“It’s awfully important that Argentina live up to its commitments to the IMF, proceed with reforms that they’ve committed to, and put themselves in compliance with the IMF program,” U.S. Treasury Secretary John Snow told the other G-7 members—Paris, Berlin, Tokyo, Rome, London, and Ottawa—meeting in Boca Raton, Florida.

Argentine president Néstor Kirchner has adopted a defiant stance toward the demands of the international bondholders. He stated the day after the G-7 meeting that he would stick to his original proposal that the bondholders write off 75 percent of the debt they hold. “There’s no possibility of modifying [our proposal],” he said. “To pay more would burden the Argentine people with more difficulties than they already have.”

The International Monetary Fund (IMF) executive board had approved a $358 million loan payment to Argentina 10 days earlier. The vote on the action revealed tactical differences among the imperialist powers over how to deal with the economic crisis in the second-largest economy in South America. Representatives of eight governments on the 24-member board abstained in the January 28 vote, indicating their disagreement with the decision, which was directed by Washington.

Among the eight who formed the minority in the vote were the representatives of Italy, Japan, and the United Kingdom. They were joined by those of Australia, Belgium, Denmark, Iceland, and Switzerland. The 15 who backed the U.S. position included the governments of Canada, France, and Germany, as well as Spain, Brazil, and Russia.

Washington’s position reflects the U.S. rulers’ concern about instability in the second-largest country of South America, which they consider to be their “backyard.” The eight who abstained, are bent on pushing to satisfy the demands of their bondholders for immediate payments on the debt and are less concerned about whether such demands could stoke the potential for a social explosion simmering in Argentina.

The funds approved January 28 are part of a $13.3 billion three-year loan agreed to last September between Buenos Aires and the IMF. That loan essentially rolled over Argentina’s debt to the U.S.-dominated institution, which plays an important role in capitalists’ ability to siphon off the wealth produced by workers and farmers in the semicolonial world. The deal was arrived at after the Argentine government defaulted on a $3 billion payment, the largest missed payment in IMF history. The IMF is Argentina’s only current source of external financing.

In December 2001 the government of Fernando de la Rúa defaulted on $88 billion dollars in sovereign debt—interest payments to holders of government bonds that were touted in the 1990’s as easy moneymakers. The bonds attracted billions of dollars of investment internationally—and in Italy and Germany, in particular—from large capitalists as well as pensioners and others who sank retirement funds and lifesavings into the get-rich-quick scheme.

The gross domestic product in Argentina dropped by 12 percent in 2002, and working people faced the brunt of an economic meltdown, in which unemployment reached as high as 25 percent, inflation shot up to 40 percent, and the peso lost 70 percent of its value against the dollar. An explosion of working-class struggles brought down four presidents in rapid succession as the capitalists tried to stabilize their control.

Behind the eight abstentions in the IMF’s vote to make the $358 loan payment to Argentina stand the bondholders who are growing increasingly worried they will never see the $88 billion on which Buenos Aires defaulted in late 2001. They argue that the IMF is giving the Argentine government no incentive for negotiating a payment on its debt to them.

The lead editorial in the February 2 London Financial Times argued that it is “Time to say no to Argentina.” The editors of the business daily state that the “recidivist government” in Buenos Aires must be taught a lesson because of the impact it would have on other semicolonial countries trapped in debt slavery. “Any crisis-hit country of sufficient size and importance could conclude from this episode that it should choose foot-stamping defiance to the IMF over painful but necessary reform,” wrote the editors. They displayed particular rancor over the fact that the Argentine government “refused to allow utility prices to rise.”

In September 2003 Argentina offered bondholders 25 cents on the dollar to settle the debt. Buenos Aires also stated that it would not pay any interest on the debt from the time it defaulted in 2001, meaning in effect that the Kirchner government is calling for a 90 percent write-off on the debt. Representatives of the bondholders countered that they would accept 65 cents on the dollar.

The creditors and their representatives claim that a recovery is underway in the Argentine economy. Pointing to an up to 8 percent increase in the country’s gross domestic product last year, they argue that Buenos Aires should pay up. With official unemployment at close to 16 percent, however, the economic devastation that the imperialist debt-squeeze has meant for workers and farmers in Argentina remains a reality for millions.  
 
 
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