By Mario Cafiero, Ricardo Monner Sans and Francisco Javier Llorens
The issuance of debt by the Central Bank with non-neutral monetary effects
An important spring of monetary policy is the responsibility and / or ability to borrow from the Central Bank. Following the phenomenon of rampant fraudulent debt of the decade of I80, this power had been expressly denied to BCRA CO Law 24,144 of 1992. But in early 2002 she was revived by NUD 401/02 issued by former President Duhalde. By art. 1 of the DNU was amended Article 18 of the CO of the BCRA, adding subsection i) that allows the Central Bank "to issue securities or bonds and certificates of participation in the securities held."
The cumulative amount of over 2,500 auctions of letters (LEBAC and NOBAC) who made the placing BCRA debt from that date until the present, reaches the astronomical figure of more than 273,000 million pesos, well above the Central Bank Assets , and its stock at 31 August current 67.228 million pesos. Excluding this amount the amount of bills issued for the operative Central Bank repos. Thus
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part of the current international reserve currency, no less than 47% of them has been learned the hard way, through a hot debt letters. Very short-term, as its average maturity, counting involved in repo transactions to 1 and 7 days, comes less than six months.
A practical purposes we can say that these reserves have been acquired through a rolled her checking to date, renewed indefinitely at maturity, which in turn from the payment to the IMF in early 2006, produced a sustained rise in interest rates. For both the BCRA, as for productive activity, having doubled the fees for the first, and quadrupled for the second, in the case of leading companies. With consequent inflationary effects will not see reflected today in the INDEC statistics.
This continual renewal of checks, a frenetic two days a week, coupled with rising internal and external uncertainty, has made the renewal thereof has been increasingly difficult, reflected this first, in increasing interest rate. After the appearance of six-month loans in dollars roads through parallel operations in the future market changes (ROFEX), in which the Central Bank agrees to deliver dollars in March next year to $ 3.14. And later in the substantial increase of repo transactions, whereby the Central Bank is taking hot money by placing letters on 1 and 7 days. It is known that when a debtor starts to flip checks to these terms, is because it is in a very compromised situation, almost terminal. Thus
payment to the IMF has been far from "a neutral monetary effect" as required by the CO of BCRA, as amended by the DNU 1599-1505. On the contrary, its monetary effect has been wicked, to promote the simultaneous rise in interest rates and inflation, two central springs on the health of any economy.
The payment to the IMF and the supposed reserves of "freely available"
The aforementioned DNU 1599-1505 issued by former President Nestor Kirchner, with whom it was possible to pay the IMF, introduced a substantial change from the reserve concept of "free availability." Art. 4 of the Convertibility Law No. 23,928 required that "free reserves" were equivalent to 100% of the monetary base.
Obviously this concept of "freely available" can be understood as the reserves of the BCRA minus debt, given that the reserves are guard or custody is one thing, to serve a timely manner, or in case of unforeseen and need. However
DNU 1599 reversed that concept happily. With him was modified art. 4 of Convertibility Law No. 23,928, eliminating the concept of "open availability." But the term reappeared in Article 5 with a completely different definition. Through modification by the DNU 1599, it specified that "free reserves" are those that exceed the monetary base, of course without taking any account of debts and obligations of BCRA, which previously had to be counted as Prior to the calculation in relation to the monetary base.
improvisation this change is noted in Article 60 of the Central Bank Charter, which sets "in a twenty percent (20%) the limit on stocks free availability maintained as a common garment may consist of government securities valued at market prices "without having to do with the authorization of Congress.
So for the remnants of the convertibility law as amended by the DNU 1599-1505, the" reserves free availability "are one thing. And for the CO BCRA another.
This is the perverse core of the issue, namely to consider the" availability of reserves, without taking any account of debts and obligations of BCRA . both currencies, and in weights that can be reversed in demand for foreign exchange in a free market exchange and only where the value of Argentina's currency is the main reference U.S. dollar price. Finally
DNU 1599 also amended § 6 of the Convertibility Law No. 23,928, providing that if a "neutral monetary effect" reserves "freely available" can be used to pay the international financial institutions. In this way was enabled to pay not only the IMF, something beyond what it was for the BCRA moral in itself, being a debt of this, but also the World Bank and IDB.
was formed and the Kirchner government in the largest and best paying external debt in Argentina's history, with total disregard of the social collapse that external debt was generated; and that payment of that debt had deepened and sustained. To paraphrase his own words that employers often blurt "watching what I say, but what I do," the former president Kirchner and his successor in the broadest sense, seem to say "do not watch what I say, but what I pay."
The payment to the Paris Club and its manifest illegality
In its first attempt to pay the Paris Club, trying to avoid both the intervention of Parliament and the signing of a NUD, President Cristina Kirchner was dispatched to Decree 1394-1308. In it, unlawfully and madness equated the informal club, with an "international financial institution." This error, or rather horror, shows clearly the quality of the decisions taken by the Argentine government in the marriage bed, as if it were a monarchy. Far behind
have been to Argentina concepts such as Economic and Social Council or the National Security Council, in vogue in other modern countries in the world.
This decree led to the question from different sectors and even the signatories of this we carried out a criminal complaint against those involved in the decree for abuse of authority (Federal Court Cause 12,672 Issue Issue 5).
belies its election promises and his legislative career, President Cristina Kirchner was forced then to sign his first NUD, the no. 1.472/08, in which Article 16 ratified payment to the Club, not to retract the decree whore 1394. And the couple decided that the purpose of that payment limitations remain ineffective assistance set by the Treasury Section 19 of the Charter of the BCRA, Law 24,144, should give the Treasury the BCRA a negotiable at book value . That is more debt on the Treasury in a mendacious debt reduction policy, which in turn the Central Bank will move to the banks. And these customers, whether by action, or omission, the caulking even more credit.
exchange and external debt is domestic debt through the festival the LEBAC, NOBAC, Treasury Bills and substitutes, regardless of this conspires against domestic credit for production, and even for the provinces and municipalities that currently lack it entirely.
But this decree is seen at once a serious misrepresentation. The alleged necessity and urgency for the issuance of the decree, is justified in the alleged urgent need for budget adjustments, not to stop the march of the country. But this issue has nothing to do with the payment to the Paris Club. This confusion of issues is evident as a camouflage which attempts to present such payment without further discussion in Congress, not to jump the hare on the real situation that is the BCRA.
regard Lorenzino Financial Secretary stated publicly that the new payments could begin realizing in December, and therefore there was enough time for the case normally pass by Congress, if any democratic will to do so. But obviously the economy of the Kirchner government, including dictatorships, not be solved with more democracy, but with decisions increasingly concentrated in fewer and influential officials, refugees increasingly in their offices. An enabling environment for the lobby, the compromise, and even influence peddling.
In this regard the announcement of the cash payment Paris Club after the meeting of the Council of Americas in Buenos Aires, and the announcement of the reopening of the exchange, made public at the meeting of the Council of Foreign Relations in New York, seems a clear example. In the near future in some other meetings of other senior U.S. and British organizations, surely the announcement of the payment of the debts of the ICSID, and / or vulture funds benefited from the judgments of U.S. judge Griesa. Finally
with art. 72 of the draft budget for 2009, will culminate this degenerative process to take by assault the Central Bank reserves, with total respect desaprensión possible and increasingly likely consequences. Under this article seeks to amend Section 20 of the BCRA CO, providing that the calculation of the limitations of the assistance to the Treasury, should not be taken into account for payments to international financial institutions or "the payment of obligations foreign currency. "
So now is not whether the Paris Club or not an international financial organization, but only if you are due in pesos or foreign currency. Obviously preparing the Argentines to pay debts, not just the Holds out, but also the ICSID rulings in favor of privatized, and the American judge Griesa for vulture funds, which will surely join the frontally reject exchange that is to be reopened.
The question of merit
A final aspect to consider is the substantive issue regarding the debt with the Paris Club, which was entirely collapsed in the past and bloody dictatorship. In terms of the approval or rejection of governance for the period of de facto, the National Congress, far from silent, expressly stated its disapproval through the enactment of the law 23.854/90 in rejecting investment accounts for the years 1976 to 1983 inclusive.
mean that Congress never legitimized these commitments, but by contrast refused. From the legal point of view the debt with the Paris Club is an "odious debt." That is not only illegal, but morally it should be rejected, having been contracted by those who should not, and having been used against those who must cope.
Another antecedent of singular importance for the purposes of analysis of the invalidity of the debt contracted during the dictatorship it is the case in the Criminal and Correctional Court N ° 2, File No. 14,467, titled "OLMOS, Alexander s / Complaint." In these proceedings the magistrate speaker, Dr. Jorge Ballestero, in July 2000 identified in its resolution the existence of at least four hundred seventy-seven external debt-related offenses that occurred during the military government. In the case
Olmos has tried illegal then as well, the debt is fraudulent. Nearly 20% of all the debt owed by the dictatorship of external funding was obtained from the Paris Club. In the beginning of the government of President Alfonsin, who had campaigned to differentiate between legitimate and illegitimate debt "is created in a Body Central Bank of Auditors of the external debt, to proceed to cancel the debt records were fraudulent.
An emblematic case was the recognition of the debt he had contracted the Dutch company COGASCO, verified that it had swollen to nearly 50% of its foreign debt. But members of the Club of Paris-all staunch defenders of alleged human rights "demanded the first democratic government to acknowledge and pay the entire debt of the dictatorship.
Central Bank officials who ruled the recognition of that debt dirty with the Paris Club were among others: Carlos Melconian, Marcelo Daniel Marx and Kiguel. This is in the case Olmos and was cloned and transcribed in Annex DEBT and WASH, the minority opinion of the Commission of Inquiry Washing the Chamber of Deputies of the Nation (2001).
One focus of the current government's position in defending human rights, and thus stride slow progress has been made in the prosecution of those responsible for state terrorism. But nothing has been done in research of those who were the beneficiaries of the dictatorship's economic plan, and participants were required for such crimes. One of the conclusions that can reach the cause Olmos, is the obvious and necessary complicity of international lending institutions, private banks, and transnational corporations, who know the situation in the country, also chose to contract with the military regime in the absence of Republican control, allowing consolidate a political-economic unopposed as possible to the framework of a massive violation of human rights.
In this special connection between crimes against humanity and described the process of borrowing, are specific consequences. Already in 1927 Alexander N. Sack odious debt defined as a despotic regime that engages, not to their needs and the needs of the state but to strengthen and repress the population that fights against it. The same author added that the debts owed and debts were not debts of state but regime, and therefore fell with him.
We can say that if that action against rights violations human, would also be in a similar way those actions that tend to identify and repair the damage of indebtedness provided him with sustenance. Based on this foundation, one of the authors of this paper, Mario Cafiero, opened case No. 2215/06 before the Supreme Court's Office, but to date, despite the time, has resulted in a judge accept its jurisdiction.
As with the issue of human rights violation was in pain and effort necessary to search for the truth and punish those responsible for crimes against humanity, with the unwarranted external debt contracted by the same dictatorship corresponds act similar Thus, on the understanding that both events were part of a common matrix, whose harmful effects persist to this day. Pay cash to the IMF and Paris Club is the most striking demonstration of the lack of conviction and commitment of this government with true Memory, Truth and Justice. Conclusion
The lessons of the past taught that future crises are rooted in that risks are not aware of this. The reason for this is to warn about it. And above all to warn about the precarious and delicate situation that is the Central Bank as a result of these sudden, thoughtless and authoritarian cash payments of debt prepared by the executive branch to Congress overpowering.
But all is not lost. As an alternative to the unreflective and arrogant decision, there are other possibilities. Perhaps not so glamorous compared to the adulation coming from abroad, and by their lackeys Argentines, but much more effective in Argentine interests.
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