BUENOS AIRES, Argentina (ChurchMilitant.com) - Pressure from Pope Francis on debt negotiations may bear fruit, but has had little effect on the Argentine government's push for abortion.
In February, the International Monetary Fund (IMF) judged that Argentina's debt is "unsustainable." The South American republic has long been beset by monetary devaluations, unstable governments and socio-economic inequities in spite of its natural resources and high levels of literacy. The country faces restructuring of $100 billion in sovereign debt with creditors, including $44 billion with the IMF, coupled with a deepening recession and inflation surpassing 50%. The head of the IMF has said that it is unlikely to offer a discount.
During the presidency of Mauricio Macri (2015–2019), the country's rating for doing business improved dramatically in comparison to the years under the previous Peronist administrations. However, government debt as figured as a percentage of the Gross Domestic Product (GDP) continued to increase throughout the years that business-friendly Macri was in office. In 2019, an election year, Argentina recorded a government debt equivalent to 89.40% of GDP. Currently, the Argentine peso (which was originally pegged at one-to-one with the U.S. dollar) hit an historical low on May 19: 0.015 to the dollar.
Argentina has defaulted on its debt six times in its history, most spectacularly in 2001, when it failed to pay $100 billion in debt, only to default again in 2014. Millions of middle-class Argentines lost their savings and faced unemployment and ruin.
According to Reuters, observers are concluding that the Argentine government is using the coronavirus epidemic as an excuse to push bondholders to accept a haircut: i.e., severe losses. "Argentina does what Argentina always does," said a Reuters source about the South American republic's negotiation tactics. There is now a high risk that Argentina will default again.
According to the Organization for Economic Development (OECD):
In 2018, Argentina had the highest government expenditure in the LAC [Latin American and Caribbean] region (38.9% of GDP) compared to a regional average of 31.2% and not far from OECD average of 40.3%. Compared with 2007, expenditures in Argentina increased by 9.4 percentage points, thereby making sure that government expenditures are well targeted is key for achieving inclusive growth.
Since coming to power in 2003, the Macri government continued much of the social and government spending of the preceding Peronist governments, which were marked by accusations of corruption, strengthening ties to socialist Venezuela and strained relations with the United States.
While Argentina is in the midst of negotiating its debt crisis, close advisors to Pope Francis are offering support to the country's Peronist government position that any solution must not come at the cost of any further suffering for the poor. In a May 18 teleconference organized by an Argentine university, economist Stefano Zamagni — who presides over the Pontifical Academy of Social Sciences — said that bondholders should accept a return of 2.3%. He said he was sorry that creditors "are not ready to accept it, preferring default over fixing Argentina's economy."
Zamagni, who has advised Francis and two predecessors, remarked that the country's task is to "convince some of the banks to accept the restructuring plan," while singling out American investment firm BlackRock, which has assets in excess of $7 trillion.
The papal advisor said that, should billionaire Larry Fink — BlackRock CEO and leading investor — accept the suggested percentage, "the other creditors will fold." On May 20, it appeared that BlackRock indeed may be folding: the Wall Street Journal reported that it is telling a group of investors that they may have to accept losses on Argentine bond holdings.
Father Augusto Zampini, who was recently named to the Vatican's Dicastery for the Service of Integral Human Development, also spoke at the teleconference, saying, "These countries are experiencing a triple shock: unprecedented collapse of demand for exports, drop in commodity prices, and capital flight." He noted that the priority is "recovering the economy," which he considered "a matter of justice."
And while he said that organizations joined with the IMF and the World Bank are going down that line, "it is not enough." The adviser to the Pope recently also said that the coronavirus pandemic is "an unprecedented opportunity for change, for a better, healthier and less unjust world." Zampini was also an advisor to the Amazonian Synod of 2019, which stressed environmentalism and communitarian themes.
Peronism, also known as Justicialism, is a nationalist, populist movement founded by President Juan Perón in the mid-1940s with labor support. As a vehicle for political power, it has won in 10 of 13 elections in which it was allowed to run and over time has embraced anti- and pro-American stances.
On the whole it has favored state intervention in the marketplace, as well as social welfare schemes. It incorporated elements of Catholic social doctrine, even while Peronist leaders (including Peron himself) clashed with Church leaders. In the early 1950s, for example, Peronist thugs burned several churches in Buenos Aires under apparent orders from Peron.
The Argentine government has responded to the coronavirus crisis with demands for debt restructuring, and freezing lay-offs, prohibiting utility cut-offs and increasing expenditures on pensioners and food for the poor.
The Catholic bishops of Argentina appear to have given tacit approval to the Peronist government's position. The president of the Argentine bishops conference, Bp. Oscar Ojea said recently that while Argentina must show its willingness to pay its debts, creditors must take into account "the enormous difficulties that the poorest countries have; in Argentina we have very high levels of poverty."
Pope Francis has himself argued that social factors must be taken into account by the creditors of the poorest countries. At the close of a February 5 seminar on economics and solidarity organized by the Vatican, attended by IMF director Kristalina Georgieva and Argentine Minister of Economy Martín Guzmán, Francis did not single out Argentina's fiscal woes but did call for "new forms of solidarity" to aid indebted countries and hoped that "we are not doomed to universal inequality."
Francis, a native Argentine, said, "Poor people in heavily indebted countries bear overwhelming tax burdens and cuts in social services as their governments pay debts contracted insensitively and unsustainably," and added, that a country's debt policy "can become a factor that damages the social fabric."
Georgieva told Reuters at the time that Argentina should stabilize its economy for a "successful debt restructuring and respond to the expectations of people that those who are the most vulnerable not be left out." For his part, Argentine negotiator Guzman told the conference that his government will not continue paying on debt that is unsustainable and pushing it further into recession. Saying that Argentina is holding firm on its threat, he dismissed demands from the Paris Club of country creditors to pay 9% in interest this year and in 2021.
In advance of the financial conference, Francis met privately with Argentine president Alberto Fernández. Like other Peronists, Fernandez made full use of photographs depicting him at the Vatican with the Pope.
Following their private meeting, Fernández claimed that abortion was not discussed, even though the Pope has otherwise reiterated his horror at the practice. Fernández said afterwards, "I asked him to do everything he can to help us [with the debt] and he is helping."
The Argentine leader said that the Pope is "an Argentine concerned for his country and his people," adding that the two spoke about their country's poverty and social divisions. It is rumored in Argentine government circles, according to local media, that the Pope asked IMF chief Georgieva to help in the debt negotiations, and even asked German Chancellor Angela Merkel to weigh in.
President Fernández appears unlikely to change his Peronist government's spending habits or his policy on abortion. He has vowed to heal a divided nation, and introduce a massive credit system with low rates to bolster domestic demand, and to boost spending to address hunger and poverty.
But he has also vowed to introduce bills to virtually eliminate protections for unborn children that are almost certain to pass in Argentina's Peronist-dominated Congress. In January, after meeting with the Pope, Fernandez and his concubine Fabiola Yáñez both received Holy Communion from Bp. Marcelo Sánchez Sorondo, an Argentine who leads the Pontifical Academy of Social Sciences. The event was interpreted by many in Argentina as tacit papal approval of the Peronist economic agenda. Argentina's leading couple are supportive of Fernández's son, Estanislao Fernández, a popular drag queen and LGBTQ activist.
Informants in Buenos Aires told Church Militant that the Pope's relations with Mauricio Macri, Fernández's predecessor, were seldom felicitous, thereby leading observers to doubt that the pontiff has a non-partisan approach to his native country's political leaders. For example, Macri's first official visit with Francis in 2016 lasted just 22 minutes, while Fernández got 44 minutes of the Pope's time. Also, photos of Macri's visit showed a scowling Francis, as opposed to a smiling face for Fernandez.
"Today's relations between [Pope] Francis and Macri are just as they were the first time, but three years have passed. It is like a non-working marriage where there has been no sex for a while," said Francis ally Juan Grabois, according to an October 2019 report by Argentina's Revista de Noticias. "There are differences in their respective worldviews. On one side are the Pope's ideas, which are opposed to neo-liberalism, and on the other are those like [free-market liberal advisor] Jaime Durán Barba who represent the new right."
In the past, Francis has shown little sympathy for market economics. While Macri championed free markets and a reduction of the government, Francis wrote in Evangelii gaudium that such a socio-economic system "kills."
In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.
In a talk to Peru's bishops in 2018, the Pope lamented government corruption and the introduction of neo-liberal capitalism to Latin America: "I believe that politics is in crisis in Latin American because of corruption." He told the bishops that while seeking "a way toward a Great Nation in Latin America, they have entered into an inhuman liberal capitalism that hurts people."
Before his election to the presidency, Macri served as mayor of Buenos Aires, championing free-market capitalism while improving infrastructure and services. As president, he sought to do much the same, while claiming to be pro-life and promising to sign pro-abortion legislation.
However, the Argentine Senate failed to pass a pro-abortion bill in 2018. Throughout 2019 and the presidential campaign, leftist and Peronist parties clamored for abortion rights, offering the currently reigning Peronists their winning support from pro-abortion advocates. President Fernández, as a left-of-center Peronist, has promised to sign bills to guarantee access to abortion and severely curtail protections for the unborn.
In an email response to Church Militant, Argentine economist Ivan Cachanosky wrote that he doubts that the Pope's intervention on the country's debt will have much effect. "If the country does not show some flexibility regarding its original proposal, and guarantees a payment or a shorter grace period, it is unlikely that an agreement will be possible, regardless of whose opinion it is," responded Cachanosky.
He could not recall that Francis made any such intervention during the Macri government, which was regularly getting IMF loans until it became clear that Fernández would be the next president. For Francis, Cachanosky said, it made more sense to wait until after the election and start a dialogue with Fernández.
But there may be a Francis effect after all, the economist said. To the Pope's credit, Cachanosky said, he is concerned about structural poverty, which Argentina has yet to resolve. "I believe that the meeting [with Fernández] was positive," he said. "While it may not have had a direct effect on debt negotiations, it may have had an indirect psychological effect. Governing Argentina is complicated because it has recurring crises and social conflict."
Cachanosky, as chief economist of Argentina's private Liberty and Progress think-tank, said that Fernández's plans for alleviating poverty are bound to fail in the long run. "Argentina must seriously and maturely consider how to resolve its structural imbalances that it has accumulated for 60 years," he told Church Militant. "This means reducing the size of government, as well as its spending and debt. This also means reducing taxes, and taking on reforms of labor law and pensions. These are the measures that will bring Argentina back from decadence."