Argentine Economy Minister admits to 'Hood Robin' policies

[sandensea]

Last edited Mon Jan 22, 2018, 01:17 AM - Edit history (1)

Speaking in a Buenos Aires cable news interview, Argentine Economy Minister Nicolás Dujovne described his economic policy as "a transfer from families to corporations."

"Hood Robin," he added.

It was an unusually frank response to questions by TN cable news' senior business anchor Marcelo Bonelli about a risky boom recently in carry-trade activity - the "financial bicycle," as it's known in Argentina.

The bicycle, made possible by a series of financial deregulation decrees issued by President Mauricio Macri within days of taking office 18 months ago, has been largely financed by the Central Bank itself through short-term bills known as Lebacs.

The Lebacs, issued in pesos and typically purchased for a 28 or 35-day maturity, pay an annualized 26% rate - over 10% in dollar terms. Attracting mostly domestic speculators, Lebacs are typically rolled over at the end of the month, with the profits used to buy dollars that are then wired to offshore accounts.

The value of Lebacs outstanding has nearly quadrupled since Macri took office to 940 billion pesos ($60 billion). The most recent payout, on June 19, suggests growing market unease over the Lebacs: a record 23% ($8 billion) were cashed in, rather than rolled over.

The scheme has drawn comparisons to the bubble created at the height of Argentina's last dictatorship in 1980, when the Argentine Central Bank paid up to 60% interest in dollar terms to attract investment - only to end in a financial collapse in 1981 after insiders "bicycled" some $20 billion in profits overseas.

Trickle down

Other Macri policies, issued likewise by decree, are estimated to have transferred at least $18 billion (3% of GDP) to the nation's powerful landowning, mining, and financial interests last year alone.

Tax cuts for these sectors helped push the nation's budget deficit up by 62% in 2016. Interest payments on Lebacs and other borrowing raised deficits by another 55% in the first five months of 2017.

Investors have nevertheless welcomed Argentina's return to global bond markets, with over $43 billion in bond issues in 2016 alone - compared to around $2 billion annually during the previous decade. Some $35 billion in speculative (portfolio) investment poured into Argentina in 2016 - a record.

Around 80% of foreign investment went to the short-term financial sector however. Foreign direct investment plummeted by over 50% last year to less than $6 billion, leaving little for the productive sector.

This trend, plus austerity policies including utility rate hikes of up to 1000%, has pushed unemployment from 5.9% in 2015 to 9.2% and real wages down by 11%.

Official data suggests that Argentina's 2016 recession may have turned the corner in March after Macri, whose right-wing coalition is trailing in polls for upcoming mid-term elections, approved a sharp hike in public works and social spending.

The recovery, even so, is so far one of the weakest in Argentine history, with GDP inching up 0.6% in April from the same time last year after falling by 3.1%.

At: https://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.diarioregistrado.com%2Feconomia%2Fdujovne-admitio-la-economia-con-macri-es-como-robin-hood-pero-al-reves_a5954fad2d669e67b19cfae21&edit-text=



Bicycling in Buenos Aires' financial district, where the "bicycle" has made a comeback among speculators.

[Judi Lynn]

1. So now an average worker's income is 89% of its value from last year, and utilities cost 1000% more.

We remember the water war in Cochabamba, Bolivia, when the little fascist fool President Hugo Banzer put the nation's water in the hands of a Bechtel-owned subsidiary. We also remember he took the land occupied for centuries by native Bolivian families and offered it to anyone in South Africa, white, that is, as he tried to create his own "White Bolivia." What a shame he died.

Macri is going like a wildfire, isn't he? It doesn't look as if there's any chance he will fail screwing up everything so badly it will take years, at least, to repair the country. Deja vu, isn't it?

Thank you for the latest news, sandensea.

[sandensea]

2. Ah, yes. Cochabamba - where Bechtel made even collecting rainwater illegal.

Last edited Fri Jun 30, 2017, 02:40 PM - Edit history (1)

Their water privatization involvement in Bolivia had to be one of their most shameless heists - until their Iraq "reconstruction" contracts anyway (remember that?).

They had a similar, albeit less dramatic, experience in Argentina with Vivendi and Suez (both French).

At the height of the privatization boom in 1992, Menem granted them the concession to run the Greater Buenos Aires water district.

The concession was free of charge - provided the consortium connect the 1/3 of metro area households that had no water service (many relied on cisterns), and with no rate increases.

Suffice it to say, it was a fiasco. After a decade, only a third of the promised water works had been completed - and rates actually doubled at a time incomes were almost flat. Customers were charged $800 for hookup - which may not sound like much, but it was a month's pay for most people back then.

Vivendi and Suez made out all right though: their profit margins averaged 20% (compared to 6% in France), and its board of directors reportedly made $6.5 million a year each.

The consortium declared bankruptcy in 2002, and the service was renationalized by Néstor Kirchner in 2006. Naturally they sued before the ICSID - a corporate tribunal with supranational powers - and in 2015 Argentina paid $400 million for "breach of contract."

The ICSID admitted that Suez/Vivendi had committed a massive breach of contract themselves. They ruled, however, that "a government’s human rights obligations TO ASSURE ITS POPULATION THE RIGHT TO WATER can't trump its obligations to investors" - i.e. brigands.

As fate would have it, it was the ICSID that helped bring down the TPP last year, since the TPP would have made it the de facto U.S. supreme court.

[Judi Lynn]

3. It's good you have reminded us of Vivendi and Suez. That was truly criminal, it's amazing

far, far more wasn't publicized about it in the US at the time. All I can remember reading is that the shocking news that residents were getting thick, very thick, brown water out of their faucets, and that was the first time I'd heard of anything like that. Shocking. To have just learned that they were also being extorted by these companies, and they most surely were, is far more than an outrage.

It must be that Menem had far, far more power behind him, as President, than he deserved, far more protection for his ghastly moves he made than should have ever been allowed. I do remember he was a very tight friend of George H. W. Bush, as well as his sons, particularly JEB. My god.

$800.00 now, for most US Americans would have been fought tooth and nail as the cost getting connected to a water company. So many people could not easily afford it even now.

And look what they got for the expense.

Menem, impeached, tried for weapon trafficking, if I'm not mistaken. It makes a person ill realizing how corrupt that man was. He even ditched his wife of many years to marry a former Miss Universe, or one of the pageant winners. It was hilarious when she betrayed him not so long afterwards after a short career of being his eye candy. He looked hilarious trying to posture beside her for photos.

All that water weirdness seemed to happen when George H W Bush was either the President or Vice-President, too. Former CIA guy, faux hero pilot who ditched his planes and his comrades who went down to their deaths, totally caught up in Latin America mischief from even before the Bay of Pigs, etc., etc., etc.

So easy to see the international corruption is deep, so deep, and decadent. Wow.

Thanks for opening that door for us to re-examine, remember the strange goings-on during Menem's bizarre leadership, too. It's so important to be able to see the whole picture.

On edit:

I wanted to thank you for posting the image of the street showing bicicletas on it, and awakening awareness that there are actually indigenous people who wear some of their own indigenous-styled clothing in ordinary life. I had come to believe, after hearing from posters who had lived in Argentina, at CNN'S old Cuba-US relations message board, that Argentinian people regarded their country as the "Europe of Latin America" once, during a conversation they were having about Argentine soccer players.

I simply assumed that there had been a near genocide in Argentina earlier in history, as there was here, too. It was a deepening experience seeing not only are they still around, they aren't ashamed to wear their customary clothing. Another point you've taught us, probably completely unaware!