Today's date:
Fall 1987

Saving Argentina

President Raul Alfonsin - Alfonsin has been President of Argentina since December, 1983. The following excerpts are taken from an interview conducted with the assistance of Jacobo Timmerman.

The pervasiveness of misery and ignorance in our region has led many to believe that democracy is a luxury to be enjoyed only by wealthy nations. Moreover, these conditions were used to justify all kinds of dictatorships. Democracy's capacity to change and improve social reality was forgotten and we became isolated from the world.

Now, with the recovery of our democracy, we have returned to the world. And now, we Latin Americans face the difficult task of inserting ourselves into the contemporary international order.

A Reverse Marshall Plan
After World War II, the exhausted European countries faced the task of reconstructing their democracies. Today, Latin America and Argentina, devastated by years of authoritarianism, are faced with the same task.

In 1948 the European countries benefited from the Marshall Plan, an imaginative and generous response from the rest of the world which helped consolidate democracy and secure liberty in Europe. Today, in Argentina and Latin America, democracy is again flourishing. But unlike postwar Europe we have not benefited from a Marshall Plan.

On the contrary In the last five years we have transferred the capital equivalent of two Marshall Plans to the developed North. Moreover, we have carried the burden of interest payments on our foreign debt while the falling international price of commodities is displacing us from world markets.

We are making a fundamental effort to protect our freedom because we know first hand what happens when freedom is lost. And we know that democracy is the only way of tackling poverty and assuring stability, growth and development. But to secure the blessings of democracy we need a greater understanding of our predicament from the creditor countries.

Debt Remedies
Today, we are all convinced that growth is the solution. High interest rates and the fall in international commodity prices make it clear that austerity cannot solve the debt crisis. Only strong and growing economies can meet their obligations. But growth requires a coordinated effort by all: creditor nations, financial institutions and debtor nations.

The creditor countries can help by better coordinating their fiscal and monetary policies, increasing their support of multilateral institutions, promoting freer commercial practices, and uprooting protectionism and subsidies so international commodities prices can find their own level. Agricultural policy in the developed world is the most flagrant violator of these criteria.

The banks can help by refinancing debt that falls due in the medium and long term with additional capital which, in turn, would buy time for the various policy changes in our economies to take hold.

The banks can also help to minimize the transfer of domestic savings out of debtor countries. These savings should be invested at home to promote growth, not exported.

In this context, we are pleased that Citibank and other US banks have taken steps to build their reserves if, as the banks themselves have stated, this will enable them to manage their portfolios with greater flexibility. These measures place in a new perspective the necessity to give serious attention to proposals for "debt and interest relief."

The debtor countries can contribute to the solution by making their economics more efficient and by following macroeconomic policies which create an increasingly favorable environment for private investment.

This is what Argentina is trying to do.

Growth is the solution for Argentina, and growth requires a more efficient use of our resources and a much higher level of productive investment. To achieve these objectives the government is carrying out structural reforms such as improved tax collection, reducing the role and size of the state and reducing agricultural export duties.

In order to achieve a higher level of productive investment we are encouraging domestic savings and providing for greater investment opportunities at home. We are also trying to attract foreign savings by assuring legal stability for direct investment and by offering foreign investors the possibility of investing in all sectors of our economy, including the most modern.

At the same time, we are trying to limit to a minimum the outflow of domestic savings in foreign debt service and as private capital flight.

All these policies are the result of sovereign decisions, which I believe are for the good of Argentina. My government is committed to remaining a responsible and reliable member of the international community of nations. We believe this is the only course of action a country like Argentina should take, and it is the best way to have our voice heard by creditor nations and financial institutions.

Joint Action
Joint action with other debtor nations such as Brazil and Mexico is both possible and desirable. Together we can explain how the debt crisis, and more specifically the transference of domestic savings to foreign countries, is at the root of problems that transcend economics and become political.

It is also important to explain to the governments of creditor countries that debtor country problems affect global economic and political objectives - trade growth with Latin America is only one example of this - just as the fiscal, commercial and monetary policies of creditor countries affect the debt crisis. For better or for worse, the foreign debt has tied the developing world to the developed countries as never before.

If the developing countries, and especially the countries of Latin America, do not transform ourselves to overcome the debt crisis, we will once again become isolated in a world which continues to progress and prosper as a result of the scientific-technological revolution.

I am convinced that Latin America is prepared to confront the challenge, and I am certain we have the sympathy of others. But it is unfortunate that the imagination which gave birth to the more audacious dream of developing a prosperous and peaceful Europe after the last World War does not accompany our efforts today.

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