10^th of July 2011

 

To the editor of the Irish Times

Madam,

Today the elections began here in Buenos Aires. Two weeks back I was in Ireland giving a talk on the financial crisis in Ireland. The enclosed response was requested by many colleagues in Dublin who asked me my opinion on the Tom Hennigan articles on the Argentina default.

I hope you might find it of interest,

Tony Phillips

Buenos Aires, Argentina.

ENCL:

 

A retort to Tom Hennigan, on the day the elections begin in Argentina

 

When I revisited Ireland in June 2011, I was invited to give a talk in the Latin American Solidarity Centre: http://www.lasc.ie/. The topic of my talk was a Latin American perspective on the Irish financial collapse, to be held next door to the Government Finance Department and just one block away from the Anglo Irish Bank, an office that no longer sports its emblematic spearhead logo and, instead, prefers to remain anonymous.

 

My Chilean and Spanish hosts handed me copies of a series of articles recently published in the Irish Times by South American correspondent Tom Hennigan. Though I do not know the gentleman, Mr. Hennigan is based in my hometown of Buenos Aires. I read the following three articles:

 

Dollarisation: Argentina’s costly currency gamble

Still haunted by legacy of the crash

Culture of corruption that erodes democracy

 

The first piece http://www.irishtimes.com/newspaper/world/2011/0516/1224297038219.html

I found to be pretty much right on the mark... So I went on to read the other two pieces critical of the Argentine default, and the current government’s global financial stance: http://www.irishtimes.com/newspaper/world/2011/0517/1224297118048.html

http://www.irishtimes.com/newspaper/world/2011/0518/1224297220899.html.

 

Sources:

I feel that Mr. Hennigan’s well-written prose deserves a belated analysis so I enclose my personal opinion on same.

 

The Argentine Opposition and Government

The Argentine government is lead by the coalition known as “The Victory Front” or simply the ‘K’ faction (‘K’ for former Peronist president, now deceased, Nestór Kirchner). Tom Hennigan quite correctly reports that "the opposition" has not got its act together. On Sunday July 20th began the Argentine regional elections and we are in the final run-up to the national elections in October. “The opposition”, it could be arguead, is even more divided than during the previous elections but I wuld argue that it is important to note that there is more than "one" opposition.

 

Apart from the dissenting Peronist groups; particularly Duhalde's "Federal" Peronism to the right on the political spectrum, there are also the non-Peronist parties both on the left and on the right of the government. Mr Hennigan claims that the opposition factions sell their vote to the highest bidder. Such a generalisation is somewhat unfair to some of the newer parties such as Pino Solanas' Southern Movement and others that are strongly against corruption and have maintained a separatist non-aligned stance from the current government.

 

Corruption

Tom Hennigan, like many European and US based commentators, is quick to cite corruption in Latin American governments, and, in as much as such corruption exists (as it does in Argentina) he is correct to do so. However by citing corruption so far from the shores of Ireland this gives the implied security that the 'C' word lies far from Ireland’s shores. I would argue strongly that this is hardly the case in Ireland; a nation where a corrupt troika of Bankers, Government financial (non) regulators and a private sector specialising in construction and financial speculation, have brought the nation dangerously close to financial collapse with the resultant damage to the social fabric of the country.

 

Speculative Gains

The 'K' political group currently government are likely to win the elections again this year giving President Fernandez de Kirchner a second term. The markets still do not like the attitude of the current government but I would argue that from their citizen’s perspective, unpopularity with the financial markets is both a difficulty (it raises the cost of debt) but also a godsend.

 

Consider the situation in Ireland today, a nation that, though almost bankrupt, remains beloved of the “markets.” The complicity of the last Fianna Fáil government in proffering a limitless rescue to the financial sector has left the incredulous “markets” incredulous at their good luck. No other nation as ever been so generous to their financial sector at the expense of their citizens that the Irish republic. Not only were “the markets” rescued by government generosity but they were able to extricate themselves from further financial risk by transferring their debts to the ECB and the IMF leaving the Irish taxpayers with the political problems that ensue from “begger my neighbour.”

 

While the say Irish politicians in Brussels and Frankfurt "We are not the Greeks” |attempting, one might suggest, to cur favour with ECB, IMF and market interests. In the streets of Athens it is the demonstrators who are proud to exclaim that: "We are not the Irish."

 

One has to question the Irish government’s attitude; appease the markets albeit at what appears to be limitless cost to the Irish taxpayer. Would it not be constructive Mr. Hennigan to examine what this generosity has brought to Ireland rather than focus on the difficulties faced by Argentina re-entering the debt markets?

 

Any citizen of a sovereign nation should expect their representatives to protect their innocent citizens even if it means some local or foreign speculators might take losses on their investments. Such is the nature of speculation. The previous Irish government did quite the opposite. Instead of protecting their citizens they protected financial interests at the cost of their sovereignty (and one could argue both Greek and Portuguese sovereignty too.) It remains to be seen whether the current Irish government can reverse this situation before it becomes too late.

 

Cosying Up to the IMF

I think it is undoubtedly relevant to Mr Hennigan’s study that the Argentine government, under President Christina Fernandez de Kirchner, are now making moves to cosy-up to the IMF from their seats in the G-20. The 'K' government are planning to pay down some of the national debt with the Paris Club and have offered more generous terms to the minority holders of defaulted bonds; the so-called “holdouts”: who held out against the offer of the default terms offered by then minister of Economics Roberto Lavagna. Lavagna is the man who negotiated the Argentine default (a lonely and difficult task). One wonders who shall step up to the plate to do the same for the Irish citizens?

 

Such payments of some rather questionable debts is facing powerful national challenges from citizen’s associations, lawyers and deputies who are calling for the Argentine debt audit to complete first.

 

For the moment the Argentine government does not need to go to the markets. It is still paying interest on most of the rest of its debt and has enough tax income left over to cover the needs of the national budget and still more money to augment Reserves in New York albeit by small amounts.

 

Argentina has managed to maintain a dual surplus for nearly a decade. It is true that one of the principle reasons for this has been the high cost of commodities and the devaluations with respect to a slowly collapsing dollar. Growing these transgenic soft commodities and gas an oil exports have been expensive to the Argentine environment but this was the cost of moving away from the markets.

 

Conclusion

All told I liked Mr. Hennigan’s writing and his interviews with the man in the street. Not so his political analysis and the sources he chose reflects a conservative stance. I would argue that such coverage perpetuates the myth that Argentina is just a Third World ‘Banana Republic’ wracked with corruption and Ireland is simply a celtic tiger down on its luck.

 

Luck has little to do with Ireland’s current misfortune. Corruption too had its part to play in Ireland’s fall from grace at the tables of the OECD, the EU and the Club de Paris. As I argued in my talk in Dublin just two weeks ago, the Argentine government have put at least some of the perpetrators of their financial woes behind bars much more than is even spoken of in polite Irish circles.

 

If Ireland has a credibility gap with the markets, it could be argued that their government (from a Latin American perspective at least) have an even larger credibility problem than Argentina when it comes to legal impunity.

 

Yours etc,

Tony Phillips

tony.phillips@laposte.net