IPS-English ARGENTINA: Museum Charts Roller Coaster of Foreign Debt
 
Date: Tue, 15 Apr 2008 15:20:40 -0700

 
Marcela Valente

BUENOS AIRES, Apr 15   (IPS)  - Anyone wondering why a country as
rich in natural resources as Argentina has such a large proportion
of its population living in poverty should definitely visit a cultural
enclave that is virtually hidden away in the bustling capital city:
the Foreign Debt Museum.

”It's the only museum in the world devoted to a process of indebtedness,”
sociologist Ignacio Marutián, one of the guides, told IPS with pride.
The museum was opened in 2005 by the University of Buenos Aires Faculty
of Economics.

”The aim is to present the problem as a classic case of what governments
should not do with their debt,” said Marutián. The museum is housed
in the basement of the faculty, and received some 3,000 visitors,
mostly Argentines, last year.

”Why a museum?” is the first question addressed on the tour. ”Because
books, articles, films and talks are not enough to engrave the topic
on our memories; because we must explain simply and clearly that debt
is not part of an inevitable fate, but the result of specific actions
and omissions,” is the reply.

The exhibit, which is concise and didactic, alternates panels containing
texts and graphics with videos and works of art. In little over an
hour, visitors come out with an understanding of how Argentina fell
so deeply into debt.

Argentina's public debt is currently estimated at 135 billion dollars.
But it was much bulkier in December 2001 when the caretaker government
that took over after president Fernando de la Rúa was forced to resign
by a profound economic crisis defaulted on the country's debt.

Later, Argentina's strong economic recovery enabled the government
to restructure the debt, on longer-term payment schedules.

The poverty rate has fallen from over 50 percent of the population
at the height of the crisis to around 30 percent today. And although
the country has recovered its ability to pay, the interest payments
due in the coming years mean that debt will be a heavy burden for
a long time to come.

”The debt has shrunk as a proportion of gross domestic product (GDP).
Prior to the restructuring, it stood at over 70 percent of GDP and
now it has fallen to 55 percent. But for it to be manageable, it should
come down to 25 or 30 percent,” political scientist Juan Pablo Pilati,
in charge of the content of the exhibit, told IPS.

The museum highlights periods of bonanza and crisis in Argentine
history, from colonial times until 2005, and it shows how those changes
were reflected in the shrinking and expansion of foreign debt. It
also discusses legal action taken to investigate the alleged illegal
nature of the debt.

The storyline starts by saying that ”when the Viceroyalty of Peru
split into Alto Perú (now Bolivia) and the United Provinces of the
River Plate (most of which is now Argentina), the latter lost its
source of precious metals.” Therefore, to finance the war of independence
against Spain, documents were issued representing ”promises to pay.”

These were the first debt bonds to be created in this land. ”Independent
Argentina came into being without monetary resources or credit,” it
says, adding that ”decisions to go into debt have rarely been a result
of seeking social improvements, the general welfare or economic growth.”

The exhibit goes on to say that often in the country's history, officials
acted at one and the same time for the state and for the lending banks.
And with every post-crisis restructuring, new bonds were issued that
legitimised debts whose origins were highly controversial.

In the late 19th century, Argentina faced its first foreign debt
crisis. During the 20th century there would be four more. Not everything
was crisis and indebtedness, however: between 1948 and 1951, during
the first government of Juan Domingo Perón (1895-1974), the country
paid off all its debt.

”It was news to me to discover that there was a period in which we
were not indebted, and were even creditors of developed countries,”
Adela Gómez, a 42-year-old Argentine who visited the museum this month,
told IPS.

In fact, Argentina lent money to Belgium, Holland, Romania and Finland,
in a period when Europe was laid waste by World War II (1939-1945).

By the start of the 1976-1983 military dictatorship, however, the
debt had grown to 10 billion dollars, and by the time democracy was
restored it had mushroomed to over 45 billion dollars.

Before its departure, the dictatorship decided to ”nationalise” private
sector debt, that is, bring it under the sovereign guarantee of the
state, which added it to the already heavy burden faced by society
at large.

President Raúl Alfonsín (1983-1989), the first constitutional president
after the dictatorship, promised during his election campaign to separate
the legitimate debt from the illegitimate, and to pay only the former.
He declared a unilateral moratorium and sought support from other
countries in the region. Later, however, he abandoned this policy
and resumed payments to creditors, until the next crisis blew up in
1988.

His successor, President Carlos Menem (1989-1999), signed a restructuring
of the debt under the Brady Plan, but the debt kept on growing. At
the end of his second term, the state owed 122 billion dollars, the
provinces 22 billion dollars, and the private sector 50 billion dollars.


The debt really erupted under de la Rúa (1999-2001). In an attempt
to prevent the inevitable, the president signed the so-called ”mega-swap”
of debt bonds, a plan to exchange 45 bonds for 5 new ones with longer
due dates. But the debt seemed to go on endlessly into the future
as an unmanageable burden.

Halfway through his four-year term, de la Rúa stepped down in the
midst of a social, political and economic collapse, after which the
country declared itself in default, ceasing payments to private creditors,
who were then the majority debt holders.

The debt was restructured under the government of President Néstor
Kirchner (2003-2007) in 2005. That year, Argentina's debt to the International
Monetary Fund (IMF) was repaid in full, ”to free itself from IMF tutelage,”
says the museum. But the story is far from over.


*****
+ ECONOMY-ARGENTINA: Poised for the Qualitative Leap? (http://ipsnews.net/news.asp?idnews=41851)
+ Museo de la Deuda Externa - in Spanish (http://www.uba.ar/extension/cultura/16.php)


(END/IPS/LA IF IP CV/TRASP-VD-SW/MV/08)


 
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