At The Financial Times: Alfonso Prat-Gay & Mario Blejer, sales pitch vs insight? A comment by Political Reporter

Headline: Argentina emerging from the ‘netherworld’, says Alfonso Prat-Gay

Sub-headline: Finance minister cites inflation and Brazil crisis as biggest threats to economy

Can one doubt that Argentina is ’emerging from the nether world’ of 12 years of ‘populist rule’ as part of a recovery from a premature expression of The Rebellion Against The Elites that happened in 2001, that is just now taking root in Europe and the USA? It is a temptation, to view Argentina as the harbinger of the watershed of the economic collapse of 2008, its immediate successor Austerity and our present doldrums, as expressing telling similarities?  Although the myth of the Lazy Southern Tier as opposed the Virtuous Northern Tier entices many  Neo-Liberals. Mr. Prat-Gay’s credentials reek current bourgeois respectability of the seasoned technocrat, not to speak of Capitalist bureaucrat. In sum, Mr. Prat-Gay is a member of the Club as is court appointed mediator Daniel Pollack.

Mr. Prat-Gay then carefully spins the yarn of appeasing the hold-outs (Vulture Capitalist Paul Singer and friends, who found an amenable American Court and a New York court-appointed mediator Daniel Pollack.Read and marvel at Mr. Pollock’s  CV here:

http://www.mccarter.com/Daniel-A-Pollack/

To call Mr. Pollack a pillar of the American Establishment political and legal is not overstatement.

Mr. Pratt-Gay declares:

‘“Our financial programme is no longer wishful thinking but a clear possibility. Solving the holdouts problem will open the window to foreign money,” says Mr Prat-Gay, cautioning that a US appeals court still has to approve the lifting of injunctions that will enable Argentina to make the payment. By raising finance abroad, Argentina will be able to plug a bulging fiscal deficit without resorting to austerity or printing money. The latter tactic was used by the previous administration and led to an inflation rate that is running at more than 30 per cent. “It’s not over until it’s over. But it’s nearly over.”’

‘The window to foreign money’ is the key phrase here, as he is a former Investment House employee with friends in the right places to make that ‘foreign money’ come to the aid of ‘center right’, meaning a business friendly government:

‘“Slowly but surely we are emerging from the netherworld of foreign investment,” he says’

The rest of the interview, besides the control of inflation, an accurate measure of financial responsibility, is an elaborate sales pitch to the very influential readership of the Financial Times.

By raising finance abroad, Argentina will be able to plug a bulging fiscal deficit without resorting to austerity or printing money. The latter tactic was used by the previous administration and led to an inflation rate that is running at more than 30 per cent.

 

But compare the Prat-Gay anti-Austerity strategy to this excerpt from this editorial, ‘Austerity by stealth, CFK has veered toward orthodox economic policies’ of Sunday, March 30, 2014 in the Buenos Aries Herald. Which amounts to a scolding of CFK for lack of political consistency, or just her free spending ways. Which amounts to demonstrable populist economic irresponsibility.

CFK’s approach has been much the same as Alfonsín’s. She too is dead against belt-tightening, spending cuts and all the other unpleasant things governments the world over often feel obliged to do. Though of late her government has veered towards “orthodoxy” in the hope of getting some much-needed loans from abroad, she still refuses to admit that anything much has changed. Nasty words like “inflation” and “devaluation” are conspicuously absent from the official vocabulary; should a government spokesperson be foolish enough to use them, it is front-page news.

http://www.buenosairesherald.com/article/155790/austerity-by-stealth

Pratt-Gay asserts that:

‘…he is working on the causes of inflation rather than the symptoms. “We are taking tough decisions to make sure we are slaying the dragon, rather than putting it in a cage for a while.” ‘

Causes of inflation, symptoms, tough decisions, and the overblown:slaying the dragon and putting it in a cage are the code words for Austerity and its costs, the chatter of the unimaginative Neo-Liberals hardly varies. Prat-Gay could have couched his argument in the palatable  Keynesianism register: now that we have reached a more stable, less acute financial stress, is the time for an Austerity, that taxes all sectors of the civic body-this places my  conjecture in the realm of wishful thinking.

One problem is that many of the government’s reforms, such as the devaluation and hikes in utility prices, have a strong impact on inflation. But Mr Prat-Gay argues that the effect will be temporary. “We are very confident that once the one-off shifts in prices are out of the system, inflation will fall quite significantly, hopefully early in the second half of the year,” he says.

 

More coded language: One problem:  government reforms, devaluation and hikes in utility prices, have a strong impact on inflation. This is Austerity, despite the claim that the  effects will be temporary. Strong Medicine is needed to wean the Argentine Economy from the Free Spending, indeed mendacious policies of CFK?

Mr. Pratt-Gay is optimistic with a 69% approval rating as of March 5th with this assurance: Second, we’ve made some fiscal decisions to ensure the poor and most exposed to one-off increases are spared the cost,” said Mr Prat-Gay. The best laid plans. There’s a good reason why there has been no social unrest. In politics it is wise to rely on the changeability of the public mood. But then Mr. Pratt-Gay acts, in this interview, as a salesman for the newly ‘reformed’ Argentina, as a country that will pay its debts. 

The government needs improvements in the economy to materialise before the reigning calm begins to unravel. For now, support for Mr Macri’s reforms remain high, with his approval ratings in March rising 5 points to 69 per cent, according to Poliarquia, a local pollster.

“There’s a good reason why there has been no social unrest. First, we are not doing anything that we didn’t promise in the campaign. Second, we’ve made some fiscal decisions to ensure the poor and most exposed to one-off increases are spared the cost,” said Mr Prat-Gay. “People have voted for a change and they understand that change won’t happen in a week or a month or a quarter. There is patience.”

http://www.ft.com/intl/cms/s/0/882e7e1e-f7aa-11e5-9afe-dd2472ea263d.html#axzz45FnwAqyo

Here is an answer to Mr. Prat-Gay’s transparent salesmanship, in the Financial Times, by Mario Blejer:

Headline:Argentina’s deal with the holdouts is a mixed blessing

Make no mistake Mr. Blejer, deputy chairman of Banco Hipotecario, is a Neo-Liberal conformist but he offers insights absent from Mr. Prat-Gay’s sales pitch:

Recalcitrant creditors bought Argentine paper at rock-bottom prices and their strategy was vindicated. They profited and the creditors who settled promptly did not. This is not fair and is also inefficient. Standard bankruptcy procedures treat creditors equitably, minimising economic damage by resolving things fast. In this case, inequality among creditors caused maximum economic harm. It underlines the need for a sovereign debt restructuring mechanism.

Yet, for all this, the readmission of Argentina to the international financial market must be counted as an important success. The new reformist government of Mauricio Macri deserves credit for its focus and effective negotiating tactics.

Some credit in this saga is also due, however, to Cristina Fernández, the former president. She argued vigorously for the creation of a formal mechanism governing the restructuring of sovereign debt. Recognising this could lead to a happier and more lasting outcome.

 

About stephenkmacksd

Rootless cosmopolitan,down at heels intellectual;would be writer.
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