Argentina’s Economic Collapse – Part 1 of 12
Documentary on the events that led to the economic collapse of Argentina in 2001 which wiped out the middle class and raised the level of poverty to 57.5%. Central to the collapse was the implementation of neo-liberal policies which enabled the swindle of billions of dollars by foreign banks and corporations. Many of Argentina’s assets and resources were shamefully plundered. Its financial system was even used for money laundering by Citibank, Credit Suisse, and JP Morgan. The net result was massive wealth transfers and the impoverishment of society which culminated in many deaths due to oppression and malnutrition. Official name: Memoria del Saqueo by Fernando Solanas 2003.
Hat tip to SLAD at the Rigorous Intuition Forums.
What A Real Financial Collapse Looks Like
Argentina – October 2001
The government of the Alliance loses the legislative elections. President De La Rua (1999-2001) refuses to change his policies.
In 2 years of power, his progressive program was replaced by the plans of the IMF (International Monetary Fund), a continuation of the policies of Carlos Menem (1995-1999).
> The recession deepens
> Millions are poverty-stricken and unemployed
> Massive flight of capital
> Bank accounts are blocked
> The crisis worsens
December 19, 2001
“In view of the situation, I have decreed a state of siege for the entire country and informed Congress of it. Our country is going through a difficult period…”
[People are anxious, frustrated, angry and banging pots in their homes and on the streets, symbolizing hunger] “Kick ’em all out!” “Every one of them!” “The government must resign!” “Together, we’ll never be defeated!”
After many years of apathy in the country, the insurrection exploded. The spontaneous revolt of “faceless” people meant saucepans were being banged in every neighborhood, all the way to the city’s vital centers. People took to the streets without getting any orders.
“I’ve been out of work for 6 weeks, and I’ve slaved away my whole life.”
“I don’t want a state of siege, or to be a pawn of the IMF.”
“It’s an outdated economic model. De la Rua must resign and all the swindlers with him.”
[As the people revolt, gas bombs are exploded on them, they are shot at indiscriminately by motorcycle, horse-mounted and walking police and troops. Explosions are everywhere, fires burn, people march, loot and revolt.]
December 20, 2001
[The revolt rages, chaos reigns, crowds are shot, sprayed, beaten and whipped]
“We’re dying of hunger!” “In glory we shall die!” “This square belongs to the Mothers, not to the cowardly others!” “We’re not in a dictatorship anymore! Bunch of idiots! Armed baboons!” “Who ordered you out here? Can you kill a woman because you’re ordered to?”
> Repression fails to empty the Plaza de Mayo
> Hundreds of citizens rally to the movement
And the people don’t clear out. They’re workers, housewives, employees, pensioners, students. The heirs of those who, for decades, defied the dictatorships and the persecutions, put up with the policies of austerity and were betrayed by democracy.
What happened in Argentina? How was it possible that in so rich a country so many people were hungry?
The country had been ransacked by a new form of aggression committed in time of peace and in a democracy. A daily and silent violence that caused greater social disruption, more emigration and death than the terrorism of the dictatorship and the Falkland Islands War.
1. THE NEVER-ENDING DEBT
Ever since Independence almost 200 years ago, Argentina’s foreign debt has been a source of impoverishment and corruption, and the biggest scandals.
Since the first loan negotiated by Rivadavia in 1824 with the British bank, Baring Brothers, the debt was used to enrich Argentinean financiers to control the finances and empty the country of its wealth. This foreign debt always went hand in hand with big business and with the complicity of nearly EVERY government, from Miter and Quintana, to Menem and De la Rua.
The policy of indebtedness gave rise in Argentina to generations of technocrats and bureaucrats who favored banks and international corporations over their own country.
Educated at Harvard, Chicago, Oxford or Buenos Aires, their portraits hang in the official galleries. There you can see 19th century lobbyists like Manual Garcia and Belaustequi, or the latest heads of the public banking system. Pedro Pou, Macarrone and Colombo, administrators of a debt that was born in the 1970s under the military dictatorship.
1976 – “We have turned the page of government interventionism.”
The present debt was the illegitimate offspring of the military dictatorship. Even though the Courts demonstrated its fraudulent origins, the pressure of the Establishment won the day. From then on it dictated national policies and depleted the public heritage.
All this is perfectly symbolized by the statue of George Canning, an advocate of colonial policies that was donated by the British Government in 1857 in recognition of the debt.
> American defeat in Vietnam
> Conservatives return to power
> Crisis and rising oil prices
> Petrodollars flood the world
> Banks offer credit at 3%
> Birth of the third-world debt
> Interest rates reach 16%
> Bankruptcy of indebted countries
An alliance of foreign banks and multinationals comes to power in Argentina. After 7 years of neo-liberal policies, the dictatorship leaves a country bled dry, with a foreign debt of $45 billion, of which half is a private debt.
$23 billion is owed by multinationals operating in the country like Citibank, First Boston, Chase Manhattan, Bank of America, Bank of Italy, Bank of London, Bank of France, Deutsche Bank, Banco Rio and Banco Qullmes, Banco Galicia and many more.
And by the multinationals like Esso, Fiat, IBM, Ford, Mercedes Benz, Swift, Pirelli, as well as local groups owned by Perez Companc, Bulgheroni-Bridas, Macri, Techint, Fortabat, Pescarmona, Gruneisen, Soldati, Corgasco, Celulosa and others.
An excessive private debt that a top bureaucrat of the dictatorship saddled the State with: Domingo Cavallo.
Domingo Cavallo…A “super-Minister” of Finance in the Menem and De la Rua governments…he is responsible for the unending growth of the debt and the worst pillage ever suffered by the Argentinean people.
“THIEVES, BANKERS, GOVERNMENTS…GIVE US BACK OUR DOLLARS”
“The police protect the thieves, Mr. Solanas. The world’s turned upside down. Now the people must demonstrate peacefully to defend their savings that were confiscated by the banks with government complicity. The State should guarantee citizens’ rights, not steal them.”
“I saved during the 25 years I worked so I could live decently when I retired, not on a State pension. Why don’t the banks treat us like their foreign customers? I chose private banks, I didn’t trust ours. I already got swindled in 1989. But I must be stupid. What do they want? A bomb? That’s not my style…that’s why I’m banging on my pan. I used to cook with it for my kids. Every time I look at it [the pan], I’ll be reminded of those scoundrels, but I’ll know I fought for my rights.”
“I’m the oldest news vendor in Avellaneda. For 65 years I’ve sold newspapers. All my savings are in Citibank. The manager of the agency says they’ll return them to me. It’s a lie! Everything I saved by making sacrifices is in their hands.”
“In fact, the foreign banks owe money to the Argentineans. In a way, it’s a reversed debt. The parent companies must be responsible for the deposits. That was decided by law in Argentina in 1971. In the well-known Swift Deltec case which established that parent companies were responsible for the debts of their subsidiaries for the debts of the banks. It’s a swindle to make the government responsible for the debts of the banks.”
What about our foreign debt?
In many ways, that debt is illegitimate. In a fundamental way, it’s illegitimate to repay the banks with 18 million people poverty-stricken and 9 million paupers. There’s a human priority. Then the banks charged usurious interest rates. If they’d charged normal interest rates, the foreign debt would have been paid off by 1988.
What was this swindle?
The parent companies made loans to their subsidiaries, so these were internal movements. These loans were assigned to the foreign debt, when in fact they were internal to the companies. Dollars were bought here and placed in accounts in the United States. With this deposit as collateral, you got a loan to purchase more dollars, and so on, because of the difference in interest rates. It’s what’s known as “bicycling” fund, and many got rich on it. The main beneficiaries were the big conglomerates, as usual.
At the end of Alfonsin’s presidency (1983-1989), the foreign debt was close to $54 billion. Menem (1995-1999) let the creditors determine what they were owed. Congress never debated on the debt, neglecting the Constitution and a decision by the law courts. Ten years later, the debt reached $130 billion.
[Cavallo] “People have a false idea of the debt. You get into debt, then you say it’s bad. But indebtedness is what enables credit. Indebtedness is beneficial. We are going to develop credit for everyone. Owing money is fine.”
A good example is what the North Americans invented around 1898 at the time they occupied Cuba. Some Spanish banks had granted loans to the colonial government of Cuba. The North Americans said: “If the Cuban people didn’t benefit from these loans, there’s no public debt.”
In 1923, a British bank, the Royal Bank of Canada, lent a petty tyrant of Costa Rica, called Tinoco, a sum that he used for personal goals. The Royal Bank of Canada asked Costa Rica for repayment. There was a lawsuit of which the arbitrator was an ex-president of the United States, President William Taft.
Taft ruled in the litigation saying, “It’s about a private debt, not a public debt. You can’t have a public debt without a “public” with the public as the beneficiary of the debt.”
These operations never benefited the public…quite the contrary. It’s the person who shops in a supermarket and pays VAT (value added tax) who ends up paying for the private debts of big enterprises, or of the very rich people. The problem of private debts that were illicitly nationalized by Mr. Cavallo must absolutely be reexamined.
What is this theory? It is the theory of the Odious Debt.
A director of the IMF, Karen Lissakers, representing the US said, “If we applied the theory of the Odious Debt, the Third World’s debt would no longer exist.”
2. A CHRONICLE OF TREASON
Democracy was reestablished with the radical, Raul Alfonsin, and his social-democrat approach. He promised to defend human rights, to fight poverty, and to show that in a democracy “you get education, care and food.”
[Alfonsin] “We have the huge responsibility of guaranteeing democracy and respect for human dignity in Argentina.” “As we’ve said, this means that the State cannot bow to international financial groups, or to privileged local groups.”
But the State was bankrupt and had to make a choice.
[This is exactly where America is at today.]
Economy minister, Grinspun, suggested repudiating the debt and favoring growth. Alfonsin would not go along and yields to financial power.
[Alfonsin] “The only solution is a policy of austerity that will be very hard and require great efforts by everyone. It’s called, my dear compatriots, an economy of war. We must all learn from it.”
This drastic measure is called “Plan Austral.” Once more, huge public funds are transferred to the banks and big corporations. Alfonsin says two things at once . He promises to repudiate the debt, but orders the president of the Central Bank to legitimize it. He favors prosecuting Army officers for their crimes during the dictatorship, but two years later, the “Due Obedience” laws exonerate crimes committed on orders of a superior.
Laws that resulted from the insurrection of the rebel “painted face” officers…People took to the streets and defied the tanks.
“We’ve had enough of jackboots!”
Alfonsin amnesties the rebels: “Dear compatriots, Happy Easter! The insurgents have put down their weapons. Among them were heroes of the Falklands War who had strayed.”
The electoral defeat of the Radical Party accelerates the crisis. Stock market instability and hyperinflation leads to runs on the supermarkets.”
Alfonsin: “I’ve decided to resign from the job of President of Argentina.”
Alfonsin has to resign 6 months before the end of his mandate.
[Throngs of citizens celebrate in the streets]
The neo-Peronist Carlos Menem becomes President after having for many years governed the province of La Rioja, one of the poorest in the nation.
His lightening rise coincided with the fall of the Berlin wall and the ideas of the “Consensus of Washington.” With his frankness and his preacher’s gestures, he promises a Productivist Revolution and big wages. He has long sideburns like the old rebel Facundo Quiroga, the “Tiger of the Plains.”
“For every Argentinean standing, the poor children who are hungry or who are sad, for our brothers without work, for the homes without a roof, for the babies without bread, for our homeland, I ask you to follow me. Follow me. I won’t betray you. I won’t betray you.”
“As God is my witness and facing the judgment of history, let me proclaim: Argentina, get up and walk! Sisters and brothers, in a single voice I say to the world: This is the advent of a new and glorious Nation.”
This is the era of the theory of the “End of History” and the single-mindedness of globalization and of neo-liberal democracies in Latin America. [Inauguration]
A few days later, he [Menem] abandons his sideburns and his promised reforms, and betrays his voters. His program becomes that of the liberal conservative minority, directed by the former rebel officer, Alvaro Alsogaray.
“Everything has changed now. There’s a new relationship between conservatives and Peronists. We appear to be the same, but a fundamental change amongst us has occurred. Historically, it’s only fair that a neo-Peronist president should bring this about.”
No one before Menem had dared to carry treason so far, or undertaken so cynically actions that harmed the Nation. The two-faced game of the new leader will pulverize 50 years of popular resistance. He imposes allegiance to the global model, amnesties the leaders of the junta, and betrays millions of workers who lived through the repression.
He abandons popular anti-imperialism and non-alignment extolled by Peron and Evita, and initiates a “physical relationship” with the US. [Menem plays tennis with Bush Sr., and wines and dines with Bush.]
His policies will be dictated by the World Bank and the IMF. But Menem isn’t the only one who betrayed. Many of the political and union leaders dumped overboard a whole life of resistance. Many of them accepted arrangements and opted for indemnifications. Others climbed onto the bandwagon of privatizations.
“Senator Cafiero, you are a historic leader of the Peronist Party. How do you explain Menem’s treason?”
[Cafiero] “It happens frequently in the political life of every nation. There’s a small French book, “In Praise of Treason,” where they prove that treason is part and parcel of politics. To succeed, you have to lie. If you say what you think, no one will vote for you. That’s what happened in Argentina, but much more intensely. Let’s face it, when Menem was in power, he even admitted he hid his goals to get elected. Of course, in my opinion, it’s politically unethical, but that’s the reality. Then, some international parameters changed and the model gradually exhausted itself.
[Interviewer] “How do you explain the existence of a real “mafiocracy”? Economic power, banks and the political class.”
[Cafiero] “On that, I won’t pass judgment. How can I put it in an absolute way…My long experience has taught me that things are relative. It’s not all black or white…things aren’t corrupt or pure. Argentinean society as a whole can’t call itself pure and assign corruption to the ruling classes. The ruling classes come from that society. On one hand, we politicians have been a failure, and I’ll assume my part of responsibility. But on the other hand, many of the ruling circles let us down…and to reach a verdict on everyone, I’d say we’re all in Dante’s hell.”
[Another speaker] “Undoubtedly, treason is very effective. Treason has phenomenal political power, precisely because it’s treason. It’s insidious. It sneaks up behind you without warning where you least expect it. Otherwise, it wouldn’t be treason. In this sense, the neo-Peronist Party was the most brilliant representative of Cafiero’s point of view. If you ask Argentinean society to choose between San Martin – our national hero – and Spiderman, it’ll vote for San Martin. But between Spiderman and Superman, how can you fault society for the consequences of that choice? So we have a society with a weakened role…a party that betrays its historic ideas and surrenders to the enemy…a working-class movement eroded by de-industrialization infested with traitors.
“Law courts that pay lip-serivce to all that…Opposition parties without much room to maneuver…and the result of it all is…”
3. THE REPUBLIC DETERIORATES
Menem’s neo-liberal model is inseparable from the deterioration of the republic and corruption. His political plan needs a biased Supreme Court and federal law courts under his control [sound familiar?], and for special powers to be delegated by Parliament.
In one month, he got his Law of Laws passed, the Reform of the State that opened up for him the door to privatizations.
“Today the Senate is debating a fundamental law for the country. For the first time, we are going to attack head on the structural weaknesses of the State as a whole…notably of its public corporations. We must be grateful to the President of the Republic because this law is the beginning of the Productivist Revolution.”
Democracy was ridiculed by Parliament during the Menem era. He gave Ministries extraordinary powers, absolute powers, total public power.
[Heed this part closely…]
“He gave Ministries the power to privatize State enterprises without inventories, balance sheets…without verifying beforehand if these enterprises generated profits or losses. Meaning that this vote was the starting point of the plunder of State property.”
Who voted for it? “The neo-Peronists, the Radicals, very obligingly. I remember very well the Radical Jaroslavsky ordering many of his congressmen to withdraw from the House so that neo-Peronists could pass these laws.”
“Rarely does everything enable a minority to come to power without throwing a bomb or firing a shot. Yet that’s what the conservative Alsogaray got for the Reform of the State. This reform gave Menem absolute, dictatorial powers that even the dictator Videla never had. Alsogaray said it openly: He told the neo-Peronists that they were taking part in an extraordinary moment…that they’d have total power. But now, this ostensibly democratic power was going to be held by those who once censored, executed and slaughtered. That’s what Alsogaray brought about.
“How far would they go? What were they capable of? Of a lot more…and they kept it up. There were denunciations over the privatization of the national oil company, YPF. A congressman denounced the remittance to senators of a bribe of $8 million…then denied it hours later.”
Of 130 congressmen present, 114 voted “Yes” … 10 voted “No” … with 1 abstention.
“We should be delighted that the House was able to perform its duties. For Argentina, this is a day of jubilation. From now on, the oil belongs to the provinces. YPF will be quoted on the stock market and benefit from private investment. Thanks to this, old-age pensioners will benefit from billions of dollars…”
These fine words hid one of the most odious acts that Parliament committed. With the help of bribed congressmen, it voted the privatization of YPF and Gas del Estado [the oil and gas companies]…the two biggest Argentinean companies. The country lost enterprises that financed its infrastructures and, of course…
…old-age pensioners and workers got swindled.
The opposition couldn’t prevent it….though dissident Peronists formed the “Group of Eight.”
“Reforming the State doesn’t mean privatizing it. In an emergent country, you don’t begin with layoffs.”
Other opponents of the oil company plunder were threatened or attacked. “In May 1991, for having filed charges against Menem for dismantling the YPF, I got 6 bullets in my legs.” “The privatization of YPF is madness. It’s an outrageous theft.”
“Of course there was corruption! It’s a fact. It goes hand in hand with privatization. Just look at the heritage of those who voted for it. I mean the leaders. Look at them. There’s no evidence. Nobody saw suitcases full of dollars. Yet, it was never denied. There were so many lobbies, so much money to be made, again and again, so many deals made on the quiet…while the media praised the advantages of privatization. Like the TV journalist Neustadt…he had high ratings.
“Not only the politicians, we reporters and the media also played a role. How long must we put up with this idiocy? TV and radio in the hands of idiots…for a nation of idiots? How long?”
The Congress of this mafioso decade that voted such disgraceful laws against the Nation, needed the police to protect it. The people were so outraged that each week brought its share of protests.
[I believe this is why the US Army’s Combat Team has been called in]
Pensioners, teachers, civil servants, students, workers and the unemployed from every profession. It was the beginning of a dark era.
The national budget had to be approved in Washington, before it was by our Congress. The government asked for the people’s understanding, because the country was on its knees…
We were called the hand-raisers
We were devoted, committed,
We voted with our eyes closed,
As the party asked us to.
We were called the hand-raisers,
We legislated without remembering,
And our voters we betrayed,
And we didn’t hear their boos.
4. THE ECONOMIC MODEL
The instrument used to apply the neo-liberal model was the Convertibility Plan that liberalized imports and was based on a lie:
One peso equaled one dollar. It managed to stop inflation, but left our nation’s industries defenseless. Until then, the country produced 95% of what it consumed, and exported machine-tools, trains and household electrical goods. Henceforth, it imported fabrics, meat, dairy products, fruit and pasta.
The country was “dollarized”: You could pay for anything in pesos or dollars. But with zero inflation rate, credit outfits and banks lent at usurious rates of 50% per year, when in the U.S. and Europe, the rates were 7%. The euphoria of peso/dollar parity made tradesmen and small businesses unable to compete and bankrupts them.
Hundreds of factories and workshops disappeared: In textiles, metallurgy, automobile spare parts, consumer goods and many other areas.
These were the years of flaunting illegally acquired wealth.
“Let’s try not to steal for 2 years.” Bribes and swindles are permitted.
“If you put your hand in the till, do it discreetly!”
Life is privatized and walled in. Security agents and country clubs…The land of “Rich and Famous”…
“You’re a Peronist?” “Always have been,” says the a wealthy woman.
…and of pizza with champagne.
The media as the driving force of change
Modeling with the YPF, with oil, was a sacrilege. It was like offending the tango or the flag.
The State meant corruption and bureaucracy – Oil underground is no good to anyone
Private ownership is modern and efficient
“Everyone has the right to a little frivolity.” “Your lover-boy image embarrasses you?”
“The opposite: it helps me.”
Politics becomes a spectacle
“My love, it’s really hot here…” “He’s so cute! Politicians are handsome now…”
“I’m thrilled by this economic model. It’s a lie, a total lie that it creates poverty,” [says a wealthy man, as the video flashes to images of dire poverty all around.]
“We’ve lived her a long time. The politicians always make promises. But our local representatives never did anything for us. So we who live here decided to block the road so that they’d understand what our daily life is like. Kids can’t get to school. Patients can’t be moved as ambulances can’t get through. We want to live decently. We’re poor, humble, but we’re not fooled when they offer us a meal, clothing, booties for babies. We wanted them to build drainage. There was money, everything that was needed. But they kept the money. When it comes to stealing, they are the masters. They teach people how to steal.”
“We’re no longer just teachers. Now we’re also social workers. Moms come and ask if we have extra sneakers. We help the community. When there’s flooding, we become the emergency shelter. We put up the students when the roof of their house blows away, when they have nowhere to sleep. The kids are worried for their families and want to take home any remaining sandwiches. We can’t make them concentrate. Their minds are on other things.”
“Sometimes they faint [the students]. Then we ask them: What did you eat yesterday? This morning? They answer: ‘Soup, tea…’ They faint very often. We’ve gotten used to it. But it’s shameful.
The Convertibility Plan was part of a global project linked to a debt that had become irredeemable. In 1992, Finance Minister Cavallo negotiated with the US Secretary of the Treasury, Nicholas Brady, exchanging this debt against our national heritage for a bargain price.
State enterprises are purchased with national bonds, pegged at 15% of their face value, but redeemable at 100%. This agreement made the country lose more than $30 billion dollars.
[President Menem] “The Argentine government achieved tonight 7 fundamental privatizations in 7 strategic sectors for the country. We will move on to the privatization of TV, of phone companies, of a forthcoming toll booth system, of forthcoming road and railway concessions, as well as the privatization of radio, without forgetting of course the privatization of the national airline. We’ve elaborated our 10 Commandments, the Menemist 10 Commandments for the Reform of the State.
[Another Speaker] Commandment #1: Menem doesn’t know it yet, it is taken from one of his speeches: “Nothing belonging to the State will remain in its hands.”
Nothing was spared. No matter what it was or how much it cost, or how or why it was sold.
Cued by the methods of other centuries, these privatizations were an extension of the old colonial expropriations. Once the Potosi was robbed of its silver and gold. Now oil, water and communications are stolen. The foreign companies did in our country what they couldn’t do in their own countries
Non-execution of works
“They were exonerated for the non-execution of works. Rates were raised to make the users pay for the investments. No new capital was needed. The more you risk, the more you earn. In Argentina, no risks yielded huge profits.”
“They either doubled or tripled the rates in dollars. 26 privatized concerns. 13% of the total number pocketed 60% of the income.
26 privatized concerns…60% of the income
“France Telecom in Argentina had a profitability of 15%, and Telefonica of 16%; whereas, the 10 biggest international operators only average a profitability of 5 or 4%
5% worldwide; 16% in Argentina
“These concerns are private here, and public in their own countries.”
The Argentinean enterprises were sold without debts. The State took care of the 150,000 layoffs required by the purchasers. The main investors were Spanish and French. The profitable ENTEL was sold for 1/5th of its value to Telefonica and France Telecom, who saddled it with a $6 billion dollar debt. Aerolineas Argentinas was profitable and owned 37 planes. The Spanish line Iberia mortgaged them to purchase the business, and stripped it of all its assets.
The State water utility was taken over by a European syndicate headed by Suez and Vivendi. After making it owe 8 times its assets, huge profits were made, but the works agreed to were not completed. 800,000 people were left without drinking water, and 1 million people had no sewers.
The worst case is probably the dislocation of the railroads that dealt a fatal blow to regional economies. Thousands of families had to move. 36,000 km of tracks existed…now only 8000 remain. There were 95,000 jobs…now only 15,000 are left. Ten years later, the State pays out more and more subsidies, and now owes the World Bank $700 million dollars borrowed to pay for the layoffs, and another $700 million in interest…just to suppress 80,000 jobs!
Billions in subsidies
Privatizations were supposed to end the payment of subsidies that supposedly led to the public deficit. The irony today is that most of the privatized companies are subsidized. Just for the national highway system, the subsidy was $1.1 billion. And as the $980 million for acquiring them weren’t paid, they stole a total of $2 billion!
They never paid the fee
You have to pay a fee to use a public property belonging to a country. They never paid it. No one. Not for the roads, the postal system, the airports…
Legal protection always favored the conglomerates. No one negotiated for the consumers. Why such impunity? Politics. Big business and political scheming.
> Big business and political scheming
> The big conglomerates
Privatizations were planned in the interest of the big conglomerates. They were the ones who financed all the election campaigns, all the governments, all the coups d’état, all the major public works undertakings. No other sector benefited from such privileges: Protected markets, astronomical subsidies, fiscal advantages, rate-overcharging, exoneration of penalties for non-performance of work, extensions of concessions, and conversion into pesos of debts in dollars. They failed to honor their contracts with the State, swindled it and then sued for damages.
Among these were: [major interests are listed]
Unemployment is spreading like a plague contaminating the whole society. The lines of dole seekers get longer everywhere. Unemployment has gone from 11% to more than 20%, not counting the temps.
What’s the situation of the workers? They’ve lost their salaries, their social benefits, their unemployment insurance, their accident and sickness coverage. More than 1/2 of them are moonlighting. A social situation that only prevails in the most under-developed countries. People don’t dare resist. They fear layoffs and that the next day there may be no solution at all. So they agree to salary cuts, deteriorating work conditions, working in unsanitary surroundings. Losing your job means ending in a void, joining an army of beggars, the army of the excluded. It leads to depression, to anxiety.
In the Latin-American country where social rights were once more advanced, thousands of destitute people flock to the church of San Cayetano, patron saint of work, asking for help.
6. THE LIQUIDATION OF OIL
Argentina’s a unique case in the world and in Latin America. No other country gave up its gas and oil without losing a war.
The country was truly betrayed by the ruling class. Mexico, Brazil and Venezuela never privatized their oil.
Why was the sale of YPF such an atrocity? Because of the role that YPF played in the country and in the world oil market. You have to remember that when Mosconi created YPF, the first State enterprise in the world, oil was considered to be very strategic, and the sale of fuel to be of national interest.
If the international price rose, YPF kept the price low, according to its costs and not the market price.
YPF was created in 1923 on orders of General Mosconi. In 1907, oil had been discovered in Patagonia. In spite of its detractors, the oil company was developed without the need for foreign funds and became a model for Latin America.
It expanded so rapidly that it earned as much for the country as the province of Buenos Aires. Its reserves were estimated to be worth $200 billion.
To privatize it, they had to commit many irregularities. Actually, if the law was applied, most private concessions would be invalid. Argentina could soon rebuild its national oil company if it had true political motivation.
The strategic reserves where the greatest sums were invested, were awarded for 25 years for a price equivalent to 9 months of production. They were so poorly sold that Menem had to deal with it personally.
$19 for shares that were worth $38…$350 million shares at $19 is a gigantic swindle. They even hired the McKinley Company to underestimate the reserves. A year later, the reserves reappeared in the accounts at their real value.
So they sold, say, a reserve for 100, when it was worth 140.
A cartel of four multinationals applied the highest rates on earth to us.