Standard & Poor’s claims Argentina has “defaulted” on its debt

Andrea Lobo

As the fallout continues from the Argentine primaries last week, which foresees the defeat of right-wing incumbent president Mauricio Macri, the Wall Street credit agency Standard & Poor’s declared Friday that the government has effectively defaulted on its debt, sending chills across ruling circles.

Unable to continue servicing the debt, the Macri administration announced Wednesday that it would postpone payments on $101 billion in borrowings, including short-term and long-term bonds, and that it is re-negotiating its deal with the IMF.

The S&P statement said: “Following the continued inability to place short-term paper with private-sector market participants, the Argentine government unilaterally extended the maturity of all short-term paper on August 28. This constitutes default under our criteria.”

After publishing new schedules for payments, the Argentine Finance Ministry said the S&P decision could be reversed, but the S&P’s statement itself indicates that its conclusion is based on broader considerations of the global economy, explaining that “the heightened vulnerabilities of Argentina’s credit profile stem from the quickly deteriorating financial environment.”

These fears and the capital flight itself that deepened the Argentine debt crisis were not the result of fears of a possible government led by the candidates Alberto Fernández and ex-president Cristina Fernández de Kirchner, but of growing social opposition among workers.

An Argentine banker cited by the Financial Times said they are recalling the strikes, riots and bank runs during the last default in 2001 and “are very afraid of what’s going on.”

Bloomberg warns that the vote doesn’t reflect “nostalgia for the so-called pink tide” in Latin America that included Kirchnerism. “This isn’t a revival: it’s buyer’s remorse.”

The financial network in fact applauded the reassurances of Alberto Fernández to IMF representatives last Monday, despite him blaming the IMF deal for the most recent crisis. The candidate reportedly said, “you’ll be able to charge us, and we’ll get along,” while his team members promised “the imposition of adjustments to wages and pensions as a mechanism to seek fiscal equilibriums and reduce pressures on prices.”

The Wall Street Journal also praised Fernández for being “pragmatic,” a “veteran politician,” and having “ample ties with the Peronist movement including trade unions, far-left groups and conservative provincial governors.”

Such commentary demonstrates that investors see in Fernández a representative of their class interests, as well as the broader superstructure of Peronist unions, parties and pseudo-left apologists that has constituted the backbone of bourgeois rule in Argentina since 1944. They are simply coming to grips with the fact that they find themselves again depending on these forces to find a resolution to another crisis, which resulted from their own financial predations, while demanding that Kirchnerists re-create the conditions needed to further their financial parasitism upon the social wealth created by Argentine workers.

In the context of a regional economic slowdown, fears of a global recession, “the persistence of income inequality and the vast informal sector,” Bloomberg adds, Argentina and the region are threatened by “extremists.” That is, what the ruling class fears is that future social protests overwhelm the political organizations they control amid a global resurgence of the class struggle and mass social protests.

The last year has seen rising poverty, hundreds of thousands of layoffs and a jump in chronic child malnourishment from 21.7 percent to nearly 30 percent. The Spanish El Pais commented that “Argentina is reaching the limit.”