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Published online by Cambridge University Press: 25 March 2011
The Argentine debt crisis of 2001–2002 and its aftermath are examined in the light of the moral framework of Catholic social teaching on the debt problems of poor countries. The author, a former practitioner in emerging-markets finance, seeks to bring together and interpret the church's teaching (which was mostly worked out in the 1980s) in the particular economic and social circumstances of Argentina in the early 2000s. The key question is how closely the outcome of the debt crisis in Argentina conformed to what social justice, in the Church's interpretation, would have required. The main conclusion is that the resolution of the crisis was broadly consistent with that teaching. The crisis was managed with pragmatism rooted in shared (by debtor and creditors) concerns for social justice—more so than had been possible in the earlier Latin American debt crises in the 1980s, which the author had also witnessed. For that, many factors are responsible, including the emergence of civil society in Argentina and changes in the system of emerging markets finance. The author argues, however, that the moral framework of the Catholic Church on matters of international debt may deserve some of the credit.
1 World Bank, “Argentina—Crisis and Poverty 2003: A Poverty Assessment,” Report 26127-Ar, July 24, 2003, p. 1; available at http:\\wbln0018.worldbank.org/lac/lacinfoclient.nsf/d29684951174975c85256735007fef12/3d29a0ed02294a8b85256db10058dbdd/$FILE/ArgentinaPAMainReport.pdf. Note that most of the reduction in poverty after 1990 was probably due to the reduction of inflation rather than to specific social policies. The steady rise in poverty after 1994 occurred as the economy struggled in the aftermath of the financial crisis in Mexico in 1994–95.
2 World Bank, “Argentina at a Glance,” August 12, 2006; available at http:\\devdata.worldbank.org/AAG/arg_aag.pdf.
3 Michael Mussa, Argentina and the Fund: From Triumph to Tragedy (Washington, D.C.: Institute for International Economics, 2002), p. 2.
4 World Bank, “Argentina—Crisis and Poverty 2003,” p. 1.
5 See, for example, International Monetary Fund, Report on the Evaluation of the Role of the IMF in Argentina, 1991–2001 (Washington, D.C.: International Monetary Fund, 2004); available at http:\\www.imf.org/External/NP/ieo/2004/arg/eng/index.htm; and Michael Cohen and Margarita Gutman, eds., Argentina in Collapse? The Americas Debate (New York: The New School, 2002).
6 Jeffrey Klaiber, The Church, Dictatorships, and Democracy in Latin America (New York: Orbis Books, 1998).
7 Fabio Ladetto, “Ante un Estado desertor, el primer sustituto social es la prensa,” etcétera (April 2002); available at http:\\www.etcetera.com.mx/pag64ne18.asp. The cited article refers to a survey done by the Centro de Estudios para la Nueva Mayoria in Argentina in April 2001. The survey purported to show that the Church was the most favorably viewed institution in Argentina, followed by the press.
8 One of the earliest publications is Consejo Episcopal Latinoamericano, La Brecha Entre Ricos y Pobres en América Latina (Bogotá: CELAM, 1985).
9 Ibid., pp. 96–99.
10 Some of the leading members of CELAM included its president in the 1990s, Cardinal Oscar Andres Rodriguez Maradiaga of Tegucigalpa, who was assisted by representatives of the Chilean Church. The publication referred to is the Vatican document entitled “At the Service of the Human Community: Ethical Dimensions of International Debt” (Pontifical Commission, Justitia et Pax, 1986); available at http:\\www.jesuit.ie/ijnd/iustitia%20et%20pax.html.
11 See these 1980s-era publications of the U.S. Conference of Catholic Bishops: “Economic Justice for All” (on the U.S. economy) (Washington, D.C.: USCCB, 1986), and “Relieving Third World Debt” (Washington, D.C.: USCCB, 1989).
12 USCCB, “Relieving Third World Debt,” p. 2.
13 For background on Catholic social thinking on debt, the following documents are usually cited: Pope John Paul II, “Tertio Millennio Adveniente” (The Vatican, 1994); “Sollicitudo Rei Socialis” (1987); “At the Service of the Human Community: Ethical Dimensions of International Debt” (1986); USCCB, “Relieving Third World Debt” (1989); and “Economic Justice for All” ( 1986).
14 USCCB, “Relieving Third World Debt,” p. 22.
15 Ibid., p. 24. “The moral categories go beyond the attitudes that should prevail between debtors and creditors; they examine the justice of the relationship itself as well as the fairness of the mechanisms through which debt is incurred and is to be repaid.”
16 This was a particularly germane point in the 1980s, as various Church leaders addressed the debt issue. They had in mind that the extraordinary rise in U.S. interest rates had resulted in a situation in which countries had already paid much more in debt service than could reasonably have been predicted at the outset of the contract.
17 USCCB, “Relieving Third World Debt,” p. 29.
18 Ibid., p. 28.
19 This co-responsibility theme is laid out most explicitly in the basic Vatican document “At the Service of the Human Community.”
20 In contrast to the situation in the 1980s, the case of Argentina in 2001 less overtly involved a role for wealthy countries, except as creditors through the IMF. This was because the possibility of nonpayment by Argentina did not create the same systemic risk to the global banking system that was posed by the 1980s crises.
21 USCCB, “Relieving Third World Debt,” p. 32.
22 This call for reform of the major institutions of the global economy dealing with trade, aid, finance, and investment was a feature of the U.S. bishops’ pastoral on the U.S. economy, “Economic Justice for All.”
23 Ibid., p. 39.
24 For example, one could usefully compare William Cline, International Debt Reexamined (Washington, D.C.: Institute for International Economics, 1995), with the lessons drawn from the crises during the era of bond financing in the more recent work of Nouriel Roubini and Brad Setser, Bailouts or Bail-Ins? Responding to Financial Crises in Emerging Economies (Washington, D.C.: Institute for International Economics, 2004).
25 Roubini and Setser, Bailouts or Bail-Ins?, p. 14.
26 A useful source for more information would be Guillermo Perry and Luis Serven, Argentina: What Went Wrong? (Washington, D.C.: World Bank, 2003).
27 The Fund's flexibility in the case of Argentina was certainly heightened by the political support for Argentina from the leaders of the G-7, particularly President Bush, but also Prime Minister Blair and Chancellor Schröder of Germany. Argentina had cultivated friends in high places and knew how to tap into their support. Michael Mussa, a former senior official with the IMF, was later bitterly critical of the decision to extend financing in summer 2001, considering that by that time “prospects for a favorable outcome were pure fantasy.” Mussa, Argentina and the Fund, p. 45.
28 Competitiveness was being gradually restored via a painful deflation of prices in the period preceding the crisis in 2001. Much of the overvaluation had occurred in the early 1990s from the lagged effects of inertial inflation after the exchange rate was fixed in 1991.
29 Privatization inflows had masked this vulnerability in the 1990s, but these inflows dissipated after privatization was essentially completed in the late 1990s.
30 The poor fiscal performance is stressed in Mussa, Argentina and the Fund, in his analysis of what went wrong in Argentina.
31 Consulate of Argentina in the United Kingdom, Argentina Economic Overview 2004 (London: Consulate of Argentina, 2004); available at http:\\www.consuargensh.com/ArgentinaEconomicOverview200505NO37.pdf.
32 Argentina Bondholders Committee, Restructuring Guidelines, December 3, 2003, p. 11; available at http:\\www.emta.org/ndevelop/ABC_Final_Restructuring_Guidelines_12-3-03.pdf.
33 Conferencia Episcopal Argentina (hereafter CEA), “Necesidades Extremas y Violencia,” May 30, 1989; available at http:\\www.cea.org.ar/06-voz/documencea/1989-7Necesidades.htm. In an early document, entitled “Iglesia y Comunidad Nacional” (1981), the bishops argued that all of the ills that affected Argentina were of a moral order, setting out a vision of Argentine society that included corruption in almost all facets of its life.
34 CEA, “Reflexiones sobre la Justicia,” April 26, 1997; available at http:\\www.cea.org.ar/06-voz/documencea/1997-Justicia.htm. Earlier documents echo this theme of generalized corruption, lack of independence of the judiciary, laws that are not enforced, and growing poverty.
35 Ibid. Emphasis added.
36 See Archbishop Osvaldo Musto, as quoted in “Karlic denunció corrupción política y llamó a luchar contra la pobreza,” El Cronista, November 7, 2000.
37 Ibid.
38 Ibid.
39 Los Obispos de la República Argentina, “Hoy la Patria requiere algo inédito,” May 12, 2001; available at http:\\www.aica.org/aica/documentos_files/CEA/Asambleas_Plenarias/81a_Asamblea_Plenaria/Hoy_la_Patria.htm.
40 CEA, “Queremos ser Nacion,” August 10, 2001; available at http:\\www.cea.org.ar/06-voz/documencea/queremos_ser_nacion.htm.
41 Chris Herlinger, “Churches on Argentina's Fiscal Crisis: ‘It's a Mess, ’” Religion News Service, January 16, 2002; available at http:\\www.pcusa.org/pcnews/oldnews/2002/02023.htm.
42 CEA, “Carta al Pueblo de Dios,” November 17, 2001; available at http:\\www.cea.org.ar/06-voz/documencea/carta_al_pueblo_de_dios.htm.
43 CEA, “Reconstruir la Patria,” January 8, 2002; available at http:\\www.cea.org.ar/06-voz/documencea/reconstruir_la_patria.htm.
44 Ibid.
45 As quoted in Agencia Mexicana de Noticias, February 12, 2002.
46 CEA, “Para que Renazca el Pais,” March 31, 2002; available at http:\\www.cea.org.ar/06-voz/documencea/para__que__renazca__el__pais.htm.
47 Conferencia Episcopal Española, “Argentina nos duele,” January 31, 2002. Much of the diplomatic work was arranged by Bishop Estanislao Karlic of Paraná, the president of the CEA.
48 Conferencia Episcopal Argentina, “La Nacion que queremos,” September 28, 2002.
49 Comisión Permanente de la Conferencia Episcopal Argentina, “Recrear la voluntad de ser Nación,” March 14, 2003; available at http:\\www.aica.org/aica/documentos_files/CEA/Comision%20Permanente/2003_03_14_Recrear.htm.
50 CEA, “Para profundizar la pastoral social,” November 11, 2004; available at http:\\www.cea.org.ar/06-voz/documencea/2004-ParaProfundizarLaPastoralSocial.htm.
51 “La Iglesia respaldó al Gobierno en su postura frente a la deuda,” Infobae, October 8, 2004.
52 Remarks by Secretary of Finance Guillermo Nielsen at a meeting of the Emerging Markets Traders Association, December 4, 2003.
53 For background, see Roubini and Setser, Bailouts or Bail-Ins?, p. 291.