LATIN AMERICA’S TUG OF WAR

NEO-LIBERALISM VERSUS SOCIAL DEMOCRACY

Executive Summary:

Neo – liberal déjà vu of the 1990’s? How long will the new Argentine government last?

Non existing transparency: who funded the three ARGENTINE presidential candidates and what was the final campaign budget figure for each of the three candidates?

Marci and Wall Street - premature euphoria

New plutocracy government of ARGENTINA

Bountiful handouts for ARGENTINE'S economic elite

Questionable move: Elimination of ‘tax’ retention on agro-exports

Hedge fund spiral – the Marci, Paul Singer “connection”

Looming storm over ARGENTINA - devaluation and decline of purchasing power

The ARGENTINA IMF trauma

The earlier version of the ‘free-market experiment’ led to the most severe economic depression in ARGENTINE history

Speculators will grab their profits and run

Debatable - Presidential versus Parliamentary systems for LATAM countries

Crime and corruption are two of the world's largest multinational industries

Introduction: Pundits and commentators on the Left and Right are pronouncing ‘the end of the progressive cycle in LATIN AMERICA’. They cite the recent presidential elections:

1. ARGENTINA, where ultra-right Millionaire MAURICIO MACRI was elected;

2. BRAZIL, where President DILMA ROUSSEFF has appointed a neo-liberal ‘Chicago Boy’ economist, JOAQUIN LEVY, as Finance Minister and launched an IMF-style regressive structural adjustment policy designed to reduce social expenditures and attract financial speculators; and

3. VENEZUELA, where WASHINGTON allegedly channeled millions of dollars to far-right parties, as well as extra-parliamentary and paramilitary groups, to destabilize the center-left MADURO government; right-wing Democratic Unity Coalition (MUD) won the legislative elections in December 2015 with more than 2:1 margin over the CHAVISTA VENEZUELAN United Socialist Party (PSUV).

NEO – LIBERAL DÉJÀ VU OF THE 1990’S? HOW LONG WILL THE NEW GOVERNMENT LAST?

No doubt social legislation has come to a virtual halt, even before the recent political advances of the US-backed right-wing parties with their neo-liberal economic agenda.

But paralysis, and even retreat and electoral defeats of the center-left regimes, do not mean the return to the neo-liberal 1990’s, a period of privatizations, pillage and plunder, which had plunged millions into poverty, unemployment and marginality.

Whatever the current voting results, the collective memory of mass hardship, resulting from ‘free market’ policies, is seared in the memory of the vast majority of the working and middle class population.

Any attempt by the newly elected officials to ‘unmake and reverse’ the social advances of the past decade will be met with resistance, if not open class warfare, institutional and political constraints and low commodity prices drastically limiting export revenues.

A careful analysis of the policies proposed by the neo-liberal right, their implementation and impact will demonstrate their likely failure and the rapid demise of any new right-wing offensive.

ARGENTINA: PRESIDENT MACRI AND WALL STREET - PREMATURE EUPHORIA

In the upper income neighborhoods of BUENOS AIRES, there was singing and dancing in the streets as the Presidential election results rolled in and MAURICIO MACRI was pronounced thevictor. WALL STREET, the City of LONDON and their financial mouthpieces, the WALL STREET JOURNAL and the FINANCIAL TIMES, announced the coming of a new era and the end of ‘anti-investor, populism and nationalism, wasteful social spending’ referring to increases in pensions, family allowances and wages, approved by the previous center-left government

MACRI - THE PLUTOCRAT 

MAURICIO MACRI does not merely represent the plutocracy; he is one of the richest plutocrats in ARGENTINA. He not only boasts of a ‘carnal relationship’ with WASHINGTON in his acceptance speech, he pleasured US President OBAMA by announcing he would work to expel VENEZUELA from MERCOSUR, LATIN AMERICA’S foremost regional economic integration organization. (A promise on which he already had to backtrack)

MACRI announced a cabinet made up of hard-core neo-liberal economists and former supporters of the military dictatorship. He then spelled out his policy agenda, which had been cleverly hidden during his electoralcampaign when his raucous rhetoric for ‘change’, spoke to everybody and nobody.

BOUNTIFUL HANDOUTS FOR ARGENTINES ECONOMIC ELITE

MACRI promises to (1) end capital controls, export taxes and retention's on agro-business exports, (2) devaluation of the peso, (3) pay over $1.2 billion dollars of ARGENTINE public money to the WALL STREET vulture-speculator, PAUL SINGER, who had bought $49 million dollars of old ARGENTINE debt (a profit of astronomical proportions for buying paper), (4) most probably privatize and de-nationalize the state-owned airline, oil company and pension funds (5)sign-off on EU and US-centered free trade agreements, thus undermining LATIN AMERICA integration projects like MERCOSUR

In a word, the multi-millionaire playboy President plans harsh austerity for the ARGENTINE working class and bountiful handouts for the economic elite.

The day after the elections, local and overseas speculators boosted ARGENTINE stocks 40% anticipating the free market bonanza. GEORGE SOROS and hedge fund mogul, DANIEL LOEB, ‘piled into ARGENTINE assets’. Investment fund managers urged MACRI to act swiftly in imposing his ‘sweeping reforms’ before ARGENTINA’S famous capacity for mass popular resistance could be organized to resist his policies.

MACRI’S WALL STREET and WASHINGTON patrons are well aware that their clients’ boisterous big business bombast faces serious political obstacles because his policies will provoke severe economic hardships.

President MACRI does not even have a majority in Congress to approve his radical proposals. The congress is controlled by a coalition of rightwing and center-left Peronist parties, which will need to be coaxed, bought or coerced.

The ARGENTINE Congress will balk at supporting his entire neoliberal agenda. When he resorts to ‘executive decrees’ to bypass Congress, he will be contested in the courts, streets and legislature. It is doubtful he will be able to neutralize all his critics and implement his radical neoliberal agenda.

ELIMINATION OF ‘TAX’ RETENTION ON AGRO-EXPORTS WILL DECREASE GOVERNMENT REVENUES, EXACERBATING THE FISCAL DEFICIT AND NECESSITATING DEEPER REDUCTIONS IN SOCIAL EXPENDITURES

The head of the Central Bank, ALEJANDRO VANOLI, who was appointed by the previous center-left FERNANDEZ government, did not go along with MACRI’S tight money policy, radical devaluation and fiscal austerity and resigned his position, giving MACRI the chance to nominate one of his  free market crony. However, the institutional damage will increase the general sense of a lawless regime willing to trample the constitutional order to impose his free market dogma.

MACRI’S implementation of eliminating ‘tax’ retention on agro-exports will decrease government revenues, exacerbating the fiscal deficit and necessitating deeper reductions in social expenditures. The contrast between higher earnings for the agro-business elite and lower living standards for labor is an invitation to greater class hostility and strife. Even more decisive MACRI’S “export strategy” will be undermined by the low world demand and prices of ARGENTINE commodity exports.

ARGENTINA IN FOR A ROUGH RIDE

MACRI’S elimination of capital and price controls will provoke a major devaluation of the peso which may exceed 60%. This will automatically result in severe increases in the price of consumer goods and increased profits for the export elites, provoking mass unrest across the occupational spectrum.

MACRI promises to meet with the 7% of speculator hold-outs of old ARGENTINE debt (from the pillage years of the 1990’s) demanding full payment with interest, especially the ‘vulture funds’ led by WALL STREET’S PAUL SINGER of ELLIOTT CAPITAL MANAGEMENT. Pay-offs of over $1.3 billion on an original $49 million purchase of ARGENTINE debt to WALL STREET speculators will provoke fury among ARGENTINE workers and nationalists who will shoulder the added burden on top of austerity and cuts in social welfare.

HEDGE FUND SPIRAL – THE MACRI, PAUL SINGER “CONNECTION”!

Moreover, the 93% of debt holders, who had agreed to the ‘financial haircut’ and discounted the debt at 70% will now demand full payment multiplying tenfold the demands on the Treasury with disastrous consequences. But then it is rumored MACRI’S campaignwas allegedly partially funded by PAUL SINGER and some powerful media moguls, thus it comes as no surprise that this administration is eager to settle with the HEDGE FUNDS, despite the fact that even the UN condemns HEDGE FUNDS practices on sovereign states. 

  

HIDDEN AGENDA

The devaluation and decline of purchasing power will not attract the ‘tidal wave of foreign investment’ to lift the economy and provide jobs and general prosperity as MACRI had promised during his campaign.

Foreign capital will not create new enterprises; they will concentrate on buying existing privatized public enterprises at fire-sale prices. Incoming capital will not increase the productive forces; it will only shift the direction of the flow of profits from public coffers to private pockets, from the domestic economy to overseas investors.

NEO-LIBERALISM: THEN AND NOW

The general foreign and domestic political climate is vastly different today from the 1990’s when the previous neo-liberal experiment was launched with such disastrous consequences. In the late 1980’s, ARGENTINA was suffering from acute inflation, stagnation and declining income. The working class organizations were still recovering from the murderous decade of military rule. Moreover, in the 1990’s the US was at the pinnacle of imperial power in LATIN AMERICA. CHINA was only beginning its dynamic growth cycle. The USSR had disintegrated and RUSSIA was a struggling vassal state. LATIN AMERICA was ruled by a motley collection of neo-liberal clones under the thumb of the IMF.

THE IMF TRAUMA

Today MACRI faces an more organized working class. The trade unions and militant popular movements are intact and have experienced a decade of substantial gains under a center-left government, even if they don’t admit it publicly, - yet . The IMF experience remains apoisonous memory for hundreds of thousands of ARGENTINES. Hundreds of military officials responsible for crimes against humanity have been arrested, tried and prosecuted under the out-going regime. The threat of a military coup, ever-present in the 1980’s and 90’s, is non-existent. CHINA has become the key market for ARGENTINE agro exports (soya). MACRI, despite his declared passion to serve WASHINGTON, is obligated to accommodate to the CHINESE market.

Any moves out of MERCOSUR and into the arms of the Transpacific Trade Agreement will prejudice ARGENTINA’S strategic trade links with BRAZIL, VENEZUELA, URUGUAY AND PARAGUAY. Today MACRI will find a hostile climate in LATIN AMERICA for his proposed embrace of the US.

THE EARLIER VERSION OF THE ‘FREE-MARKET EXPERIMENT’ LED TO THE MOST SEVERE ECONOMIC DEPRESSION IN ARGENTINE HISTORY

In summary, MACRI will find it most likely impossible to replicate the neoliberal policies of the 1990’s for all the above reasons. There is one additional factor to consider: The earlier version of the ‘free-market experiment’ led to the most severe economic depression in ARGENTINE history with double-digit negative growth, unemployment exceeding 50% in working class districts (and 25% nationally) and poverty and extreme misery in some ARGENTINE provinces exceeding SUB-SAHARA AFRICA.

SPECULATORS WILL GRAB THEIR PROFITS AND RUN

If MACRI believes he can rush through the “harsh medicine” – and avoid the inevitable mass protest– while attracting a massive inflow of capital with which to rapidly grow the economy, he is gravely mistaken. After the initial giveaways and uptake of the stock market, the SOROS and LOEB speculators will grab their profits and run. Weakened domestic consumption and the depressed global commodity market do not attract long term, large-scale capital.

The real question is not (as the financial pundits claim) whether MACRI will ‘seize the opportunity’ but how soon after he tries to impose his free market model his regime will crash amid the ruins of a depressed economy, raging inflation and general strikes.

ARGENTINA WOULD DO GOOD TO CHANGE FROM PRESIDENTIAL TO A PARLIAMENTARY SYSTEM

In view of past experience and current circumstances, some political observers have doubts that this administration will finish its 4 year term (if democratic values are respected). The question is what entity will replace it? In order to prosper, ARGENTINA should change its constitution and move from a presidential system to a parliamentary EUROPEAN style system, thus political continuity would be manifested and a multiple party systems form real coalitions. A model that has proven a success in regards to stability and prosperity in central EUROPE for the last 80 years.

BRAZIL: RIGHT TURN OR A LEFT OPPORTUNITY

Commentators left and right cite the vertical decline of support for President DILMA ROUSSEFF from over 50% to less than 10% as a sign of the ‘decline of the left’. Judicial investigations have led to the arrest and prosecution of dozens of Congressional leaders of the so-called ‘Workers Party”’ (PT) for wholesale bribery, money laundering and illicit transfers of millions of dollars!

Prosecutors have jailed scores of PT officials, legislators and senior executives of the giant public petroleum company, PETROBRAS, the directors of the biggest construction companies and investment banks who were partners in crime with former PT President LULA DA SILVA. The one-time trade union leader, President LULA, turned into a poster boy for WALL STREET and more recently a notorious influence peddler for BRAZILIAN big businesses.

Prosecutors have arrested 117 officials from PETROBRAS, the giant state oil corporation, and BRAZIL’S biggest company. They have arrested two of BRAZIL’S most powerful capitalists: MARCELO ODEBRECHT, president of CONSTRUCTORA NORBERTO ODEBRECHT, and OCTAVIO MARQUEZ DE AZEVEDO of the ANDRADE GUTIERREZ CORPORATION. Both contributed to the Workers Party electoral campaign of ex-President LULA DA SILVA and current President DILMA ROUSSEFF.

CRIME AND CORRUPTION ARE TWO OF THE WORLD'S LARGESTMULTINATIONAL INDUSTRIES

Big business contributors, currently under investigation or jailed, had received forty-times the value of their political donations in terms of lucrative PT government contracts (a 4000% return on investment!).

Criminal cases and arrests for ‘bribes for contracts’ schemes have affected the financial sector, including the billionaire financier ANDRE ESTEVES, founder-President of BTG PACTUAL, a close friend and associate of LULA DA SILVA.

The entire elite of BRAZIL’S capitalist and financial class has been indicted, jailed or is under investigation. The Treasurer of the PT, Senate and Congressional leaders and Presidential advisers of the ‘Workers’ Party have been arrested and jailed for bribes, money laundering and fraud, in connection with the PETROBRAS and other corporate corruption scandals.

A MYSTERY, ARGENTINE'S CAMPAIGN FUNDING – WHO FUNDED THEM AND HOW MUCH DID THE CAMPAIGNS OF EACH OF THE PRESIDENTIAL CANDIDATES COST? 

Interestingly  enough during the entire election campaign in ARGENTINA none of the mainstream media, both locally and internationally ever asked the parties or candidates who was funding them and what the campaign budgets ceiling was. Why, because in each case local and international media moguls and financial institutions or so-called shadow banks with clear agendas on Argentina apparently funded them and thus made sure that none of this information was made public.  And strangely enough no one questioned it. So much for transparency.

The victory of hard right neo-liberal MAURICIO MACRI in ARGENTINA and the disintegration of the PT do not augur a new rightwing cycle in LATIN AMERICA.

TUG OF WAR IN SOUTH AMERICA

MACRI’S economic team will quickly confront mass opposition and, outside the upper class neighborhoods, they lack any political mass support. Their policies will polarize the country and undermine the stability, which investors require. Brutal devaluations and the end of capital controls are formulas, not for economic development, but for inciting general strikes. Conflict, stagnation and hyperinflation will put an end to the enthusiasm of local and foreign investors.

Moreover, MACRI cannot embrace WASHINGTON’S entire agenda because ARGENTINA’S natural trading partner is CHINA.

Macri’s regime is the beginning and the end of a reversion to the neo-liberal disaster, similar to what took place at the end of the 1990’s. Unless he manages to obtain enough funds to reduce the burden on ARGENTINA’S poor and middle class. But since he will get into debts with the IMF, this will hardly be the case.  

The fall of the PT, more a product of conscientious prosecutors than the action of trade unions and social movements, opens political space for new working class struggles, free from the constraints of corrupt leaders and bureaucrats.

Even if the Right returns to power in BRAZIL– it is tainted with the same stench of corruption; its capitalist partners are in jail or facing prosecution. In other words, the fall of the PT is only part of the decline and decay of all the capitalist parties.

Over time, soon after the collapse of the ‘New Right’, a new authentic alternative political entity may emerge, free of corruption and links to big business.

Adapted by Geopolitical Analysis and Monitoring from the original article published and written by James Petras 

ARGENTINA: WHY MACRI’S WIN IS BAD NEWS FOR ARGENTINA

OR SHOULD HIS ADMINISTRATION BE GIVEN THE BENEFIT OF A DOUBT THAT THEIR MODEL IS THE RIGHT ONE?

The election of right-wing candidate MAURICIO MACRI as ARGENTINA’S president, which was unexpected just a few months ago, is a setback for ARGENTINA and for SOUTH AMERICA.

In the past 13 years, ARGENTINA made enormous economic and social progress. Under the outgoing administration, poverty fell by about 70%, and extreme poverty fell by 80%. (This is for 2003 to mid-2013, the last year for which independent estimates are available; they are also based on independent estimates of inflation.) Unemployment fell from more than 17.2% to 6.9%, according to the INTERNATIONAL MONETARY FUND.

But DANIEL SCIOLI—the candidate of the Peronist “Front for Victory” party who represented the governing coalition, including President FERNÁNDEZ—did not do a good job defending these achievements. He also didn’t seem to make clear what he would do to fix the country’s current economic problems. In the past four years, growth has been slow (averaging about 1.1% percent), inflation has been high, and a black market for the dollar has developed. This gave MACRI (and his “Cambiemos,” or “Let’s Change” coalition) an opening to present himself as the candidate of a better future.

PSY – OPS STYLE CAMPAIGN

With skilled marketing help from an ECUADOREAN public relations firm and the CLARIN GROUP, MACRI defined himself as something far more moderate than he is likely to be, winning over voters who might otherwise be afraid of a return to the pre-KIRCHNER depression years.

SOME OF THE THINGS MACRI HAS INDICATED HE WOULD DO COULD HAVE A POSITIVE IMPACT, IF DONE CORRECTLY.

He will likely cut a deal with vulture funds that have been holding more than 90% of ARGENTINA’S creditor’s hostage since NEW YORK Judge THOMAS GRIESA ruled in 2014 that the government is not allowed to pay them. If the cost isn’t too high, it could reopen a path for ARGENTINA to return to international borrowing—something SCIOLI would likely have also done.

A liberalization of the exchange rate that got rid of the black market could be a big step forward. But much depends on how it is done: If it causes inflation to spike and the government does nothing to protect poor and working people, they could lose a lot.

MARCI’S MANCHESTER LIBERALISM - NEOLIBERALISM WILL CAUSE A DOWNWARD SPIRAL OF AUSTERITY AND RECESSION

Avram Noam Chomsky born December 7, 1928 is an American linguist,philosopher, cognitive scientist, logician,political commentator, social justice activist, and anarcho-syndicalist advocate.Chomsky is also a major figure in analytic philosophy.He has spent most of his career at the Massachusetts Institute of Technology (MIT)

MACRI may also take measures to bring down inflation, which is something that needs to be done, but he’s likely to do so by shrinking the economy. He wants to reduce the central government budget deficit, which will grow as a percentage of GDP with austerity. Given his ideology, there is serious risk of a downward spiral of austerity and recession, as the country suffered from 1998 to 2001. If there is inflation from the devaluation, this could make matters worse.

In his campaign statements, MACRI made it clear that he is against a government role in promoting industry, so the country’s economic development is likely to suffer as a result. He has proposed tax cuts for upper-income groups. That suggests that budget cuts are in the offing, since MACRI has pledged to reduce the government budget deficit. The majority of Argentines are likely to suffer from such an economic transition.

MACRI WILL SUCCUMB TO THE USA, THUS BEING THE NEW PUPPET OF THE US NEOCONSERVATIVES  

But MACRI won’t have a working majority in Congress, so it’s unclear how much he can do. Immediately, he has demonstrated his overwhelming loyalty to the UNITED STATES government, which had been previously made clear in confidential U.S. embassy cables published by WIKILEAKS. One of his very first statements after being elected was to denounce VENEZUELA and threaten to have the country suspended from the MERCOSUR trading bloc of SOUTH AMERICAN nations. (As of 8^th of December he pivoted already on that statement)  The issue wasn’t of pressing concern to ARGENTINE voters, so it may very well be related to a U.S.-led international campaign to delegitimize VENEZUELA’S government.

In joining the effort against VENEZUELA, MACRI showed a willingness to take steps that no other SOUTH AMERICAN president would do. In the past decade, SOUTH AMERICAN presidents have repeatedly joined together to defend democracy in the region when it was under attack—with WASHINGTON on the other side—not only in VENEZUELA in 2014, 2013, and 2002, but in BOLIVIA (2008), HONDURAS (2009), ECUADOR (2010), and PARAGUAY (2012). MACRI runs a serious risk of damaging relations in the Western Hemisphere if he continues down this road.

USA POLICIES OF “ROLLBACK” AND “CONTAINMENT” AGAINST ALMOST ALL OF THE SOCIAL DEMOCRATIC GOVERNMENTS

WASHINGTON has maintained a policy of “rollback” and “containment” against almost all of the leftist governments that have won elections in the 21st century. So there is quite a bit of excitement among the business and foreign policy elite over the wave of setbacks among LATIN AMERICA’S left, with BRAZILIAN President DILMA ROUSSEFF facing a recession and political crisis and VENEZUELA’S ruling Chavista party confronting an economic crisis and loss of its first national election in 17 years. Articles are already sprouting up, welcoming the long-awaited demise of the LATIN AMERICAN left.

But reports of this demise, to paraphrase MARK TWAIN, are somewhat exaggerated. A more likely outcome is like what we saw in CHILE, where a lackluster candidate was unable to take advantage of Socialist Party President MICHELLE BACHELET’S 80% approval rating and lost to a right-wing billionaire in 2010. He lasted four years, and then the country went back to BACHELET.

MACRI’S HANDLERS PACKAGED HIM SOMEWHAT DIFFERENT FROM WHAT HE REALLY IS – A ULTRA-RIGHT MANCHESTER LIBERAL

Argentina and the surrounding region have changed too much over the past 15 years to return to the neoliberal, neocolonial past. The WASHINGTON foreign policy establishment may not understand this, but MACRI’S handlers did. That’s why they took the trouble to package him as something very different from what he is.

By Mark Weisbrot

Mr. Weisbrot is co-director of the Center for Economic and Policy Research in Washington, D.C., and the president of Just Foreign Policy. He is also the author of the new book Failed: What the ‘Experts’ Got Wrong About the Global Economy.

ARGENTINE ELECTION WINNER : "PAUL SINGER"

Vulture Capitalists Are the Real Winners of Argentina’s Elections

ARGENTINE CITIZENS HAVE ABOUT $400 BILLION OFFSHORE OF PRIVATE WEALTH 

THAT THEY'VE KEPT OUTSIDE OF THE COUNTRY. PRIORITY OF THE GOVERNMENT SHOULD BE TO ATTRACT THAT INVESTMENT BACK TO ARGENTINA.

James S. Henry is a leading economist, attorney and investigative journalist who has written extensively about global issues. James served as Chief Economist at the international consultancy firm McKinsey & Co. As an investigative journalist his work has appeared in numerous publications like Forbes, The Nation and The New York Times. He was the lead researcher of the recently released report titled 'The Price of Offshore Revisited.'

Transcript

JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to the Real News Network. I'm Jessica Desvarieux in Baltimore.

Wall Street is celebrating this week after Argentina elected a new conservative president. Conservative opposition leader Mauricio Macri beat the ruling party candidate by a 51-48 percent margin. The change in government could end a decade-long battle between hedge funds and Argentina over huge debt payments. You may remember back in 2001 Argentina set a record by defaulting on $95 billion worth of loans. Their economy tanked and vulture capitalists like Paul Singer swooped in and purchased nearly worthless debt after the default. Then they waited while the debt gained value, and now they want full repayment. A plan this new administration is more amenable to than sitting president Cristina Fernandez de Kirchner. She and her party have refused to pay the hedge funds for the past twelve years.

Here to give us more context is our guest James Henry. James is a leading economist, attorney, and investigative journalist who has written extensively about global issues. Thanks for joining us, James.

JAMES HENRY: You're very welcome.

DESVARIEUX: So James, Paul Singer, who I mentioned in the intro, he wants Argentina to pay back at least $1.5 billion. Why shouldn't they pay back these hedge funds? I mean, a New York judge recently said they should. So do you agree?

HENRY: No, I don't. I think, you know, governments don't have a bankruptcy court, unlike the rest of us. And so when they get into deep debt problems, by virtue in this case of the previous neoliberal government in Argentina under my classmate Domingo Cavallo, they ran up a huge foreign debt that they just could not service. And there was no place for Argentina to go other than to restructure that debt on its own. So they issued new bonds in 2004, and 95-98 percent of the bond owners, the creditors, that had bought Argentina debt, Argentine debt before, accepted those bonds and the terms of the bonds.

Paul Singer actually didn't buy the bonds that he owns in 2004-2005. He waited till 2008 and purchased them for $48 million. And today he's claiming the face value of the bonds he bought back then at $1.5 billion. So you know, that's--it's really a basic fault of the international system that we don't have a bankruptcy court for a government where they can work out reasonable payment terms and figure out how to restructure debts. Because every government in the world, including our own, gets into debt problems. But Argentina has a history of indebtedness. In the 1970s about half of the 2001 debt, $180 billion, came from the military junta during the 1970s. Nobody even knows where that money went, about $88 billion was inherited by the succeeding democratic government. And you know, it's outrageous to deny Argentina the right to restructure those odious debts.

But in fact, one of the good things about the Kirchner government, I mean, you can criticize them for being, you know, letting inflation getting out of control more recently, and corruption problems have emerged over a 12-year period. But one of the great legacies of this Kirchner government is that they reduce the debt to practically nothing. 
I mean, the current net public debt over looking at reserves for Argentina is less than $25 billion.

HENRY: So I think the fact--what people are really worried about here, in fact, is that the Macri government might come in and do what previous neoliberal governments and military junta did, which is to run up the debt as an alternative to raising taxes.

DESVARIEUX: What is the new president proposing? How does he propose to handle the debt, and can you just speak briefly about how the Kirchner administration handled the debt?

HENRY: Well, they've engaged in this bond restructuring, and they stubbornly refused to negotiate with Singer, because it would make a, it would set a bad precedent. They were supported, by the way, with hedge funds all over the country that are basically supporting the Argentine position, as well as leading economists like Joe Stiglitz. I mean, I don't know of a single Western economist that, or even at the IMF, who doesn't agree that the vulture capitalists need to be put out of their misery.

But Macri has indicated that he's going to get beyond this issue and basically settle with Singer. And so, you know, because discussions will probably lead to a payout for Singer and he'll realize a huge return on this $48 million.

DESVARIEUX: All right. Let's turn the corner a bit, James, and let's talk about an alternative plan that would give everyday Argentines a more prosperous future. Considering, as you said before, massive inflation is happening in Argentina right now, declining cash reserves, and really a meager economic growth some say due to exclusion from the global markets post-default. Do you agree with that assessment, and what should be done to address the clear economic woes that the country currently faces?

HENRY: Well, one of the opportunities for Argentina is that their own citizens have about $400 billion offshore of private wealth that they've kept outside of the country. So I would love to see a government that was able to attract that investment back to Argentina. I think there's tremendous growth potential there. They have enormous resources, including, you know, some of the largest untapped oil reserves in the south.

This government has talked a good game. But I think in terms of mounting a concrete economic strategy to compete, they've lost a lot of opportunities, and they've been riding the backs of the commodity boom and the China growth spurt during the last decade. So you know, Argentina is a country with a very well-educated labor force. They have enormous natural resources. It's practically empty Much of the country is, you know, there's enormous agricultural potential there. But they have a, they've had a consistent--the whole century of sort of bad governance. The Kirchner government I think was actually relatively adept at solving certain problems, like I mentioned, with debt.

But on the tax front, one clear thing that they need to do is a tax reform not only reducing payroll taxes, which are exorbitant, but to have taxes, actually a more fair tax system that takes advantage of all this wealth that many wealthy Argentines have offshore. I would say focusing on the tax system would be one of the first priorities.

DESVARIEUX: Okay. James Henry, thank you so very much for joining us.

HENRY: Quite welcome.

DESVARIEUX: And thank you for joining us on the Real News Network.