Argentina, whose gross domestic product was valued at $374 billion in 1998, owes $132 billion to foreign banks and private investors. The annual interest payments on the country's debt of around $10 billion represent more than one-third of the country's export income. Debt bonds guaranteed by the Argentine government are widely held by U.S. and European banks and companies. Among the largest U.S. investors are Fleet-Boston, Citigroup, Bank of America, and J.P. Morgan Chase. The latter two banks hold $900 million each in loans to Argentina.

The prime minister cast the swap as a "voluntary" exchange of bonds with creditors. Up to $95 billion worth of government bonds, presently paying 11 percent interest, will be cashed in for longer-term securities, which will yield a return of around 7 percent and will also be backed by the government.

Worldwide, the Third World debt, a mechanism by which banks and governments in the imperialist world bleed the wealth created by workers and farmers in semicolonial countries, stands at nearly $2.5 trillion.

Forty-one months of recession have helped to undermine the Argentine government's ability to keep up with onerous interest payments on the debt. Workers and poor farmers have borne the brunt of the slowdown. Today, official unemployment approaches 20 percent and poverty levels are soaring. Industrial output fell by 7 percent in September. In October, the government's tax receipts dropped by more than 11 percent compared with the same period in 2000. The government owes more than $520 million to provincial administrations, who face the wrath of state employees who have not been paid, sometimes for many weeks. The combined debt of the provinces stands at $20 billion.

Like its predecessor, De la Rúa's government has undertaken a series of austerity measures to slash government expenditures on social services and load even more of the burden of the country's crisis onto the backs of working people. In August his finance minister, Domingo Carvallo, announced cuts of up to 13 percent in public workers' salaries and pensions--one of a number of steps demanded by the IMF in return for a guarantee of $8 billion in new loans.  
 
Resistance by working people
Teachers and other state sector employees protested these brutal cutbacks, joining the resistance being put up by unemployed workers and industrial workers. Union federations have organized two national strikes this year. Over the three-and-a-half years of economic recession, workers throughout the country, especially in the most depressed industrial areas of the north, have held protest marches and blocked highways and bridges, demanding jobs and government relief and payment of back wages.

Other actions include a protest in early November of hundreds of public employees in San Juan province, who set fire to a government building and are demanding payment of two month's back wages. On November 2, some 5,000 farmers and others rallied in Bonaerense, a town in the Carlos Tejedor region, demanding relief from the effects of a massive flood and calling on the banks to refinance their loans and open new lines of credit. To try to stem these protests, the government announced on November 1 a series of measures to offer debt relief to some businesses, and provide assistance to the unemployed.

Several commentators and investors have expressed doubt about the "guarantees" on offer. "What they are saying is, accept an instrument that pays 7 percent interest with the same guarantee as the last one that paid 11 percent. I ask myself, who would accept that voluntarily?" said Roque Fernández, former minister of the economy. "It's a default disguised as a swap," said Christopher Eccolstone, an analyst at New York-based Buenos Aires Trust Co. "It's like having a gun against your head."

In the days leading up to the announcement, people in Argentina withdrew more than $500 million from banks with large holdings in government bonds. The official one-to-one linkage of the Argentine peso to the U.S. dollar, a policy requiring large holdings of the U.S. currency, is being openly questioned.

The Washington Post noted that a default in Argentina "could jolt emerging markets," including Turkey. "Especially in danger are already troubled economies in Latin America.... Brazil's currency has already slid 40 percent in value in recent months as the crisis in Argentina has come to a head."  
 
 
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