At least with Argentina there's reason to be optimistic. From what I've read, the newly-elected Macri administration seems to be taking concrete steps toward reversing Fernandez's economic mismanagement.
Be aware the country is highly divided along political lines, and some of us in Argentina are thinking Macri is sinking the country into a profound unpayable debt and a crisis the likes of which-- well, I was about say "we've never faced before", but sadly my country is cyclical. We have faced it before, and we will again.
I have reason to be pessimistic about Macri's policies.
You can see in the video, the son and the accountant of a major contractor from Kirchner's Administration.
They're counting corruption money, and drinking a scotch to celebrate afterwards.
Looks like a hollywood script. Reality surpasses fiction.
Yes, the almost complete surrender to the terms of the holdouts and vulture funds, Paul Singer included, will sink the country into a debt I don't see how it can ever be paid. All within 90 days, quite a feat!
Alleged contractors corruption cases are a serious deal which should be investigated, no-one is denying that, but I don't think corruption alone is all that matters in a country. I'm more worried about disastrous policies. A perfectly honest politician can lead a country to ruin, and many of us don't think Macri is clean in any case.
The US had a lot of debt to "Vulture Funds" after the Revolution. The US paid.
Like the US, Argentina's decision to pay its debts will enable the country to borrow, which is useful if you want to invest in stuff which will improve your economy.
I'm unfamiliar with that part of US history, can you provide me with a brief recap (or better yet, a link to an article) explaining how their creditors behaved like vulture funds? (edit: do you mean this? https://history.state.gov/milestones/1784-1800/loans)
This isn't about regular creditors, but about vulture funds, sovereign debt, ruining countries, and the never-ending cycle of incurring even more debt to pay for existing debt.
After the Revolution, the US owed money to many including soldiers who served in the War. After a few years, it seemed like the payments would never be made, and speculators began buying up the debt at steep discounts. These speculators basically acted exactly like the "Vulture Funds" did in the Argentine situation.
Many were naturally for paying what was due to soldiers, and against paying off the speculators who were "preying" on the situation. By paying it all off, Alexander Hamilton demonstrated the (a) the US would make good on its debts and (b) US debts can be can be liquidated bought and sold freely without exception.
Both of these points make it easier for a country to obtain new finances on demand at lower cost. Point (a) means the lender can be assured the country will not disown the loan. Point (b) because debt which can be freely sold gives the lender much more flexibility.
Thanks! Very informative. I see the parallels now.
However, am I right in thinking that, along with incurring new debt, Hamilton also recommended additional policies, such as taxation and protection of the industry? These are points of criticism of Argentina's new government: relaxation of import restrictions, and decreasing taxation of businesses and of exports from the wealthy agricultural sector.
A bit nearer to you, Brazil also surrendered to vulture funds at the 90's, and paid it back with things running very smoothly. During all the time the opposition (current government) was screaming how it was impossible to pay it back just like it's doing in Argentina now.
But yes, there are debits that are impossible to pay back. Argentina is too big to get one of those in 90 days, but you may be in that hole - it depends on the details.
Also I'll disagree. Corruption is the single most important issue on LATAM today. It's the root of nearly all of our problems.
Thanks for the reply and for the polite disagreement :)
> Brazil also surrendered to vulture funds at the 90's, and paid it back with things running very smoothly
What was the impact of those policies on the population, especially on the poor? Honest question, this isn't a trick question -- in fact, I'll be honest and say my assumption is that neoliberal policies in Latin America hurt the poor and create the ground for the rise of so-called populist governments. With Brasil this theory of mine is made less clear by the fact that, if I'm not mistaken, Lula's PT continued many of the policies of Cardoso... I remember being very confused about that!
The results of controlling inflation and privatizing state companies was that from 94 forward a never seen number of people raised from poverty. Hunger was almost eradicated (yes, before Lula), and wealth inequality started to reduce fast. The result of unwinding those policies is now that people are going back to poverty, also in huge numbers.
I don't have much idea if the net result of renegotiating the external debit was positive or negative. It was mostly a non-event, it is hard to find any impact anywhere. I imagine the magnitude varies with the actual debit size, and at the end of the day, our wasn't that big - despite politicians focusing their discourse on it for a generation.
Anyway, to the extent that it has any meaning, "neoliberalism" also includes focusing on extractivist industries. We didn't practice that part.
Also, there was some effort into fighting corruption and institutionalizing policy. I'd classify it on the poverty reducing side of the balance, so that it murks a bit the effects of monetary stabilization. But then, poverty continued to reduce even late at Lula's government, so I must conclude that the stabilization was more important than this fighting (that wasn't as big as what is happening now).
About the raise of PT, it happened in a period of worldwide economical crisis, and our economy took a hit. The party got very lucky that the world economy recovered fast, and got into a big period of growth, that only ended in 2008.
The new government will also be corrupt. And they have agreed to repay questionable old debt by taking on new loans, and will probably receive kickbacks from the vultures.
Yeah, same thing is happening here in Venezuela. Chavistas now want the new Assembly to fix what chavismo has been destroying here (still is) for 18 years.
I'm not very familiar with Venezuela's history (I have a vague notion of events like the "Caracazo", but not too much). What was there before the rise of Chavismo, and was it successful and good for the country?
Well, she wasn't running for re-re-election so she couldn't have been kicked out (personally, I think if she had run, she would have won against Macri, but lost because her party ran with Scioli, a highly divisive and uncharismatic politican, but I admit that's speculation on my part. Let's remember on her first re-election she won with 54% of the votes on the first round, almost unprecedented).
I assume you meant her party was kicked out. Since 49% of voters voted for this party, and Macri's (somewhat fragmented) coalition only won on ballotage, I'd say it was a pretty close call... and now the country is highly divided.
Regardless, the political left doesn't like either Kirchner or Macri, and their criticisms are valid.
Fair enough. I've never been to Argentina, and can only go on what I've read in the news. I'm curious what policies you specifically think are going to sink the country into crisis. Is it just about his deal to make good on the defaulted bonds, or is he a profligate borrower and spender in other areas as well?
If it's primarily the bond deal, I would be sympathetic to the argument that Macri is just being honest and having the country take responsibility for the debts racked up by his predecessors. Another good sign is how he's cleaned up the government statistics office that Fernandez was using to publish ginned up economic indicators to make herself look better (which wasn't fooling anybody outside the country; I don't know how widely they were believed domestically). These sorts of moves pay off in the long term by restoring the goodwill of the international community and giving the government more room to maneuver. The fact that he's making them now, when they make his job more difficult in the short term, suggests a profound professional integrity that inclines me to think of him as a statesman.
Am I misreading your objection here? If so, I'd like to know more about your take on things. (Or maybe you could point me to some sources I could read?)
Yes, in this concrete case I was thinking about the debt incurred in order to pay the holdouts and the "vulture funds", like Paul Singer's. I think it will be a short term respite that will ultimately lead the country to ruin.
Let's not forget kirchnerismo (the party ousted by Macri) arose from the ashes of De la Rua's government, which was fiscally conservative and "orthodox", and who few would accuse of being populist. His reign ended in the 2001 chaos, with economic upheaval, a collapse of the banking system, a few deaths and the goddamn president flying away in a helicopter! Kirchnerismo didn't even exist back then.
