A story of dependency

Article published on March 12, 2003
community published
Article published on March 12, 2003

This article has not been vetted by an editor at Paris HQ

One year on from the Argentinean crash, just what part have Europe’s companies and governments played?

Since the time of the Washington Consensus and throughout the course of the last decade, Argentina was the global economic and financial establishment’s star pupil and an excellent example to other third-world countries. But, within the space of hardly a year, Argentina ceased to be the spoiled child of international credit organisations, becoming instead ‘an example of a disorganised society’ (Paul O’Neill) and ‘incapable of introducing a sustainable plan’ (Ann Krueger). What happened in the intervening time? How is such a rapid transformation possible? What has been Europe’s role in all this?

Some background

Attempts to develop a bona-fide free-market economy in Argentina were systematically crushed by domestic allies of the British crown. In the name of free trade, an economic model misleadingly called agro-exportation was established, through which Argentina sold its meat to Great Britain, constantly adjusting its production to meet the demands of this one particular market, and imported its manufactured goods, preventing any possibility of industrialisation, devastating the country’s balance of payments and condemning it to a drop in its relative prices. Thus, a national structure was established which, without much modification, lasted until mid-way through the twentieth century.

Drop the clichés

It is time to lay to rest the cliché that ‘Argentina is a rich country.’ It’s still a country with vast natural resources, but whose models of production and wealth accumulation were always planned from abroad and for the benefit of foreigners, with the full participation of the land owning oligarchy, inclined to sacrifice national progress in favour of their own particular interests. The Argentina known as ‘the granary of the world’ was a country of abundant riches, with a countryside divided into enormous ranches and one of the worst wealth distribution indexes in the world. Already then, extensive exploitation by ranchers left millions of inhabitants cut off from the legal economy. In order to give an impression of the British influence in the Río de la Plata, one need look no further than these two quotations: ‘Argentina is virtually a part of the British Empire,’ said the nation’s vice-president, Dr Julio Roca, at the London Stock Exchange, in 1934, whilst negotiating a trade treaty. And his words, far from expressing the pain of someone suffering a humiliation, conveyed the satisfaction of someone fulfilling an historical destiny. Years later, in a letter to Lord Halifax during negotiations with the US over their intervention in World War II, Winston Churchill declared, ‘We follow the lead of the United States in South America as far as possible, as long as it is not a matter of our beef and mutton’ .

The forties saw the only attempt at industrialisation and decrease in imports, which provoked the country’s estrangement from the major powers. In the fifties, the political changes brought a new legal market, which opened the door to foreign investment. North-American interests benefited the most. There subsequently began a struggle among different social plaintiffs, without any of them being able to gain a large enough advantage over the rest to allow them to impose their hegemony - until 1976, that is, when the nation’s bloody coup d’état would inaugurate a period of devastation of national resources and de-industrialisation that would culminate, in the 1990s, in the complete defeat of the working classes and the shaping of a new era, in which large European companies would play a leading role.

"Politcal transformation"

To explain the process of the privatisation of Argentina’s public-sector companies, begun in 1990, we need to consult the Gramscian notion of ‘political transformation.’ Transformation was, for Gramsci, the systematic winning over of the working classes by the elite by way of bribery, the purpose of which was the neutralisation of dissent. As a result of this transformation, Argentina’s two major political parties disappeared completely, having been alienated from their traditional sources of support and having consolidated their alliance with foreign capital. This transformation practically allowed the offering companies to choose the price of the assets they were to acquire, and to decide on the awarding of tenders and the regulatory frameworks in all cases. In short, Argentinean corruption, to which such frequent reference is made, was promoted and encouraged, underpinning the country’s capital accumulation. This structural corruption was fixed and endemic. The politically correct discourse of the media does, in all fairness, denounce the corruption of public officials, but they forget that, for every official who takes a bribe, there is a businessman who pays it. Throughout the whole privatisation process, corruption allegations were brought forward by the press or court-appointed counsels. There are very few cases of businessmen denouncing offers of bribery. Many of these companies - Telefónica, Repsol, Aerolíneas - thus secured the exploitation of monopolies or oligopolies, which, in addition to guaranteeing them incredible profits, granted them decisive power over the setting up of the country’s price structure and comparative profitability (in short, of its competitiveness).

Spanish companies received the largest slice. By way of example, an oil company like Repsol can, solely by way of transformation and without its own wells, acquire another company, such as YPF, rich in crude oil reserves, at a bargain price: 13 million dollars, which it very soon recovered. Not even a bar or a restaurant recovers its costs so soon. The asset stripping of Aerolíneas Argentinas, controlled by Iberia, is another shameful episode of recent times… The privatisation instalments were paid… by liquidating assets! Unsurprisingly, the process concluded, at the end of 2000, with an Argentina asphyxiated by debt, without external credit and almost without assets, after which, for a decade, the absurd pegging of the peso to the dollar guaranteed privatised companies a strong currency in which to send the returns they owed their parent companies. This, of course, had the effect of weakening state funds.

No safe place

Are the Spanish investments in Argentina significant? They are to the extent that, at the height of the crisis, the chancellor Josep Piqué and then Aznar himself were the first to ask Argentinean authorities not to devalue. Have they generated employment? No, they have increased profitability by reducing costs – that is, personnel. Have they added value to the economy? No, they have restricted themselves to the purchasing of existing assets, declining to take any risks, whilst paradoxically continuing to demand state subsidies. Have they lost money? No. They continue to profit, even with a currency that has devalued by 300 per cent in one year. They simply earn less, when compared with the tremendous profits they reaped for a decade. Why, then, are they announcing losses, which, according to them, result from their position in Argentina? To justify laying off workers and increasing taxes… in Spain. Money has no nationality. This not only happened in Malaysia and Ecuador, but also in Russia and then Argentina. No one is safe. Now, how does that poem by Bertold Brecht start? ‘First they took away the…’