Landmark court ruling condemns Argentina’s illegitimate debt

Jubilee 2000 SA
August 8, 2000

An unprecedented judicial ruling from the Argentine courts has condemned the illegitimate origins of a substantial portion of external debt amassed during the military period from 1976 to 1983. The marathon lawsuit was originally brought before the courts in 1982 by the campaigning academic, Alejandro Olmos who sadly died early this year before the final ruling. Between 1976 and 1983, Argentina’s debt rose from $7.5 billion to $43.5 billion, yet these new loans were of no benefit to ordinary people in Argentina.

‘The clearly arbitrary conduct of those most responsible for the nation’s politics and economy in those periods analysed has been made apparent during the course of the lawsuit’, concluded judge Jorge Ballestero. The loans were part of ‘a damaging economic policy that forced [Argentina] on its knees through various methods … and which tended to benefit and support private companies – national and foreign – to the detriment of society and state companies…’

The ruling throws down the gauntlet to Argentina’s lawmakers to investigate the origin of the loans. According to Ballestero there should be ‘no impediment [to prevent] the Congress of the Nation evaluating the consequences of the court’s proceedings in order to determine the eventual political responsibility corresponding to each one of the actors in the events which led to Argentina’s phenomenal external indebtedness.’

Adding their voice to the judicial demand for an investigation, at least 5,000 people gathered outside the congressional building in Buenos Aires on 26 July to demonstrate. The demonstration was led by delegates of the Forum on External Debt (FORDEX) along with members of Argentina’s main general workers union, the CGT. Despite this significant pressure on Congress, there has been a mute response. This is partly because congress is currently in recess, but also because key congressional leaders, allied to the government are fearful of upsetting relations with multilateral institutions who will be in the spotlight if the investigation progresses.

The ruling specifically cites responsibility within the international financial system. This includes multilateral institutions such as the IMF. Ballestero noted that ‘the existence of an explicit link between external debt, the inflow of short-term foreign capital, high interest rates in the internal market and the corresponding sacrifice of the national budget since 1976 could not pass unnoticed among the IMF authorities who were supervising the economic negotiations.’

The issue is set to be taken up by a congressional finance committee. The Jubilee 2000 parliamentarian commission led by MP Mario Cariefo has also called for a ‘public audience’ on debt to be held, inviting members of civil society along with key economic officials. Two prominent politicians invited include the current Economy Minister Jorge Luis Machinea and Domingo Cavallo, who held the same posts in the early years of ex-president Carlos Menem. Both men also held key economic posts during the military period and would be subject to investigation, should it proceed.

Consequent investigations are also likely to highlight the responsibility of the international banks that dealt out the loans. Oil price increases in the late 1970s produced high levels of liquidity in the banks and were perceived as a threat to the stability of the financial system. The banks’ response? To offer loans to ‘developing’ nations, regardless of their end destination. In this way, Argentina’s illegitimate rulers were able to use their control of the country to successfully apply for exorbitant bogus loans (that were unaccounted for in the Central Bank records). Banks involved in offering loans to the regime included prominent British banks found on every high street, such as Barclays and Lloyds. In all some 30 British financial institutions leapt at the chance to peddle loans on Argentina in that period.

For Olmos’ son, Alejandro Olmos Ganoa, ‘the judge’s ruling is an important landmark, because for the first time in the world, a court has exhaustively analysed…how external debt was amassed’ as well as ‘its terrible consequences on the national economy.’ It will also certainly strengthen arguments for cancellation of illegitimate debt built up under dictatorships in other countries such as Haiti, Bangladesh and former Republic of Zaire.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s