Discord over Argentina leaves gaping hole for defaults across the recession-troubled world

The Argentinian Ambassador to the UK will be speaking at the London School of Economics on Thursday. But what will she say to us?

by The Commentator on 16 May 2012 10:57

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The global impact over Argentina’s historic default in 2001 has left a gaping hole in the world’s ability to deal with Greece and other nations who look to international markets for forgiveness.

Almost relentlessly, financial outlets are using Argentina as an example of ‘what could happen’ if Greece leaves the Euro and the squabbles emerge over contracts, debt payments and currency conversions. It’s enough to keep lawyers engaged for years. “Great!” say the Keynesians. “Ah, the broken window fallacy!” say those planted firmly in the Bastiat camp.

But Argentina is certainly not a model that economically embattled nations should seek to follow. With their default in 2001, they turned their backs on market norms, eschewing protocol and opting instead for a ‘take it or leave it option’ when negotiating with creditors.

Recently, we know, they have sought to reconcile this using tactics including the nationalisation of the Spanish YPF Repsol company that contributed enough to the Argentinian economy to perhaps seem incorruptible to the Argentines. But it was not to be so.

Many are currently reflecting on the Chavez-isation of Argentina. A reflection on its shrinking place on the world stage and its almost unfathomable place in respected international markets.

Yet next month, in June, Argentina will be one of the nations represented at the G20 summit in Mexico. Independent statisticians and commentators can’t understand why and we fall squarely in this camp of confusion. Despite myths promoted by the likes of Paul Krugman, Argentina remains a ‘respected’ G20 nation, findlng itself in the company of economies who more often than not, play by the rules.

Despite the right kind of pressure by the markets and international insitutions, Argentina has yet to be held to account for it profligacy and reluctance to engage with institutions such as the World Bank International Center for Settlement of Investment Disputes. The odds are truly stacked against Argentina now and her most recent belligerence vis a vis the Falklands and further beyond is a sure sign of desperation.

There is a message the international community must send as we amble towards renewed legitimisation of Argentina’s place on the G20. Play ball or go home.

Between 2001 and 2010, Argentina has racked up $157bn in liabilities, primarily to the US taxpayer but far beyond also. The country is truly in dire straits as inflation rates hover around 25 percent and nary a figure emerging from ‘official sources’ is to be believed.

Tomorrow, the Argentinian Ambassador to the Court of St. James’s (UK) will speak at the London School of Economics on the issue of the Falklands. But instead of having an easy ride, The Commentator and our friends will be in attendance in order to ask the questions that the Argentinian government simply does not want to answer.

Questions like, “When are you going to pay back your debt?” and “What chances are there of Argentina remaining a G20 nation, having annexed a foreign company?” You should join us, too. For in numbers, we have strength, and Ambassador Alicia Castro should not be able to return a message home to Buenos Aires that everything on this side of the pond is “going accordingly to plan”.

Argentina must be made to pay according to its international obligations and we all can start by asking the right questions.

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