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What happened to the debt?

August 12, 2020

The military dictatorship in Argentina has left a disaster in many ways. There are of course the dead. On the economic side, however, it could be said that the Argentine drama, with its perpetual foreign debt, dates back to Videla’s time. I’m not saying that all of the guilt is Videla’s responsibility, but it could be said that it was at that point that the ball got rolling. The dictatorship fell in the early 1980s, but the debt in subsequent governments continued to grow. Now we have a monster worth more than $ 300 billion. Not even with Bitcoin they all pay for the baby. Macri’s successor, the brand new Alberto Fernández, defaulted on payments in May and has now miraculously reached an agreement with his private creditors. This with the curious support of the IMF. Let’s talk about Argentina and its endless history.

Argentina as a good Latin American country has always suffered from a chronic shortage of dollars. And for the simple reason that it uses more than it produces. It’s the same old story. The economic configuration of Latin America is very fragile. It mainly depends on goods with little added value. So, When prices are high in international markets, there is a gold mine. And when they fall, there is a crisis.

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What happened to the debt?What happened to the debt?

In these cases there are always two problems. On the one hand, there is the problem of financial incompetence. Or, to use a more neutral term, the lack of competitiveness. Our economies are essentially Neolithic. And in a world dominated by big tech companies, that’s a definite disadvantage. During their stay in Silicon Valley, they talk about quantum computers, trips to Mars and artificial intelligence. In Latin America we are waiting for the Chinese to eat more grain. Agriculture, mining, oil, and informality are the kings of the Latin American economy. Well, that’s not enough in today’s world.

On the other hand, we have our institutional incompetence. That is, the political catastrophe. There are no functioning institutions in Latin America. We are more toxic than Chernobyl. Politicians and citizens. There is no recognition for the others and we don’t know how they work as a team. We’re more chaotic than monkey party. To swap a lightbulb, we would borrow from the IMF, beat each other up, and then blame the United States and the Catholic Empire for the disaster.

At the center of this catastrophe is the long tradition of holding previous governments responsible for all of our diseases and always starting over in every administration. And of course there is personalism. That is, the idea of ​​the savior who promises us mansions and castles, but in the end we are all worse than before. Pure rhetoric and no concrete plans.

The issue of trust is fundamental to business. Because the economy is a social enterprise. That said, it requires collaboration. This cooperation depends on fair agreements, concrete plans and clear visions. It takes ethics. Respect for the other. We are all important. And a country in constant struggle does not create trust in cooperation. The absurd class struggle must be replaced by the cooperation of all classes.

Argentina has been in recession since 2018 and during Mauricio Macri’s tenure (2015-2019), according to the employers’ register of the Federal Administration for Public Income (AFIP), more than 24,500 small and medium-sized enterprises had already closed. However, with the arrival of the coronavirus and the decision of the new President Alberto Fernández to issue one of the longest and most rigid quarantines in the world, the number doubled. From a business perspective, we are facing a “corporate massacre”.

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Before the arrival of the blessed virus, Telefónica, Nike, Wrangler and Lee had announced their departure because they considered the Argentine market to be unprofitable. The Chilean airline Latam, the German car paint manufacturer BASF and the French car parts manufacturer Saint-Gobain Sekurit have decided to take their suitcases with them and turn to other horizons. And the list of defectors continues to grow at an alarming rate.

The great exodus of businesses is due to the unpredictability. There is no such thing as trust. In other words, people get tired of constant conflict. It’s not good for business. The all-powerful unions, the ban on dismissing workers, volatile politics, price and currency controls, and a variety of forms of reckless state intervention. The businessman is fed up. And many have decided to throw in the towel. It’s an exodus of exhaustion. Not even Mandrake the wizard can attract foreign investment in such an environment.

The failed attempt to expropriate the country’s main grain mill, Vicentin, did not do much to build Argentina’s credibility in international markets. That and the Mai standard were the icing on the cake.

“”In all honesty, I don’t like cheap plansFernández said. “Really?” This beauty! Aimless with delirium. Of course they talk about reindustrialization and import substitution as goals. But if there is no plan, what is there? Improvisation and personalism.

Public spending is financed with money issues, which has led to the collapse of the currency and inflation. And of course, as usual, there was capital flight. Every man for himself! The last one switches the light. And with the big flight, its cousins ​​always come: the exchange controls and the parallel market (the blue dollar). History repeats itself over and over again. There is no end. We never learn from past mistakes.

Here bitcoin comes with an ally of the blue dollar. Now Argentina is sharing the volume with Venezuela in Localbitcoins by volume. Forex traders using bitcoin to evade currency controls. Bitcoin is the bridge between the beaten Argentine peso and the quoted blue dollar because the government walled the official bridges.

Now the debt. It is an open secret that the International Monetary Fund has a political lead. Of course, Christine Lagarde, former head of the IMF and current head of the European Central Bank, gave Mauricio Macri a happy blank check to help him re-elect. It worked in Brazil, but not in Argentina. Macri lost, and that reckless credit was outrageous.

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Fernández has miraculously managed to reach an agreement with his private creditors who make up 20% of the package. Ironically, this was achieved with the support of Kritalina Gueorguieva, the new head of the IMF. Why? Well, because of guilt. Because they are jointly responsible for the disaster. Macri followed his instructions in detail and failed immediately. However, this support was also unnecessary as they don’t have many options. The point is that after long and complicated negotiations, an agreement was reached. A win for Fernández.

Finally: Latin American politicians come to power with the rhetoric of the conflict. The victim’s story and all that blah blah of the forces of oppression that want us to be poor and submissive. But to be an eternal victim is really pathetic. When you clean your house and sweep the front lines, we speak of empires and tyrants. We can’t change a lightbulb without a fight. But it bothers us that nobody trusted us. Are international markets crazy about putting their money into our disasters? Instead of weeping over what Christopher Columbus did or did not do in the 16th century, we need to focus on improving the institutional framework and competitiveness of our countries.

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