By Diana Cariboni
MONTEVIDEO, Jul 14 2004 (IPS)

Argentina has a new ally in its fight with its private creditors: a coalition of British activists who want the IMF to stop meddling in the negotiations. To bring that about, they plan to "soften up" a key figure, Britain’s Treasurer Gordon Brown.

Economic Justice for Argentina was created in June to coordinate a campaign by various British organisations, individuals, labour unions, experts and legislators, economist Alan Freeman explained in an interview with IPS.

In late May the Argentine government formally presented a proposal to restructure some 100 billion dollars in debt, mainly in bonds, which it defaulted on in December 2001.

The proposal is based on a 75 percent reduction of the debt to private sector creditors.

But while the creditors haggle, the International Monetary Fund continues to (IMF) insist that Buenos Aires come up with a more flexible formula.

But the Néstor Kirchner administration in Argentina claims it will be unable to honour the debt if the country is unable to maintain long-term, sustainable economic growth.

The de facto military regime that seized control in 1976 found itself with a debt of 9.7 billion dollars, a figure that climbed to 45.59 billion by the end of the dictatorship in 1983, and that skyrocketed to 146.4 billion by 1999, according to economics Professor Julio Gambina, director of the Social and Political Research Foundation.

Today, it stands at around 180 billion dollars.

The IMF has made serious mistakes in Argentina, and the financial community is well aware of this, said Freeman, who added "The IMF experts are specialists on money. What do they know about running a country? We cannot entrust this team with running the world."

Freeman, a professor at the University of Greenwich who was an activist during the days when Europe received Latin American exiles fleeing the dictatorships of the 1970s, spoke to IPS in Montevideo following his third visit to Argentina, early in July.

IPS: There are organisations involved in this initiative that took part in the international Jubilee 2000 campaign for the cancellation of the debt owed by the world’s poorest countries. Why are they now backing Argentina?

FREEMAN: If Argentina continues to follow IMF policies it will become very poor. It already has seven million people who cannot afford a meal every day.

But it is also a test case. If it manages to maintain a policy of negotiation with its creditors based on the principles outlined by Kirchner, there will be more opportunity for other countries to negotiate in more favourable conditions. Also, the chances of success are better for Argentina, as the IMF has a particular responsibility in the 2001 financial crisis.

IPS: How do you distribute the weight of the blame?

FREEMAN: We don’t accept that it should all fall on Argentina. There is part of the debt which is suspected to be illegitimate. Another portion is pretty much a direct consequence of an IMF-imposed policy: the privatisation of supposedly loss-making public utilities and companies whose liabilities, however, were left to the State.

The IMF also now admits responsibility for not having recognised that it was impossible to maintain convertibility (the currency board that pegged the peso to the dollar in the 1990s).

Some foreign banks are even suspected of fraud. In Britain hardly a single bond was sold to British buyers, because stock exchange regulations prevented high risk bonds from being traded. It was an illegal business in Britain. Meanwhile, in Italy, Germany and Japan, the banks offered these bonds for sale endangering the purchaser. There should be an independent investigation.

IPS: But who would carry out such an investigation and how?

FREEMAN: That’s open to debate. But given that the IMF has no appropriate framework to deal with this problem fairly, it should give the Argentine government and people the right to decide for themselves how best to do this. There are a lot of people in Argentina talking about investigating who was responsible.

But in the meantime, the present relationship between the IMF and private creditors needs to be loosened. The IMF should stop pressuring the government to reach an agreement with its creditors, and should restrict itself to its original function: managing currencies and international monetary policy.

IPS: How do you plan to campaign for such change?

FREEMAN: The British government has great influence in the IMF. Brown, our finance minister, is chair of the international monetary and financial committee, probably the most powerful committee in the IMF. It has the formal right to determine policy, which demonstrates the role of Britain.

Brown appointed the current managing director, Spain’s Rodrigo Rato. That is because he plays the middleman between U.S. interests and those of Europe and Japan, and reflects the position of the London money market, perhaps the biggest in the world.

We aim to use democratic mechanisms, we are going to talk to parliamentary committees which deal with debt, foreign trade, Latin America, and trade unions and other organisations. We are preparing a petition, signed by leading figures, which we will present to Brown before September, when the next meeting between the Argentine government and the IMF is scheduled.

IPS: What interest could British members of parliament, trade unions and non-governmental organisations have in Argentina?

FREEMAN: A new wave of solidarity is emerging. Previously there was solidarity with the victims of the repressive Latin American dictatorships (of the 1960s, 1970s, and 1980s). Then came a period of quiet. Now, once again, the importance of solidarity is being recognised because this is where resistance to pressure from the IMF arises, and the European world is watching closely.

IPS: The campaign is mainly based in Britain?

FREEMAN: Committees are being organised in Germany and France. Italian creditors have responded to open letters sent from Argentina, changing their outlook and even bringing a successful lawsuit against a bank which had sold them bonds. An alternative to the existing blocs of creditors is beginning to take shape. For the next European Social Forum in London this October, two key points of solidarity with Latin America have been defined: US military intervention in the region and debt.

IPS: Argentina’s situation is unique, to a large extent because of the 2001 default. There are other heavily indebted countries, like Brazil or Uruguay, which have taken different paths.

FREEMAN: Each country is different. I have heard much debate of the issue in Argentina. And I find three common points: the Copacabana declaration (signed by Kirchner and his Brazilian counterpart Luiz Inácio Lula da Silva) reflects the intention to place the State’s priorities and duties towards the economy and the citizenry above debt servicing. The Uruguayan government has not agreed on this principle, but this also concerns the Uruguayan people.

The second point is the shared responsibility of debtors and creditors.

The third dimension is more global: coordinating action by the debtor countries. I believe the countries of Latin America are focusing on these three aspects.

IPS: The last point has proved complicated. Argentine and Brazilian coordination vis-a-vis the IMF is limited to a discussion on how to calculate expenditure on infrastructure and social plans in the budget. And the call to cease debt servicing payments, advocated by Peruvian ex-president Alan García (1985-1990) and others, was not taken up.

FREEMAN: García’s attempt failed because he was isolated. Economic and political conditions have changed. The move towards a Free Trade Area of the Americas (FTAA) is weakening, and Venezuela and Mexico want to join the Southern Common Market (MERCOSUR – Argentina, Brazil, Paraguay and Uruguay). The discourse in Latin America is one of joining forces.

IPS: Is the IMF weak?

FREEMAN: Its vulnerability to the debt of only two countries, Argentina and Turkey, is enormous: it comprises 30 percent of its assets. How can a bank make so many mistakes? They are even questioning it themselves.

IPS: How far has the questioning gone? The language of its internal documents is quite mild.

FREEMAN: Even something said mildly in the words of the IMF reaches the ears of the financial world. I know they are listening. They are very practical people. I am almost sure they do not trust the IMF as before. The ability of the IMF experts must be questioned. The IMF experts are specialists on money. What do they know about running a country? We cannot entrust this team with running the world.

IPS: And Brown, the man your campaign is aimed at?

FREEMAN: Brown is also a pragmatic man, with training as an economist, not ideological. You can talk to him. He is very firm. But when he sees a build-up of facts that show him he should change his mind, he does so. He has done this in relation to monetary union in Europe. We hope to present him with just such a build-up of facts.

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