Committee for the Abolition of Illegitimate Debt

That commission included members of the public administration and the government, the Ecuadorian and the Amerindian social movements, and also international representatives like the CADTM. On the basis of the commission’s conclusions the Ecuadorian president Correa took two important steps without asking for the creditors’ approval.

The first was in November 2008 when he unilaterally suspended the payment of a part of the public debt deemed “illegitimate”. The second came through in June 2009, when he persuaded the creditors for a 70% debt reduction. This important reduction enabled the Ecuadorian government to save $ 7 billion and thus increase the public expenditure- primarily on health, education and social security.

This debt reduction is very different from Argentina’s case in 2005 and 2010 following negotiations with its private creditors. To attain a reduction of 70% of its public debt contracted with private entities, Argentina restructured with 93% of its creditors giving them new debt securities at a lesser value but without canceling the older ones bought back by the vulture funds Vulture funds
Vulture fund Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors. .

The latter acquired a part of these old debt securities at a very low price with the intention of compelling Argentina through legal means to pay the full price. Which means that Argentina has to pay the initial sum of the debt (estimated at its nominal value) compounded with interests, penalties plus various legal charges/costs. These vulture funds made no mistakes, as two of them - NML Capital and Aurelius – have obtained a favorable judgment in the US by means of which they earned the right to be reimbursed by as high as $1.3 billion, which implies a 1600% capital gain.

Ecuador on the other hand adopted a different strategy. Based on the conclusions of the audit which revealed the illegitimate portion, the Ecuadorian government refused to negotiate with its creditors and bought back 91% of the debt only at 30% of its initial value. In these conditions, it was difficult for the creditors like the vulture funds to sue Ecuador in the US courts or elsewhere. The collective action clause (CAC) prevented the creditors, who had not sold their securities to the government, from prosecuting the Ecuadorian state as it held 75% of the securities.

If Argentina wants to draw lessons from its past errors, it must:

• Immediately put in place the Audit Commission provided by the Act 26984 adopted recently. Decide on the methodology of its functioning and involve the social movements and experts who have been conducting researches on the illegitimacy of the public debt for years.

• Suspend debt payment in order to carry out, with an active peoples’ participation, an integral debt audit. Once the audit is completed, Argentina should repudiate the part of the debt identified as illegitimate, odious or illegal.

• Take recourse to the Olmos judicial rulingi handed down by the Argentine Supreme Court on 13^th July 2000. This judgement identified 477 offences in the development of the argentine debt which blew up during the dictatorship (1976-1983) and kept on mounting during the civilian governments of Raúl Alfonsin and more of Carlos Menem. It also implicated the IMF IMF
  International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.
  
  When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.
  
  As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).
  
  The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
  The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
  
  http://imf.org : “From 1976 to1983, the policies of indebtedness and loans were totally arbitrary. It involves the staffs and the council of administration of the public and private institutions. The existence of an explicit link between the external debt, the flux of foreign capital in the short term, the raised rate of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. in the internal market and the corresponding sacrifice of the national budget since 1976 couldn’t have passed without the notice of the IMF authorities who supervised the economic negotiations of this period.”

• Implement the Calvo doctrine which lays down that in case of a conflict with foreign investors including creditors, the national jurisdiction would be binding to settle the dispute. This doctrine was earlier implemented throughout most Latin American countries but was discarded in favor of external jurisdictions, such as that of the US, once the neoliberal offensive started. The US laws protect the interests of the investors and the creditors. It is important to point out that since the military dictatorship of 1976, Argentina systematically allows the US jurisdiction to settle disputes- thus abdicating partial sovereignty.

• Immediately quit the World Bank World Bank
  WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.
  
  It consists of several closely associated institutions, among which :
  
  1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;
  
  2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;
  
  3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.
  
  As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.
  
  tribunal headquartered at Washington, the ICSID ICSID The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.
  
  Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6^th most powerful world economy seems to show no special interest in doing so.
  
  In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
  "In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.
  
  https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx (International Centre for Settlement of Investment Disputes) as Venezuela, Bolivia and Ecuador have done. The ICSID is not an international tribunal; it is an international body composed of arbitrary “ad hoc” tribunals. That means that the tribunals, created on a case-to-case basis, do not care about human rights. For the private ‘investors’, they are the preferred legal tools against the States.

According to the CADTM, the mobilization of people only would enable the government to take these steps effectively. The CADTM network supports all social movements in Argentina which fight against the dictatorship of the creditors.