Assigning blame in Buenos Aires: questionable lending practices by United States' banks and other foreign financial institutions played a critical role in the meltdown of Latin America's third-largest economy

0 Comments | Insight on the News, Feb 18, 2002 | by Martin Edwin Andersen

Banking insiders say that buying time might have been the reason for Kissinger's reappearance in Argentine affairs in September 1984 as an intermediary between the Alfonsin government and its foreign creditors. Playing host to a meeting at his Manhattan residence between Alfonsin and 10 bankers, Kissinger claimed: "I don't have any personal role in this except that I am a friend of Argentina and of President Alfonsin, and of course, the bankers." But a December 1985 issue of Business Week reported that 28 U.S. and foreign multi-national corporations, including Rockefeller's Chase Manhattan, paid the useful Kissinger a yearly retainer of $150,000 to $250,000.

Facing the real possibility of a united Latin American front against the debt burden, Alan Stoga of Kissinger Associates has explained privately, his firm pointed out differences between the countries in order to create divisions, or "made them up" where they didn't exist.

Alfonsin still might have staved off financial crisis by a crash program in sorely needed free-market reforms, if only to limit the damage to Argentina's financial condition caused by huge loss making state enterprises, many of which the military still controlled. However, with agriculture providing 80 percent of its export earnings and 12 percent of the gross national product, Argentina's share of the world market actually was shrinking at a time when the terms of trade between developing and developed nations was swinging heavily in favor of the latter. The crushing foreign-debt service left little money for economic reactivation and, as the conservative former foreign minister Oscar Camillion noted: "We are being asked to learn how not to breathe."

Kissinger reappeared once more in Argentina at the July 1989 presidential inauguration of Menem, whose heterodox coalition ranged from anti-Semitic right to radical left, and whose campaign was financed in part by international rogues Muammar Qaddafi of Libya, Manuel Noriega of Panama and Alfredo Stroessner of Paraguay. Menem quickly gained support in Washington by claiming fealty to free-market principles, while his foreign minister described Argentina's pro-U.S. diplomatic tilt as so pronounced that the countries enjoyed "carnal relations."

During Menem's 10-year reign, however, an estimated $10 billion was looted from the national treasury in bribes, payoffs and other practices. Argentina became a major center for money laundering, much of it by U.S. and Spanish banks working in concert with Menem's minions, his enemies now say. In particular, Menem's privatization scheme, while in itself unobjectionable in market terms, became a cesspool of corruption.

At the same time, government expenditures rose by 150 percent while the economy grew by only 50 percent. The 1-1 parity between the dollar and the Argentine peso, claimed by Menem to be his greatest achievement, actually camouflaged a gaping public deficit and was financed by the privatizations and seeming endless opportunities to take on more international credit. Despite the warning signs, the foreign bankers and bondholders kept lending until late 2000.