WORLD BANK... by Greg Palast Reformatted

[Alan Cibils <abcibils@xxxxxxxxx>]

I have reformatted the excellent Greg Palast article that Michael Pugliese
kindly posted to the list.

Here it goes:


ARGENTINA: WORLD BANK PRESIDENT'S SECRET PLAN FOR BLEEDING NATION AN
UNCHARMING MIX OF SELF-DELUSION AND CRUELTY
BY Greg Palast

AN ENVELOPE has walked onto my desk containing the memorandum for
Argentina's "Country Assistance Plan" for the next four years. The
document, signed by World Bank President James Wolfensohn, includes a
warning that recipients must use the document "only in the performance of
their official duties."

Here's the update of my prior report on the IMF, World Bank and Argentina.

********************************************************
Greg Palast was this month named Guerilla News Network's 2001 Reporter of
the Year for his exposés of the Bush family for BBC television's 'Newsnight.'

His new book THE BEST DEMOCRACY MONEY CAN BUY (Pluto) will be released this
April. Check our website at http://www.gregpalast.com for pre-order
information.
*******************************************************

In December in Buenos Aires, the Paris of Latin America, police gunned down
27 Argentines after they chose to face bullets rather than starvation. The
nation's currency had crumbled and unemployment had shot up from a grim 16
percent to millions more than the collapsed government could measure. The
economy had been murdered in cold blood.

Who done it? The killers left fingerprints all over the warm corpse. A
"Technical Memorandum of Understanding," dated September 5, 2000, was
signed by Pedro Pou, president of Argentina's Central Bank for transmission
to Horst Köhler, managing director of the International Monetary Fund. I
received a complete copy of the inside report from . . . let's just say the
envelope lacked a return address.

The "Understanding" required Argentina to cut the government budget deficit
from $5.3 billion in 2000 to $4.1 billion in 2001. Think about that.
Eighteen months ago, when the "Understanding" was drafted, Argentina was
already on the cliff-edge of a deep recession. One in six workers were
unemployed. Even the half-baked economists at the IMF should have known
that holding back government spending in a contracting economy would be
like turning off the engines of an airplane in stall. Cut the deficit? As
my 4-year-old daughter would say, "Stooopid."

The IMF is never wrong without being cruel as well. Under the boldface
heading, "Improving the Conditions of the Poor," the agency directed
Argentina to lop $40 a month from salaries paid under the government
emergency employment program; the order cut the salaries 20 percent to
$160. The "Understanding" also promised a 12-15 percent cut in
civil-servant salaries and a pension "rationalization" (IMF-speak for
cutting 13 percent from payments to the aged under both public and private
plans).

Cut, cut, cut amid a recession. Stooopid.

Salted in the IMF's mean-spirited plans for pensioners and the poor were
economic forecasts bordering on the delusional. In the "Understanding," the
globalization geniuses projected that, once Argentina carried out the IMF
plan to snuff consumer spending, somehow the nation's economic production
would leap by 3.7 percent and unemployment would fall.

It didn't. The IMF plan kneecapped industrial production, which fell 25
percent in the first quarter of last year before keeling over completely to
interest rates that, by the summer, were running up to 90 percent on
dollar-denominated earnings.

Another envelope that walked onto my desk contained the memorandum for
Argentina's "Country Assistance Plan" for the next four years. The
document, signed by World Bank President James Wolfensohn and dated  June
25, included a warning that recipients must use it "only in the
performance of their official duties."

My duty as a reporter is to tell you that the plan amounts to a
breathtaking mix of cruelty and Titanic-sized self-deception.

Written only months ago, when the economy was already plunging into its
death spiral, Wolfensohn wrote, "Despite the setbacks, the goals set out in
the last [year's] report remain valid and the strategy appropriate." The
IMF plan, cooked up with the World Bank, would, "greatly improve the
outlook for the remainder of 2001 and for 2002, with growth expected to
recover in the later half of 2001."

In this strange, eyes-only document, the World Bank president expressed
particular pride that Argentina's government had made "a $3 billion cut in
primary expenditures accommodating the increase in interest obligations."
In other words, the government gouged spending on domestic needs to pay
interest to creditors, mostly foreign banks.



Crisis, indeed, has its bright side, as Wolfensohn crowed to his banker
readers: "A major advance was made to eliminate outdated labor contracts."
And "labor costs" had fallen due to "labor market flexibility induced by
the de facto liberalization of the market via increased  informality."
Translation: Workers lost unionized industrial jobs and turned to selling
trinkets in the street.

What on Earth would lure Argentina into embracing this goofy program? The
bait was a $20 billion emergency loan package and "stand-by" credit from
the IMF, the World Bank and their commercial bankpartners. But there is
less to this generosity than meets the eye.

The "Understanding" assumed Argentina would continue its "Convertibility
Plan," instituted in 1991, which pegged the peso, the nation's currency, to
the Yankee dollar at an exchange rate of one-to-one. The currency peg
hadn't come cheap. Foreign banks working with the IMF had demanded that
Argentina pay a whopping 16 percent risk premium above U.S. Treasury
lending rates for the dollars needed to back the scheme.

Now do the arithmetic. When Wolfensohn wrote his memo, Argentina owed $128
billion in debt. Normal interest plus the premium amounted to $27 billion a
year. In other words, Argentina's people didn't net one penny from the $20
billion in "bailout" loans. The debt grew, but none of the money escaped
New York, where it lingered to pay interest to U.S. creditors holding the
bonds. The creditors range from big fish, led by Citibank, to little biters
such as Steve Hanke.

I spoke with Hanke, president of Toronto Trust Argentina, an "emerging
market" fund that loaded up 100 percent on Argentine bonds during a 1995
currency panic. Cry not for Steve, Argentina. His 79.25 percent profit that
year put his outfit at the top of the speculators' league.

Hanke profits by betting on the failure of the IMF policies. This junk-bond
speculation--the players call it "vulture investing"--is merely his
lucrative avocation. In his day job as a Johns Hopkins
University  economics professor, Hanke freely offers a cure for Argentina's
woes. The advice would put him out of business: "Abolish the IMF."

And, Hanke advised, abolish the peg. But the importance of this one-for-one
dollar exchange rate has been far overstated. When the Argentine government
finally devalued the peso in January, it wiped out the value of local
savings accounts. The currency peg is best understood as the meat hook on
which the IMF hung Argentina's finances. It forced Argentina to beg and
borrow a steady supply of dollars to back each peso, and this became the
rationale for the IMF and World Bank to let loose  in the pampas their Four
Horsemen of neoliberal policy: liberalized financial markets, reduced
government, mass privatization and free trade.

"Liberalizing" financial markets means allowing capital to flow freely
across a nation's borders. Capital has indeed flowed freely. Last  year
Argentina's rich dumped their pesos for dollars and sent the hard  loot to
investment havens abroad, bleeding as much as three-quarters of a  billion
dollars a day from Argentina.

Once upon a time, government-owned national and provincial banks supported
their nation's debts. But in the mid-1990s, President Carlos Saúl Menem's
government sold these off to foreign operators such as  Citibank of New
York and Fleet Bank of Boston. Former World Bank advisor  Charles Calomiris
told me these bank privatizations were a "really wonderful story."
Wonderful for whom? With the foreign-owned banks unwilling to repay
Argentine depositors, the government has frozen savings accounts,
effectively seizing money from regular Argentines to pay off the foreign
creditors.

To keep the foreign creditors smiling, the "Understanding" also required
"reform of the revenue sharing system." This is the IMF's  kinder, gentler
way of stating that the U.S. banks would be paid by siphoning  off tax
receipts that the provinces had earmarked for education and other public
services. The "Understanding" also found cash in "reforming" the nation's
health insurance system (cut, cut, cut).

And when cuts aren't enough to pay creditors, one can always sell "las
joyas de mi abuela" (grandma's jewels), as journalist Mario del Carril
describes his nation's privatization scheme to me. Notoriously, Vivendi
Universal corporation, the French infrastructure and entertainment giant,
picked up a big hunk of the water system in 1995--and promptly  cut staff
and raised prices (by 400 percent in Tucumán Province).  In his
confidential memo, the World Bank's Wolfensohn sighs, "Almost all  major
utilities have been privatized," so now there's really nothing left  to sell.

The coup de grâce, spelled out in the "Understanding," was imposition of
"an open trade policy." This required Argentina's exporters (with  their
products priced via the peg in U.S. dollars) into a pathetic, losing
competition against Brazilian goods priced in that nation's devalued
currency. Stooopid.

Have the World Bank and IMF learned from their horrific errors? They  learn
the way a pig learns to sing: They can't, they won't and, if  they try, the
resulting noise is unbearable. On January 9, with the  capital in flames,
IMF Deputy Managing Director Anne Krueger ordered  Argentina's latest in
temporary presidents, Eduardo Duhalde, to cut still deeper into government
expenditures. (President George W. Bush backed the IMF budget-cutting
advice -- the same week he demanded that the U.S. Congress adopt a $50
billion scheme to spend the United States out of  recession.)

Wolfensohn's memo insisted that the World Bank-IMF scheme could
still  work: All Argentina needed to do was "reduce the cost of
production," a step that required only a "flexible workforce." Translation:
even lower pensions and wages, or no wages at all. To the dismay of
Argentina's elite, however, the worker bees proved inflexibly obstinate in
agreeing to their impoverishment.

One inflexible worker, Anibal Verón, a 37-year-old father of five,  lost
his job as a bus driver from a company that owed him nine months'  pay.

Verón's joined angry unemployed Argentines, known as "piqueteros," who
block roads. In November 2000, in clearing a blockade, the
nation's  military police killed him with a bullet to the head.

Globalization boosters portray resistance to the New World Order as a  lark
of pampered, naïve western youths curing their ennui by, as  British Prime
Minister Tony Blair puts it, "indulging in protest." The U.S. and European
media play to this theme, focusing on demonstrations in  Seattle and Genoa,
while burying news of a June 2000 general strike honored by 7 million
Argentine workers.

While the July 20 death in Genoa of demonstrator Carlo Guiliani
was  front-page news in the United States and Europe, Verón's death
went  unreported. Nor did U.S. media record the June 17 deaths of
protesters Carlos Santillán, 27, and Oscar Barrios, 17, gunned down by
police in a churchyard in Salta Province, north of Buenos Aires. Only
in  December, when Argentina failed to make an interest payment on
foreign-held  debt, did the Euro-American press suddenly report a "crisis,"
feeding us the images we expect from Latin America: tear gas, burning cars
and a  parade of new presidentes taking oaths of office.

The "Understanding" and the Wolfensohn memo are irrefutable evidence of IMF
and World Bank guilt in the nation's financial assassination. But  did they
have accomplices?

Adolfo Pérez Esquivel, leader of Buenos Aires-based Peace and Justice
Service, (SERPAJ), a Church-based human rights organization, is documenting
cases of police torture of protesters in Salta Province where Santillán and
Barrios died. Pérez Esquivel, who won the Nobel Peace Prize in 1980, told
me repression and economic "liberalization" are  handmaidens.

SERPAJ has filed a formal complaint charging police with recruiting
children as young as 5 years old as informers for paramilitary squads, an
operation he compares to the Hitler Youth.

Pérez Esquivel, who last year led protests against the proposed Free Trade
Agreement of the Americas, doesn't agree with my verdict against the IMF in
Argentina's death. He notes that the IMF's fatal "reforms"  were embraced
with enthusiasm by Finance Minister Domingo Cavallo, a  World Bank
favorite. Cavallo, fired in December after mass protests, is  best known by
Argentines for heading the nation's Central Bank during the nation's
1976-1983 military dictatorship. For Pérez Esquivel, Cavallo's enthusiastic
collaboration with the IMF and World Bank suggests that  the untimely
demise of the nation's economy wasn't murder, but suicide.

****************************************

Additional research provided by Globalization Challenge Initiative,
Washington DC, and Oliver Shykles, Brighton University (UK).

This article will appear in Connection to the Americas magazine and  on
http://www.Americas.org, the premier English language site information on
Latin American politics and economics.

Note: This article may NOT be reproduced in English without permission of
the author and Americas.org. Spanish-language version will soon  be posted.


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