International Monetary Fund International Fund Currency in Washington wants to Poski wepchac unnecessary credit for 20.5 billion dollars to
Donald Tusk's government finance patched.
Who depends on this, and who it supports? Sam
line of credit without the download will cost hundreds of millions. How many hospitals or schools can be built for it. Previously
Goldman Sachs manipulating Polish golden now we want more burden. According to Catherine
Zajdel-Kurowska who pays no tax in the U.S. and Poland, Polish representative at the IMF said in private conversation as Poland has always voted in line for what they will pay the older and wiser, it's true
confirmed. Belka also works there.
Polish compatriots, please write protest letters and call to
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The Shock Doctrine
Argentina's Economic Collapse - Part 1 of 12
Polish situation in the eyes of the IMF remain unchanged
Tuesday, April 13 (19:40) According to Catherine
Zajdel-Kurowska, Polish representative at the IMF Polish situation after Saturday's disaster in the eyes of the IMF and foreign investors has not changed. The Fund maintains its expectations of the Polish activities in terms of fiscal and monetary policy and calmly waiting for decisions on personnel in state institutions.
AFP
Zajdel-Kurowska stressed that from the perspective of the IMF should continue to be implemented the recommendations that the Fund introduced Ministry of Finance and National Bank of Poland in March. "These recommendations are quite clear. As regards fiscal policy should be developed medium-term plan of fiscal consolidation so that the national debt is not increased.
Regarding monetary policy, we advised not to hurry with interest increases, because the economic recovery in the world, particularly in Europe is very fragile, unstable. To not translated into the revival in Poland where we advise caution with the changes of interest "- said Tuesday in TVN CNBC Zajdel-Kurowska. "These recommendations will not change and should be put into effect" - Added. Zajdel-Kurowska said that the IMF is not afraid to disruption of the state and institutions to the tragic death of key persons for the operation of the state. "The IMF has accepted with calm all the comments from Marshal Komorowski, also institutionally nothing is changed.
read more
state is prepared to carry out state functions, the government and the NBP are working well and it is most important. Here there was absolutely no concern about imbalance in the financial markets or investors perceive Polish "- she said. Zajdel-Kurowska added that the IMF does not interfere in the issue of the role of the NBP president Peter Primrose on the MPC. "Until these issues in a macroeconomic approach, global. Each member of the Fund is its legal status quo on these issues.
These are the internal affairs and should give the lawyers. The Fund is not an expert on this issue" - said. "Fund observed further developments and will take these decisions, which will be applied" - she added. Zajdel-Kurowska believes that given the high foreign exchange reserves, Poland is not vulnerable to speculative attacks and the gold is not jeopardized. "All the interventions in the world experience shows that it is very difficult to fight the trend. Strong economic fundamentals attract investors to the Polish.
This is not a bad trend. What should be monitored, the rate of capital inflows that when the situation changes in the global economy and interest in other countries, has not been too rapid outflow of capital "- she said." Interventions have a big psychological dimension. Whenever the central bank enters the market it has a significant and strong impact on investors. Poland has a very high foreign exchange reserves are strong, and this is also a very important element for investors, because they do not cast on countries that are strong. Here there obawiałabym to get something threatened Poland and the golden "- she added.
According Zajdel-Kurowska, an economic revival in Poland more impact than the exchange rate will have a situation on the labor market." We recommend that you are still very good, while what is now larger than the ratio on the economy exchange rate is the labor market situation. Of course, too much appreciation of the zloty will have a negative impact on the dynamics of Polish exports, it will translate on the competitiveness of Polish goods.
What is important is the labor market situation, if there is an increase in the unemployment rate - but this trend is not jest jeszcze niepokojący, poczekajmy jeszcze z oceną kilka miesięcy" - powiedziała. "Jeśli nie dojdzie do wzrostu bezrobocia to nie powinno być osłabienia wzrostu gospodarczego" - dodała.
May 5 (Bloomberg) -- Poland will apply to the International Monetary Fund to extend a $20.5 billion flexible credit line after the central bank said it won’t defy the government’s wishes.
Finance Minister Jacek Rostowski asked the bank’s acting Governor Piotr Wiesiolek to endorse the application to extend the one-year facility, which expires today, the Finance Ministry said in an e-mailed statement. Deputy Governor Witold Kozinski, said the bank will drop its opposition to renewing the loan if the Finance Ministry insists, according to the statement
Poland was the only country in the EU that refused to strengthen its currency, as its Zloty being weak was a benefit to the Polish economy in exports, employment and tax revenues. The national bank governor had said he would not take loans from the IMF…they had even been so bold as to offer to loan the IMF money! But after the governor’s untimely death the IMF loans have started against his plans.
Poland is the only country that is not in recession in Europe, it’s actually grown 2.75% this year, and 1.7% last year, and growth projections are even higher for next year. Its debt is quite low compared to other countries at around 50% of its GDP. We Poland can expect to be absorbed into the Eurozone and Increasing the size of its debts as its Central Bank governor was Taken in the crash.
to go with a loan from the IMF
kk 05-05-2010, last updated: 05-05-2010 2:06
expires today an agreement to make available to Poland, a flexible credit line for the International Monetary Fund
year ago, the IMF put at the disposal of Polish € 20 , $ 6 billion. Measures replenished the reserves of the NBP and were to be used in the event of changes in the markets that threaten the stability of the financial system.
Though far Poland has not made use of them, the government has repeatedly declared that the extension agreement is advisable. The Ministry of Finance, we could not find out if his boss asked for permission to NBP contract extension. If this happens, it does not you will be immediately covered by the umbrella of the IMF. - First, workers assess whether a country meets the criteria, then held an informal meeting of the Board of Directors, and after a few days - formal. In practice, it takes two - three weeks - says Katarzyna Zajdel-Kurowska, Deputy Executive Director of the IMF.
Everything can be explained by today - Vice President of the NBP Peter Koziński convene a conference on the loan from the IMF.
Is Poland earns error of Argentina and Greece? Shipyard workers occupy the achievements of the yards is not a Polish Us Tuska.to his Government is ours!
PolishAmericanDC Polish deal by employees.
everyone will have one vote. Equal pay for all. Shipyard workers
what are you waiting? the works!
to repay foreign debt this year is 63.9 billion debt
intl Polish general in the second quarter rose to 176.563 billion - 30/09/2009 14:18 NBP
30.6.Warszawa (PAP) - Polish foreign debt has risen overall in the second quarter of 2009 to 176.53 million from 169.827 million in the first quarter of 2009 - said the NBP.
this long-term debt rose to 129.573 million from 125.059 million in the second quarter, a short-term debt to 46,990 million from 44.78 million.
business debt rose to 80.510 million in the second quarter with 78,515 million euros in the first quarter of 2009.
debt of the banking sector increased from 42.135 million from 41.761 million.
state and local government debt rose to 51.612 million from 47.840 million (PAP)
Warsaw, 29.06.2007 (ISB) - Polish Foreign debt rose to a total of 131.70 billion at the end of the first quarter of 2007 from 127 , 71 billion at the end Fourth quarter of 2006, the Polish National Bank announced in its Communication on Friday.
the first quarter of 2006 foreign debt amounted to 115.0 billion.
foreign debt of the general government increased in the first quarter of 2007 to 53.5 billion euros from 51.62 billion in the fourth quarter of 2006 and to 52.15 billion euros a year earlier.
At the same time, the banking sector external debt rose to 17.95 billion from 17.67 billion euros at end-December 2006 and to 12.747 billion euros a year earlier. (ISB)
How many similarities
Argentine economic miracle
prof. Dr. Ronald Clement
18-08-2006 10:44 That was a few years ago, when corporate TV stations showed a terrible situation in Argentina - a country of a turbulent past, but until you enter the global economy pretty good shape the trick. Crowds of people protesting in the streets, soldiers shooting at them. Smoke, firecrackers, fire and unemployment surpassing 22%. In 2001 Argentina was on the bottom of the abyss, from which, according to Western economists, there was no escape. Globalists, industrialists and bankers were massively leaving a country taking away what still could be. Media dostaly order to forget about this country and its existence.
Argentina fights and overcomes - the corporate media not be allowed in August ye about that country
In December 2001, Argentina herself in the bottom of the economy, which was pushed by the elite and globalism. The banks stopped paying out the money. Economy of the country was no longer able to control. Exercises before the authorities, President Carlos Menem, industrialist chosen for the post in 1989, promised Argentineans beautiful women and Ferrari cars. From the door he would sell out the country in foreign hands for ridiculously low prices. He borrowed large sums of money from World Bank and International Monetary Fund (IMF). The citizens of Argentina, which thanks to the borrowed money was in a state of unprecedented prosperity, cheered in honor of their President and declared him a genius of the free market.
idyll ended when they had to start paying back the borrowed money. In 2001 the gross domestic product as much as 11%. However, the country did not receive from the IMF any additional funds, or any concrete advice.
When the blood flowed
history of Argentina is full of unsuccessful uprisings, uprisings, protests and wars. It is also full of poverty of the masses and unimaginable richness of selected groups. Is full of corruption, horrible torture and fascist prisons. But by the end of the 1990s the whole world was left speechless. What was going on the streets of Argentina was a warning and a prophecy for the supporters of the global economy.
Privately journalists wondering how it was possible to destroy a whole country in such a short time. How was it possible that no one noticed and no one counter. Such questions were circulating on the Internet and in private conversations. In newspapers and television chasing for sensation and bredzono something about fiscal irresponsibility on a large scale. Soon to be blamed ordinary Argentinians, and the new Argentine president De la Rua.
In 1999, when De la Rua was elected president and the country was already in a 3-year recession, termagant CNN announced that Main was selected because, according to the constitution because he could not enter the election for the third time. However, he said he would enter the elections in 2003. Menem belonged to the Peronist party, the biggest political power in Argentina. He was closely linked with the United States, globalism and free market.
new President of Argentina had almost no traffic. The authorities still wielded Peronists who have already attacked from the very beginning of his presidency. De la Rua in his speeches Argentinians asked: 'Please, would you understand here is how important is unity. I want to be president of all Argentineans. When
crash came, International Monetary Fund, first wash their hands. Its experts have claimed that Argentina spent too much money, although the budget was much smaller than the budget of the United States during the Great Depression. When the economists ridiculed such an explanation, lawyers IMF began to the storm. They claimed that Argentina had such rights to distribute the loans to which the Fund had to adjust, which prevented the normal functioning of the economy. This means that the Fund wants us to believe that poor Argentina dictated his terms.
All that show was overseen by the U.S. elite. Over the past 55 years, during the entire existence of the International Monetary Fund, the voice of the United States has been decisive. Other rich member countries could easily oppose the U.S. in voting and win. Strangely they never did. But when we look closely at the IMF find out that in fact it is only lenders ruled by the American Treasury. You should not surprised then that the American government, and the obedient American and Western media, unanimously stated that Argentina must be submissive to the rules imposed on her by the IMF. Economic analysis
Today we know already why Argentina's economy collapsed - although the media do not want to say. Please here for a special attention of the readers in Poland. In 1991, Menem based economies of the state of 'higher' currency, which was the American dollar. Argentinean peso exchange was introduced into U.S. dollars at constant ratio of 1:1. Menem hoped that the dollar will become so fast-circulating currency in Argentina. It was a good idea at first, but soon turned out that the value of the dollar was overrated. Overstated in August also automatically value of the Argentinean peso. Let us pay attention to how the Euro in Poland.
At a time when investors figured out that the value of the peso is overrated started fearing that it would fall. Therefore, they began demanding higher interest rates on everything. Also on private and government loans. It caused a huge debt. The interest rate was raised to 40%.
To keep up the the American currency, the Argentinian government had in the banks have adequate amount of dollars. With progression of the crisis the government had to buy more and more dollars after a much inflated price. More and more people demanded cash. This process pushed Argentina into a debt of 140 billion dollars. In December 2001, the government Argentina announced to the world that it is not able to pay anything. Argentina became the pariah of nations.
To keep the overrated value of the peso, International Monetary Fund gave Argentina huge loans. Only one year into the treasury of the state sent 40 billion dollars as a package organized by many lending institutions. Guarantee that these loans would be paid off was a basic requirement - to maintain zero deficit. Which meant that Argentina had to oscillate at 100% of the budget. During the recession, it is impossible to keep 100% of the budget, except that it requires a very painful surgery, such as cuts in the budget, which in turn cause high unemployment, eventually leading to street fighting on a big scale.
How does this process look like from an average, hard working Argentinian? In the early 1990s Argentinians were encouraged to buy almost everything. Companies were privatized and incorporated into conglomerates. Encouraged to build houses by giving them low mortgage loans. Asked to set up their own companies and the people made redundant were given compensation packages. Middle-class luxury cars were shown and sold for very low payments for high percentage of loans and long term payments. Media shouted out that it is so good, that everybody would be able to afford to pay off a car or house. You can have everything now - will pay off later. Argentinians, like the Poles, the prosperity zachlysneli not knowing that pledged trap them. After 40 years of poverty and wars they are, what we have been seen in American films could have in their gardens or garages.
With the Western capital came the people whose job it was to watch its flow. Taught Argentinians what the free market and global economy (global prosperity). Soon they had such huge influence on the structure of the state of Argentina, the country has virtually lost its independence.
At a time when the dollar was bought with the peso at a 1:1 ratio everything that was produced in Argentina as well as services, have become too expensive to be able to be exported. The whole country, like Poland and other countries literally choked to death. Imports of goods was much cheaper than their production. In this way, destroyed almost 10% of national income.
Mass privatizations in the early 1990s almost all national assets for a fraction of its market value had already caused large-scale unemployment. Mostly privatized electricity, municipal, telephone, etc. Globalists know very well that process. Start privatizing of selected key sectors. After that, our markets are becoming outdated (compatibility financial structures and management). Then there is no way out but to privatize up to all sectors of the economy. When the spiral of privatization went up, the spiral dismissal went down. At the bottom there was a a growing number of people without a job and ending up with no means of living.
The scale of the country to the top of the spiral movement was balanced by the movement down. Finally more and more people stopped doing their shopping, the money stopped circulating. Taxes. Poor Argentinians did not pay taxes because they had nothing - instead of buying rifles. When the money stopped circulating, now privatized companies laid off more and more people to keep up the economy of enterprises. These three interrelated crises (taxes, unemployment, overrated value of the currency), the Argentinian government to beg the IMF for help or advice. International Monetary Fund, after long negotiations decided. Argentina is too much debt. We can not help. Let us leave this country in the state of free falling into an abyss. For many military councils was also decided to cut off Argentina from the outside world if the expected an armed uprising began with the borders.
This decision by IMF, foresaw the decline in value of the peso, Argentinians went to the banks to pay out their savings. The banks were closed, the salaries in many sectors of the economy on hold. Desperation, the President of Argentina announced that Argentina stopped paying off their debts. Press predicted that in August there will be sections Dante scene after that they interest in the matter. Argentinian miracle
seemed that for Argentina there was no retreat. Rats began to leave the sinking ship. President Menem left for Chile. Businessmen and their international advisors were leaving for their country. Even small investors, whose parents came to Argentina in search of a better life, frantically tried to get a visa to travel to their home countries. Were left behind with the whole plant machinery equipment - which was not profitable to produce anything. The workers on the pavement. Left beautiful mansions with swimming pools and the whole office blocks lined with marble. Those who had led to the crisis were like a locust on other fields, which could still objesc.
Time magazine was wondering: What's Next can do De la Rua? That is the million dollar question. Whether alone or in a coalition, he immediately needs a plan to ease the crisis. He must help people fill their stomachs and maybe, to revive economic growth. The problem is that, to ease the effects of the crisis on the poor, the government has to spend millions of dollars on food and basic needs. This will deepen the financial crisis. Something must happen ...
I became. Argentinians trusted their President, who broke the negotiations with international financiers. The army, police and ordinary people lined up. They claimed that Argentina belongs to the Argentinians, not to the international financial mafia. Argentina's government, left alone, made a decision that the White House and international bankers furious. Contrary to the recommendations of the exchange rate of the peso was freed. Minister of Economy, Roberto Lavagna, stated: competitive prices, foreign exchange and exports will help meet the needs of the country. They also decided to discontinue the free market policy, the economy was a prisoner. Economic Cooperation was established with Brazil and China. Capital started to flow into the country. Central bank began to buy the dollar again, but only what is needed to maintain economic growth.
When Argentina announced that it is able, after three years from the date of separation from degenerated concept globalists, to pay 30 cents for every dollar of debt and keep her unprecedented economic growth, first nobody believed her. Later strictly forbidden to inform the media. No wonder the boy is a palpable proof of how quickly the economy of a given country and life of its citizens can improve when they forget globalist absurdities.
British 'Guardian' in December 2004 he wrote: "Three years ago, in December, Argentina was in crisis. Economics uncontrollably rolling down the precipice, banks closed their doors to investors, presidents changed every week ... Today, the common opinion among economists in Buenos Aires are that the country has left the worst. Yes, Argentina is still struggling with a complicated process of reconstruction of debt, but the economy has undergone incredible changes ...
Like Phoenix, the economy has risen from the ashes. After a 11% decline in national product in 2002 and in 2003 it rose by almost 9% and will rise another 8% this year. The Government carefully announces that in 2005 it will rise by 4%, but most economic experts believe that actual growth will be 5% ...
These assumptions "free market" were bad for jobs. Unemployment in 2002 and reached its peak and 22%. Now it is 12% ...
Whether you are a believer or not. Some commentators say about the rise of Argentina as a miracle which could not Rodrigo Rato, director of the IMF. Hand of God turned to be more powerful than the hand of the International Monetary Fund. Now nobody is cheating.
Another thing which is hidden by the media, the fact of absolute unification of the working class with the management class.
When sitting idly on the streets
When the factory owners closed and fled to other countries, because production was not profitable, the employees and executives lost jobs and infested the nearby cafes and park benches. Mainly discussed how to improve your life and situation for the destruction of the country. Employees such as abandoned factories Zanon looked at the gate. In those factories spent most of his life. In the end, made up their minds. They entered the grounds of abandoned and dilapidated factories. Established works councils, started the machines and began production of the materials which were still in warehouses.
At almost the communist people's behavior, the authorities and the army looked. Soon, the turners, grinders, and joined by warehouse managers, office clerks and economic directors. In record time sales and exports. There were no fixed hours of work. Decisions in their plants, taken by the people during the short production meetings.
turned out that the production is profitable and necessary. What had not been profitable for globalists started to be such common people. Without the help of banks and financial cartels. Soon, production and sales reached a certain factories record levels. People shared the profit with one another. I have never earned such sums of money. So they started to think. Thus building and other industries.
All this happened so quickly that America did not even announce the Argentine communist country. The Movement of Unemployed Workers (MTD). This movement soon had the power to influence politics. And it was yet another mystery Argentinian miracle.
rats come back
situation of Argentina began to improve. Globalists and manufacturers began to come back and demand a return of looted by the people of factories. Those who had left three years ago, country on the verge of civil war, now have some claims, quoting international law. Or something like that remind the Poles?
MTD, which was created almost on the streets is strong. Threatened mass demonstrations. Zanon ceramics factory, the first taken over by staff and brought to a state of a profitable, as the Gdansk Shipyard used for the Poles, has become a symbol of the new and improved. MTD is considered by the CIA and other similar organizations as a group, which managed to create the most modern strategies and solutions to unite and defend people against capitalism.
returning rats attack from international financiers. Because Argentina is a serious threat to the whole global economy, we should assume if the USA was not involved in Iraq, American soldiers in the name of democracy, defending their oil under the Argentinian grass, or would be defending the freedom of their country.
new president of Argentina, Kirchner, demands the extradition of former president Carlos Menem, who is in Chile. Menem is wanted by the Argentinian authorities for corruption and bringing the country to ruin. He planned to enter the presidential elections in 2007 and promise the factory to return their property. Of course, why he enjoys support from international financiers and can afford to laugh at the orders and decisions of Argentinian courts.
In January 2005, international bankers agreed to the proposal from the Argentinian government paid 25 cents for every dollar of debt. Unseen thing happened. Argentina declared war on the IMF and several other globalist organizations and won. Argentina is not only protected by her own army blackmailed the globalists, but also refused any negotiations with 700 thousand. holders of the state (bondów). Argentina has an open way to be accepted back to the international society, which had been thrown away. And it is on their terms, as a full member, making decisions.
Many bankers and international investors accuse Argentina of totalitarianism and cheating investors and lenders. This caused quarrels among the great financiers, among them Italians and Americans, who claim that if it was not September 11, is talking to Argentinians otherwise.
Three months later the IMF again began demanding a full payment of the debts. But Argentina in an economical layout of Brazil and China, he felt strong enough to bankers on Wall Street to show how "became two trees and broke one in August ..." (in the original, prof. Clement wrote about the middle finger of right hand - Red ..) Argentina started to prove to the world with that about half of lenders have already made a considerable profit from the Argentinian debts and that it is wrong to demand any more. This position was exposed by Chinese and Indian media. By the way, Argentina showed the world that how the I tried to bankruptcy and what it meant in practice.
British 'Guardian' writes: Three things worked for the benefit of Argentina. Firstly, the card Kirchner was strong thanks to the strong economy. Second, it began to go out the truth about the International Monetary Fund. Why they wanted a quick settlement. Thirdly, the Wall Street left Argentina just before the crisis and the negotiations led by European banks. American Treasury was not pressed to hard with Argentina. Also they did not want Kirchner to make friends with a strong populist, President of Brazil, Lula ...
the footsteps of Argentina - show the globalists posterior parts of the body, can go now many indebted countries. In this also, and Poland. And this is what the financial fear most. He was created a precedent. Relatively little significant country, objected to the wall, wide-spread slogans of democracy, law and free market. And she won - at least so far. For other countries, has emerged a big chance. Now, when the American army is involved in Iraq, they can get rid of the yoke. Only need to want and go for it. So how did the citizens of Argentina regardless of their social function, possessions and education.
prof. Dr. Ronald Clement
Sources:
Alavio Grupo March in Defense of Zanon, Z Magazine, September 17, 2004.
Oliver Balch, Taking care of business, Guardian, June 3, 2005.
Ezequiel Burgo, Argentinas miraculous recovery Owes little to the IMF, The Guardian, 13 December 2004.
Larry Elliot, Who needs the hand of God? ", Guardian, 7 March 2005.
Free-Market Flop: What Happened in Argentina, (www.americas.org/item_77). Uki Goni
, Argentina Seeks Arrest of Main, Guardian, 22 April 2004.
Hacher Sebastian, Beneton Vs. Mapuche, Z magazine, June 6, 2005.
Katel Peter Argentinas Crisis Explained, Time, 20 December 2001.
Morduchowicz Daniel, Manufacturing militiants, Z magazine, May 8, 2005.
New Argentinian president-elect pleads for national unity, CNN, 25 October 1999.
The 100 billion dollar question, Guardian, 13 January 2005. Harris Whitbeck
, Struggling economy fuels Argentine Emigration, CNN, July 23, 2001. Too much debt
Polish, and Poles in the international finance markets
asks for trouble.
Who is pushing Poland and the Poles to such a big debt?
Argentina Did not Fall on Its Own
Wall Street Pushed Debt Till the Last
By Paul Blustein
Washington Post Staff Writer
Sunday, August 3, 2003;
BUENOS AIRES - Ah, the memories: Feasting on slabs of tender Argentine steak. Skiing at a resort overlooking a shimmering lake in the Andes. And late-night outings to a "gentlemen's club" in a posh Buenos Aires neighborhood.
Such diversions awaited the investment bankers, brokers and money managers who flocked to Argentina in the late 1990s. In those days, Wall Street firms touted Argentina as one of the world's hottest economies as they raked in fat fees for marketing the country's stocks and bonds.
The human scale of Argentina's crisis: People wait to search for food in garbage
Thus were sown the seeds of one of the most spectacular economic collapses in modern history, a debacle in which Wall Street played a major role.
The fantasyland that Argentina represented for foreign financiers came to a catastrophic end early last year, when the government defaulted on most of its $141 billion debt and devalued the nation's currency. A wrenching recession left well over a fifth of the labor force jobless and threw millions into poverty.
An extensive review of the conduct of financial market players in Argentina reveals Wall Street's complicity in those events. Investment bankers, analysts and bond traders served their own interests when they pumped up euphoria about the country's prospects, with disastrous results.
Big securities firms reaped nearly $1 billion in fees from underwriting Argentine government bonds during the decade 1991-2001, and those firms' analysts were generally the ones producing the most bullish and influential reports on the country. Similar conflicts of interest involving analysts' research have come to light in other flameouts of the "bubble" era, such as Enron Corp. and WorldCom Inc. In Argentina's case, though, the injured party was not a group of stockholders or 401(k) owners, it was South America's second-largest country.
Other factors besides optimistic analyses impelled foreigners to pour funds into Argentina with such reckless abandon as to make the eventual crash more likely and more devastating. One was Wall Street's system for rating the performance of mutual fund and pension fund managers, who were major buyers of Argentine bonds. Bizarrely, the system rewarded investing in emerging markets with the biggest debts -- and Argentina was often No. 1 on that list during the 1990s.
Within the financial fraternity, some acknowledge that this behavior was a major contributor to the downfall of a country that prided itself on following free-market tenets. That is because the optimism emanating from Wall Street, combined with the heavy inflow of money, made the Argentine government comfortable issuing more and more bonds, driving its debt to levels that would ultimately prove ruinous.
"The time has come to do our mea culpa," Hans-Joerg Rudloff, chairman of the executive committee at Barclays Capital, said at a conference of bank and brokerage executives in London a few months ago. "Argentina obviously stands as much as Enron" in showing that "things have been done and said by our industry which were realized at the time to be wrong, to be self-serving."
Compounding the financial industry's sins, Rudloff said, were its sales of Argentine bonds to individual investors, mostly in Europe, when the pros balked at buying them. Moreover, in mid-2001, as Argentina was hurtling toward default, Wall Street promoted an expensive and ultimately futile "debt swap" that gave Argentina more time to pay its debts but jacked up the interest cost. The fees on that deal alone totaled nearly $100 million.
Wall Street firms assert that their enthusiasm for backing Argentina's borrowing was motivated by a sincere, if misplaced, optimism about the country's economic strengths. But critics contend that the same forces that fueled the U.S. tech-stock frenzy were at work in Argentina, in effect causing economic globalization to play a cruel trick on the country.
Charles W. Calomiris, a Columbia University economist who was one of the earliest prophets of Argentina's financial doom, wonders why government investigators have not intervened, given the danger that the same fate could befall other countries.
"How come we have one standard for private-sector deals, where everybody is getting all upset about conflicts of interest, and nobody in Washington has raised an eyebrow over the obvious conflicts of interest involving research and underwriting activities by U.S. financial firms in the area of emerging-market sovereign debt?" Calomiris said.
"A Bravo New World." So proclaimed the title page of a report on Argentina and other Latin American markets that Goldman, Sachs & Co. sent to clients in 1996.
The report hailed Argentina for shucking policies that had afflicted the country for decades with stagnation, bouts of hyperinflation and repeated currency devaluations. The government of President Carlos Menem was accelerating reforms launched in the early 1990s aimed at deregulating the economy and turning inefficient state-run enterprises over to the private sector. Particularly important, the report's authors observed, was Argentina's determination to maintain its currency "convertibility" system, which guaranteed that the central bank would exchange pesos for dollars at a fixed rate -- one peso for one dollar. Implemented in 1991, that system was remarkably effective in keeping inflation at bay, imparting a sense of stability among consumers, savers and businesses that had been absent for generations.
"For Argentine citizens and for those investors who were willing to believe in [the government's] promises, the benefits are now becoming apparent," the Goldman report said. The nation's economy, which started to grow robustly in the early 1990s, expanded at an average 5.8 percent rate from 1996 through 1998.
As the report suggested, that success story translated into a compelling sales pitch for the Street.
Seeking to exploit a fevered atmosphere for emerging markets, firms such as Goldman, Morgan Stanley & Co. and Credit Suisse First Boston LLC built their presence in Argentina and neighboring countries by dispatching teams of economists and financial experts, many in their twenties and early thirties. They competed fiercely for "mandates" from governments to be lead managers of bond sales, especially in Argentina, whose government was the single largest emerging-market bond issuer. They found plenty of customers for the bonds in the United States and other wealthy countries among professional investors who managed hundreds of billions of dollars held in mutual funds, pension funds, insurance companies and other large institutions.
"Every time we finished a meeting [with institutional investors], the orders would come," said Miguel Kiguel, who then was Argentina's finance secretary, recalling the demand for a $2 billion issue of 20-year bonds, managed in 1997 by J.P. Morgan and Merrill Lynch.
In the emerging-markets world, people "were making money hand over fist in those days," said Stewart Hobart, a recruiter working in the field. According to Hobart and other recruiters, strategists and senior economists at major banks typically earned $350,000 to $900,000 a year, including bonuses, while their bosses, the heads of emerging-markets research, were paid well more than $1 million.
Much was at stake for the firms in their Argentine business. Were it not for Argentina's prodigious bond sales, LatinFinance magazine reported in 1998, many emerging-market investment bankers "would probably have been twiddling their thumbs" that year, because crises in Asia and Russia caused capital flows to dry up to the markets they usually served.
One securities firm, Dresdner Kleinwort Benson, reassured clients who were worried that Argentina would follow countries like Thailand and Indonesia into turmoil. "Argentina has come through the first phase of the Asian crisis with flying colors," the firm said in a June 1998 report, and it was "no coincidence. The economic fundamentals are considerably stronger than three and a half years ago."
Amid the ebullience, however, Argentina was laying the groundwork for its economic destruction.
Early Warning
In meetings with top Argentine policymakers in April 1998 to discuss the country's finances, a senior official of the International Monetary Fund, Teresa Ter-Minassian, sounded the alarm that the country might be headed for an Asian-style meltdown. "The Argentine economy contains a sort of Molotov cocktail," Ter-Minassian was quoted in Argentine media reports as saying.
Many economists' postmortems on the crisis agree: that was when Argentina went wrong, missing a crucial opportunity while the economy was going gangbusters to reduce its vulnerability to crisis.
In particular, the government had to shrink its budget deficit, because its constant borrowing was causing its debt load to increase, from 29 percent of gross domestic product in 1993 to 41 percent of GDP in 1998. Argentina had a special reason to exercise extraordinary prudence: the cherished convertibility system for the peso. If markets began to get jittery about the government's ability to repay its debts, they might well lose confidence in the currency, and overwhelm the system by dumping pesos for dollars.
Argentina's budget policy was "not all that bad" during the 1990s; "it just wasn't terrific at a time when terrific was needed," said Nancy Birdsall, president of the Center for Global Development.
Globalization is supposed to keep problems like Argentina's from occurring. In theory, international financial markets reward sound economic policies by steering capital to countries that practice them. The influence of the capital inflow makes a government even more disciplined, because policymakers know that otherwise investors may yank their money out.
In practice, the gusher of foreign money lulled Argentina's government into complacency, acknowledged Rogelio Frigerio, who was secretary of economic policy in 1998. "If you get the money so easily as we did, it's very tough to tell the politicians, 'Don't spend more, be more prudent,' because the money was there, and they knew it," he said.
Argentina's best chance to put its economy on a sound footing was gone soon thereafter, as supercharged growth gave way to recession in 1999, mostly because of a financial crisis in neighboring Brazil. At that point, a vicious circle emerged: The slump caused tax revenue to fall, which widened the budget deficit, which aroused concern about the government's ability to service its debt, which caused markets to drop, which deepened the recession, and so on.
Argentina was unable to escape the vicious circle, which gradually intensified over three years. At the big Wall Street firms, few realized how dire the country's predicament was -- with one notable exception.
Underplayed Pessimism
Long before Argentina's default, Desmond Lachman, chief emerging market economic strategist at Salomon Smith Barney Inc., saw that the Argentine economy had no way to break out of its slump and would hit the wall one way or another. Many people in the emerging-markets business recall the gloom Lachman conveyed in conversations with clients as recession began to grip Argentina, while analysts at other firms predicted a recovery.
But Lachman's pessimism was not spelled out in reports published by Salomon, a part of Citigroup, which was a major underwriter of Argentine government bonds. Written research reports are important in influencing where capital flows, partly because money managers want to have material in their files to back up their investment decisions.
Officials in Argentina's economy ministry knew that Lachman was describing the country's prospects in very dark terms. They continued to include Salomon among their underwriters anyway, but they told the firm to "make sure you have a variety of views" besides Lachman's, a former Argentine official recalled. Published research on Argentina by other Salomon analysts tended to be relatively sanguine about the country's chances for pulling through, even in the turbulent months of 2001 leading to the default.
Lachman, who left Salomon to become a scholar at the American Enterprise Institute, declined to be quoted for this story. Asked why his negative assessment of Argentina wasn't published, Arda Nazerian, a spokeswoman for Citigroup's securities arm, cited Salomon's merger with Citibank in the fall of 1998, which created a firm with an abundance of analysts, enabling Lachman to spend more time privately with big clients. "The expansion of our emerging-markets research team reduced Desmond's responsibilities for writing on individual countries," she said.
Lachman's story is emblematic of Wall Street's reluctance to offend major issuers of securities. "It's a lot of self-censorship," said Federico Thomsen, who until recently was chief economist of ING Barings's office in Buenos Aires. "It's like, if you have something good to say, you say it, but if you have something bad to say, just keep your mouth shut."
The reports that Wall Street firms published on Argentina, to be sure, became much less bullish as the recession deepened in 2000 and early 2001. Analysts increasingly stressed the importance of the government cutting its deficit and reforming labor laws. But in general, the reports predicted that Argentina would muddle through. An example was a report published in October 2000 by J.P. Morgan, the biggest underwriter of Argentine bonds in the 1990s, titled, "Argentina's debt dynamics: Much ado about not so much."
By contrast, the analyst who most publicly warned of Argentina's impending doom was Walter Molano, head of research at BCP Securities, a Connecticut firm that does no underwriting of sovereign bonds.
Such evidence of bias among analysts is misleading, according to some current and former analysts who maintain that their overriding objective has always been to serve investor-clients well by providing the best advice possible. "My incentive is to be able to predict what will happen," said Siobhan Manning, emerging market strategist at Caboto USA. "If I can predict accurately, hopefully I gain credibility, and the firm does, and I'm able to make money."
But others acknowledge that they cannot help being influenced by the fact that their compensation is likely to be greater if their investment banking colleagues win deals to sell bonds. For one thing, success for the investment bankers means the pool of money available for bonuses will be larger, and at some firms, the analysts' bonuses are decided by groups of managers that include investment bankers.
"Your salary will be about one-third of your compensation in a decent year, so your bonus is everything," said Christian Stracke, who covered Latin American economies at Deutsche Bank and other firms in the 1990s and is now with CreditSights, a much smaller outfit specializing in research. "You'll never know what percentage of that bonus came from the recommendation of [investment bankers], but you do know that without the recommendation of [investment bankers], your bonus is just not going to be very big."
Although analysts want to make the right calls, Stracke said, "they're in it for the money. If they were in it to be smart, they'd be professors."
A Perverse Situation
It wasn't just rosy analyst reports that enticed big investors to buy Argentine bonds. Many money managers thought they had to be big holders of the bonds because their jobs depended on it. The word "perverse" is repeatedly used by people in the industry to describe what happened.
Just as in the world of stock market investing, where money managers aim to beat the Standard & Poor's 500-stock index, many professional investors in emerging markets are judged every quarter or so by how well their portfolios fare in comparison to a benchmark. Their job security and annual bonuses have often depended on whether they outperform an index called the Emerging Markets Bond Index-Plus, developed by J.P. Morgan, which tracks the prices of bonds issued by various emerging economies.
During much of the 1990s, Argentina had the heaviest weighting in the index of any nation, peaking at 28.8 percent in 1998 -- not because of its economic size, but simply because its government sold so many bonds.
The index virtually forced big investors to lend vast sums to Argentina even if they feared that the country was likely to default in the long run, several money managers said. Although default would hurt their portfolios, they would still lose less than the index as long as they were a bit "underweight," meaning they held a smaller percentage of Argentine bonds than the index dictated.
They didn't dare be too far underweight. Money managers who shunned Argentine bonds were taking a huge risk, because their portfolios would almost certainly underperform the index in the event Argentine bonds rallied, as happened from time to time.
So at investor gatherings, money managers who were asked their views and investment positions on Argentina would often say "negative" and "underweight," said Mohamed El-Erian, who manages emerging-market bonds at Pimco, the giant West Coast investment firm.
"The dreaded third question would come: 'How much underweight?'" El-Erian said. "They would say, 'It's 22 percent of the index. I can't possibly be more than 5 percent underweight.' So they'd have 17 percent of their money in Argentina."
Indexation survives for lack of a good alternative for measuring money managers' skills, but unhappiness over its flaws is widespread. Everyone knows that the system "can cause credit deterioration" by impelling more lending to borrowers with the most debt, said Michael Pettis, a professor at Columbia University Business School who was a managing director in the fixed income capital markets group at Bear Stearns.
It is like "a bizarre AA program in which you remove booze from the homes of people who are reducing the amount they drink and put it into the homes of people who are drinking more every day," Pettis said. "This is probably not the best way to reduce drunkenness."
Europe Bought In Big
Professional portfolio managers, of course, had a pretty good sense of the dicey game they were playing with Argentine bonds. The same could not be said of some others.
Felicia Migliorini, a divorcee who lives north of Rome, sank her life savings, about $135,000, into Argentine bonds in March 2001. About 400,000 fellow Italians did the same; together with other individuals, mostly in Europe, they now hold about $24 billion in claims on the bankrupt Argentina government.
Migliorini has been forced to put her apartment up for sale because she cannot afford the condominium fees and other expenses. Like thousands of other Italians, she blames her bank, which sold her the bonds. Lawsuits are flying; the banks contend that the purchasers were mostly wealthy, sophisticated people who surely realized what sort of risks they were taking. But Migliorini is outraged. "They told me [the bonds] were good, stable, guaranteed, and that since they were obligations they had to be paid back," she said.
European retail investors like Migliorini were an attractive market for the syndicates selling Argentine bonds. Professional money managers in the United States were often reluctant to buy at the yields the Argentine authorities were willing to pay. So the syndicates tailored a number of their offerings to Europe, in local currencies.
One attraction of the European market was that regulations protecting small investors are substantially less strict than in the United States.
"That's what kept Argentina going," said Tom White, who at the time was employed by Metropolitan Life Insurance Co. as an emerging-market bond manager. "Those poor suckers didn't have a clue as to what they were buying."
For Argentina, "keeping the country going" might sound beneficial. But a different conclusion could be reached as the recession dragged on and the government's debt neared 50 percent of gross domestic product in late 2000. The longer Argentina was kept going with infusions of cash, and the more the country delayed facing unpleasant realities about its plight, the more cataclysmic a crash it would suffer.
At a closed-door meeting at the Argentine Embassy in Washington in October 2000 to discuss the country's finances, Calomiris, the Columbia professor, urged that the government summarily reduce the amount of its debt payments by 20 to 30 percent. The country, he recalled saying, was ensnared in a trap: The markets were demanding increasingly high interest payments on the mountain of debt at rates far in excess of the economy's capacity to grow.
Foreign creditors were bound to conclude sooner or later that the debt was unpayable in full, Calomiris warned, and if Argentina continued trying to honor its obligations it would only build up more vulnerability to complete financial breakdown.
Calomiris's proposal was rejected by the Argentine government and the IMF as too drastic. But in the months that followed, his scenario began to unfold more or less as forecast.
Capital fled the country and interest rates skyrocketed when a political rift erupted in the cabinet of President Fernando de la Rua in November 2000.
The IMF rushed to Argentina's aid with a $14 billion loan, but after a brief rally, the country's markets sank anew. By the spring, buyers of Argentine government bonds were demanding yields as high as 10.5 percentage points above U.S. Treasurys, which meant that interest costs would become even more burdensome for the government and the economy at large.
Wall Street had one more plan to keep Argentina going -- a profitable one, at least from the Street's standpoint.
Debt Swap
Upon being appointed Argentina's economy minister in March 2001, Domingo Cavallo had barely ensconced himself in his office before David Mulford, chairman international of Credit Suisse First Boston, arrived to make a pitch.
Cavallo, the father of Argentina's peso-convertibility system, had a long history of dealings with Mulford, going back to Cavallo's previous term as economy minister from 1991 to 1996. The men got to know each other when Mulford was Treasury undersecretary for international affairs during the first Bush administration, and their relationship deepened when Mulford joined CSFB, which handled the privatization of Argentina's state oil company and became one of the biggest underwriters of Argentine government bonds.
Mulford had an idea for a deal that would dwarf the ones he had done before. He proposed a "debt swap," in which Argentina's bondholders would be given the opportunity to exchange their old bonds for new ones, on a voluntary basis. The purpose was to eliminate a problem that was disturbing the markets -- the large amount of interest and principal payments Argentina was scheduled to make in the years 2001 through 2005. Under the swap, those interest and principal payments would be stretched out so that much more would fall due in the years after 2005. That would give Argentina "breathing space" to restart economic growth, Mulford contended.
Despite the skepticism of some analysts and policymakers, including the IMF's chief economist, who believed the deal would prolong the agony and dig Argentina into a deeper hole, Cavallo agreed to try the swap.
Mulford traveled to the world's financial capitals to pitch the swap, which he described as creating the opportunity for improvement in the economy, the fiscal situation and market sentiment. The deal was "essential to long-term success in restoring Argentine growth," he declared in Buenos Aires. Mulford declined to comment for this article.
The results, announced in June, were proclaimed a resounding success: Bondholders offered to exchange nearly $30 billion worth of bonds, considerably more than had been expected. The seven banks that managed the deal, led by CSFB and Morgan, collected nearly $100 million in fees, an amount they justified by pointing to the 60-plus experts who worked on the complex transactions.
Within weeks of the deal's completion, though, Argentine markets were again in a tailspin and another IMF loan in August provided only a temporary respite.
By late November 2001, deposits were flying out of Argentine banks. The government took the extraordinary measure of slapping controls on withdrawals.
That helped trigger street demonstrations and rioting, which led to the resignations of Cavallo and de la Rua in mid-December. Their successors soon thereafter declared default and freed the peso from its dollar anchor.
Lessons Learned
A year and a half after the crash, Argentina has begun recovering from its depression. Although the economy is still producing considerably less than before the crisis, and unemployment is much higher, growth has picked up in the past several quarters. A few Wall Street bankers are sniffing around again for deals to restructure defaulted debt, but the national government has ruled out hiring any firm that underwrote its bonds during the 1990s.
The brightening outlook in Argentina has helped attract a new inflow of funds from abroad, enough to drive the stock market and the peso sharply higher this year. This time, however, the government has responded with restrictions aimed at limiting the amount of "hot" money coming into the country. The move reflects the view of some in Argentina, notably Roberto Lavagna, the current economy minister, about the lessons that should be learned from the country's economic collapse.
"The lesson is, we must pay attention to bubbles," Lavagna said in a visit to Washington this year. "With stocks, or companies, or countries, all are part of the same phenomenon. Probably Argentina is the best example of a country."
For developing nations
, "the worst period Is When Financial Markets have the most liquidity," Lavagna said. "This Is When countries make the worst mistakes. That is certainly the case in Argentina."
Special Correspondents Brian Byrnes in Buenos Aires, and Sarah Delaney in Rome, a contributed to this report.
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