The London-based Financial Times reported September 20 that most of the foreign bondholders seemed to be ready to accept a debt restructure plan in which the Argentine government would pay 30 cents on the dollar. The government of President Néstor Kirchner has said that it could not pay more than 25 cents on the dollar, suggesting that it would otherwise risk a social explosion.

After years of monthly reports of Argentine bonds that pay no interests, most insurance companies, pension funds, and mutual funds that purchased these securities have dumped them onto so-called vulture funds. These funds specialize in buying up “distressed debt.” Along with individual bondholders, they now hold 80 percent of Argentina’s debt, the Financial Times reported.

On September 17 the International Monetary Fund (IMF) agreed to a delay in payment on $1.1 billion in Argentina’s debt for one year while Buenos Aires works out its debt restructuring. The IMF, which is dominated by U.S. finance capital, said the Argentine government must still pay $1.46 billion due in the next four months.

The international bondholders hope to take advantage of Argentina’s economic upturn to recoup as much of their losses as possible. After a devastating recession that reached its low point in 2002, the country’s gross domestic product rose 8.4 percent last year and exports increased sharply. Inflation, which had reached double digits, has decreased substantially. The official unemployment rate is now at 14.4 percent, down from more than 20 percent in 2002.

The economic squeeze has eased somewhat for the middle classes and better-off workers, widening the gap between these layers and the most pauperized sections of the working class, who are still feeling the long-term effects of the privatization of state-owned industries in the 1990s and the plant closings during the recent recession.

In December 2001 the Radical Party government of President Fernando de la Rúa resigned after Buenos Aires defaulted on its debt in face of a mounting depression, setting off a financial collapse and an eruption of working-class and middle-class protests. De la Rúa was replaced by Eduardo Duhalde of the Peronist party, a capitalist party that has the backing of the labor officialdom.

Duhalde’s government broke the decade-long linkage of the Argentine peso to the U.S. dollar, precipitating a 70 percent devaluation of the national currency. Duhalde used his Peronist credentials as a “man of the people” to push through the devaluation and other measures devastating to working people, in order to restore the confidence of the capitalists. The current president, Kirchner, is also a Peronist.  
 
 
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