework of international justice, can those who are guilty for
this crisis, be brought to justice and be disciplined. "The crisis in
Argentina is not only a lesson for the political class of Argentina, it is
also a lesson for those who supported and colluded with the political class
of Argentina. These include the very richest people of our own citizens;
but also the IMF, the British, Spanish German banks and multinationals
companies, who benefited from Mr. Cavallo's policies.

"The winners of the Cavallo model of economics were: the British, Spanish,
American and German banks who profited from the usurious interest rates.
Winners also included the Spanish companies like Telefonica and Repsol (60%
of their revenues come from Argentina) who benefited excessively from the
privatization of Argentina's assets. But the wealthy individual Argentines,
helped by foreign banks like HSBC and Lloyed, have been able over ten
years, to export $130bn of wealth through the capital flight mechanisms
that both foreign and local banks provided. "The losers were the ordinary
people of Argentina, the new poor. Each day, before the crisis broke, 1000
people were being pushed below the poverty line. 30% of the population now
live in poverty and the 45% in the informal sector who are now unemployed.

"The IMF has co-responsibility for these massive transfers of wealth, both
within and outside Argentina. The IMF shares responsibility for economic
policies that have driven Argentina over the cliffs of recession and into
effective bankruptcy. The IMF therefore is in no position to distance
itself from this crisis - and it certainly cannot play an disinterested
role in resolving Argentina's crisis.

"We need an independent ad-hoc panel to investigate the relationship
between Argentina's massive debt, capital flight and fiscal fraud. That is
why we need an international insolvency process like the "Jubilee
Framework" for the independent resolution of this crisis. "British banks,
like HSBC and Lloyds Bank have to honour their debts to the people of
Argentina, who entrusted them with $6bn of their savings and hard-earned
money. I call on the British banks, today, to reassure Argentinians, by
publicly declaring their commitment to return these savings to the ordinary
people of Argentina.

"I am sure that if foreign banks were to withhold $6bn of the savings of
British people, there would be uproar in this country. "Sadly, 50% of the
savings of ordinary Argentines are today in foreign banks, thanks to the
advice of the IMF, which encouraged the liberalization and takeover of the
Argentine financial sector. "HSBC, together with Credit Suisse, J. P.
Morgan and other banks, colluded with Mr. Cavallo in the ruinous debt swap
deal, negotiated last June (2001) and known as the Mega Swap. Under this
deal, Argentina's debt was re-structured, and as a result rose by $55bn.
"The repayment of this debt every year, for the next 22 years, represents
as much as Argentina will hope to earn from her export of cereals - in
other words, $2.5bn a year.

"If the judicial system functioned properly in Argentina, then Mr. Cavallo
would be in prison today for this deal - and so would some of the
Presidents and managers of European and American banks. "We are sure that
an important part of the capital flight from Argentina is made up of those
who have savings abroad, and have used these savings as collaterel for
loans from Argentine banks. Now they are expecting to be subsidized for the
devaluation of the Peso.

"I am calling on Mr. Eddie George, Governor of the Bank of England to
collaborate in the investigation of Argentine 'back-to-back" loans, to
discover if those who have loans in the Argentine banking system, also have
savings abroad. (Thanks to the information available within the Argentine
financial system, we know who the borrowers are. However, we do not know if
they have savings abroad, which guarantee their borrowing. The return of
these savings or 'capital flight' - could of its own help resolve the
Argentine financial and banking crisis".