At Large
Argentina’s Illegal Antics
Argentine president Cristina Kirchner is bilking Americans out of billions of dollars.
When the financial crisis first hit, the U.S. government bailed out major banks in part so the banks’ foreign government clients would not suffer huge losses on their U.S. loan exposures. So where are U.S. policymakers when a foreign government bilks Americans out of billions of dollars? It’s been nearly a decade since Argentina perpetrated the largest sovereign default in history, and the South American country still owes roughly $15 billion to international creditors, including $2 billion to New York taxpayers and to U.S. investors ranging from university endowments to pension funds.
Rather than make good on its outstanding defaulted bonds, the Argentine government has been sheltering some $45 billion worth of liquid foreign reserves (86% of its total supply) in the Basel-based Bank of International Settlements (BIS), which is immune from most legal challenges. Earlier this month, two bondholders reportedly lodged a formal complaint with the Swiss government, saying that Buenos Aires has used the BIS to engage in money laundering.
The matter should be of particular interest to Federal Reserve chairman Ben Bernanke and New York Fed President/CEO William Dudley, each of whom is a BIS board member. For that matter, the United States is a member of the Paris Club, to which Argentina owes around $9 billion. So, in effect, Bernanke and Dudley have direct authority and a responsibility to oversee the BIS’s immunity as it relates to Argentina. They would be wise to re-examine Argentina’s abuse of BIS and help return Argentina’s funds to U.S. taxpayers.
The criminal complaint has further highlighted the duplicity of Argentine president Cristina F. Kirchner, whose Chávez-style economic policies have alarmed private investors, sparked capital flight, damaged her country’s global image, and contributed to rampant inflation.
Of course the “official” Argentine inflation rate remains in the single digits, but nobody takes that number seriously. According to a June survey of Argentine inflation expectations conducted by Torcuato Di Tella University, the median projection for the next twelve months is a remarkable 25%. While inflation rages, Cristina F. Kirchner grows more autocratic in her treatment of critics. As the Wall Street Journal reports, the Argentine government is “escalating its persecution of independent economists” who dare to question its obviously bogus inflation and poverty numbers.
Argentina enjoys an abundance of agricultural resources, and high commodity prices have been fueling strong economic growth. But the real inflation rate dwarfs the real growth rate, and this has had devastating consequences for the Argentine poor. “The poverty level is higher now than the worst moments of the 1990s,” former Argentine economy minister Domingo Cavallo told the New York Times this past winter. “Without a doubt, inflation is increasing poverty.”
To appreciate just how much Kirchner and her late husband, Néstor, who preceded her as president from 2003 to 2007 and died last October, have diminished economic liberty, look at the Heritage Foundation’s Index of Economic Freedom. Between 2003 and 2011, Argentina’s ranking fell from 68th (out of 156 economies) to 138th (out of 179 economies). It now ranks behind even Haiti and Cameroon. Meanwhile, the World Economic Forum’s Global Competitiveness Index ranks Argentina behind Guatemala, Rwanda, Trinidad and Tobago, the Philippines, and Algeria.
Argentine press freedoms have declined, and corruption has become a massive problem. Indeed, Peruvian Nobel laureate Mario Vargas Llosa has said that the Kirchner government “is corroded by corruption, and to such an extent that it is losing its natural leadership and disappearing as a political reference for Latin America.” A WikiLeaks cable from the U.S. embassy in Buenos Aires lamented that Argentina’s “emasculated institutional framework” is “incapable of providing needed checks and balances.”
In her foreign policy, Kirchner has cozied up to Hugo Chávez (whose bond purchases helped Argentina recover from its 2001 financial crisis), poisoned bilateral relations with Washington, and reportedly offered to suspend two investigations of Iranian-backed terror bombings in return for economic concessions from Tehran. Earlier this year, her foreign minister, Héctor Timerman, accused the United States of operating torture schools. A few weeks later, Argentine officials abruptly and bizarrely seized the contents of a U.S. military plane that was delivering equipment for police training.
Is it any wonder that the former “Jewel of South America” has lost regional influence, respect, and credibility?
Nevertheless, its quasi-autocratic president is hoping that rapid GDP growth and profligate public spending will help her secure re-election in October. With the opposition bitterly divided, four more years of Kirchnerism may be unavoidable. But it’s not something that Argentines or Americans should applaud.
About the Author
Jaime Daremblum, who served as Costa Rica’s ambassador to the United States from 1998 to 2004, is director of the Center for Latin American Studies at the Hudson Institute.
Letter to the Editor View all comments (18) | Leave a comment
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Hal G. P. Colebatch| 8.16.11 @ 8:16AM
Regular readers will know I and others have been warning against the parlous state of Britain's defence forces for some time. Argentina's economic problems make a foreign adventure - an attack on the Falklands, to divert discontent at home - even more likely. It is a classic tactic of bad governments. Cameron should be re-building Britain's defence forces on an emergency basis if it is not too late already. I almost said put flight-decks on merchant ships so they can fly off Harriers, but of course the Harriers are gone, although perhaps he could buy some from the US.
Michael Tomlinson| 8.16.11 @ 9:08AM
Amen. He could use them in the British streets too. What's going on in Britain makes Lifeforce and the zombie movies look civilized.
John K| 8.16.11 @ 12:58PM
Too true. Cameron may go down as the worst Prime Minister ever for the way he has hamstrung our defence forces, especially the Royal Navy. If Argentina seizes the Falklands again he, and the Conservative Party, will never be forgiven.
Michael Tomlinson| 8.16.11 @ 9:06AM
Time to cutoff Argentina and embargo all goods and services from this soon to be collapsing "leftist utopia." To hell with the Latin American despot and the nations stupid enough to keep them in power.
SpiralArchitect| 8.16.11 @ 1:34PM
+1
Kobe| 8.16.11 @ 9:14AM
Cameron should be re-building Britain's defence forces on an emergency basis if it is not too late already.
http://www.summer-products.com
http://www.ainibag.com
Garnett| 8.16.11 @ 9:15AM
Regular readers will know I and others have been warning against the parlous state of Britain's defence forces for some time.
http://www.jerseys-hats-store.com
http://www.honey-gifts.com
POST American| 8.16.11 @ 9:17AM
----5 decades ago Argentina was one of the wealthiest nations
on earth.
Bueno Aires was the Paris of the southern hemisphere. It truly was.
"Rich as an Argentine" used to be the saying.
POST the USURY OP the World Bank/IMF,
and the Glow-ball-ist standardization,
it's now verging on third world.
It's the role model for the 'DE-in--dust-REAL--eyes--a--shun'
of America. CHECK OUT
Agenda 21, New American Century ---the
CFR/RIIA and UN white papers.
"Did you just hear me? --THIS IS TREASON."
-ALEX JONES
('Bankers OR Us' on Youtube)
It was, and IS indeed.
------------------------------TAKE HEED
Bob K.| 8.16.11 @ 9:57AM
Seriously Ambassador Daremblum; what the hell is a billion dollars or so today?
Senator Everett Dirksen from Illinois is alleged to have said many years ago in the 1960's about our federal budget then: "A billion here, a billion there, pretty soon it adds up to real money."
Today, 50 years later, we talk of trillions of dollars!
TrueBlue| 8.16.11 @ 11:23AM
It's not just the amount of money, it's the principle of it all. You allow someone to do what Argentina has done, and soon enough it WILL add up to trillions of dollars. Corrupt governments tend to get even more corrupt unless checked by their own citizens, which isn't going to happen there. Only way to deal with it from the outside is to starve the beast.
Bob K.| 8.16.11 @ 4:13PM
Of course! When do you think it will happen?
See Cicero's comment below.
It has already added up to trillions in OUR country. We aren't doing anything about it here either.
cicero| 8.16.11 @ 12:17PM
Of course, the sane solution would be for the U.S. governmant to stop bailing out banks, both foreign and domestic, when they invest in bonds issued by various countries. If they all knew that they were not going to be bailed out (Mexico, Argentina, Goldman Sachs, etc) they would not invest in such paper. Then, those issuing the bonds would have to stand on their own credibility. Who would ever invest in Argentine bonds after their previous default, if they thought they would have to look to Argentina to honor them? For that matter, who would invest in Mexican bonds, Venezuelan bonds, Greek bonds, Spanish. . . .? But I suppose you get the picture. Without the guarantee of the U.S. taxpayer, none of the socialist states would be able to continue on their ruinous ways. Eventually, they will pull us down, too. But in the meantime, our political class can pat themselves on the back, secure in the knowledge that they saved another poor country from ruin, while preparing for the next cocktail party at the Argentine Embasy.
No bailouts. No rescues.
Seek| 8.16.11 @ 1:13PM
I lived in Buenos Aires many years ago. I can still remember having steak breakfasts and all kinds of wonderful foods lunch and dinner for a combined tab of under $20. The city was cosmopolitan and the living was cheap. One day the official story (that's a reference to the title of a 1985 movie about Argentina) will be written about national decline, but it's clear the Kirchner mob has more than a little to do with it.
Riff Raff| 8.16.11 @ 4:04PM
Who cares what Kirchner is doing? She's HOT!!! Besides, Socialism is the salvation of humanity! Hot AND socialist! WOW!!! Do you think she spreads herself around like she spreads everyone else's money?
Occam's Tool| 8.16.11 @ 8:09PM
It's astounding...
Time is Fleeting...
Madness
Takes its Toll.
Occam's Tool| 8.16.11 @ 8:08PM
I think everyone should pick up Mark steyn's new book. He wasn't funny, but he is damn accurate. "After America." (NO FINANCIAL INTEREST)
POST American| 8.16.11 @ 10:45PM
--------------------BOTTOM LINE----------------------
Argentina, and what was done to Argentina,
is yet another item for the dock of the coming
NUREMBERG for global, full spectrum, EUGENICS Banksterism.
-----------------------REALLY-------------------------
-----------------------TRULY---------------------------
--------------------INEVITABLY----------------------
larryG| 8.18.11 @ 1:45AM
What do youn suppose Bernanke and Dudley know aboutm this?:
Rothschild
http://www.iamthewitness.com/D.....schild.htm
Bilderberg
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