Why Argentina Should Stop Paying Its External Debts

There's a case to be made that at least some of what the country owes is 'odious' and therefore illegitimate.

August 30, 2019, Buenos Aires, Argentina
August 30, 2019, Buenos Aires, Argentina
Cristian Dimitriu


BUENOS AIRES — Almost all of our leaders — including President Alberto Fernández and his production minister, Matías Kulfas — agree that Argentina must honor its external debts. The government is planning to restructure them, of course, but restructuring implies recognizing the validity of the debt, even if payments are made in a different time frame than the one initially devised.

The argument used to defend the obligatory nature of repayment is always the same: The debt was contracted by a democratic government (in this case by Mauricio Macri and preceding administrations) and must therefore be honored. And yet, if we scrutinize this argument, we find that it is, at the very least, questionable.

First, democratic governments can also incur invalid debts if the loan is destined to ends incompatible with the public interest. For example, when an official steals money that began as a loan to the state, is it morally acceptable to offload that debt onto the public and make future generations responsible for it? This is even more evident if the lender had reasonable cause to suppose the theft might occur. Why should the population take responsibility for a decision taken in its name, but without its authorization?​

The debt is not of the Argentine state but one taken on by the executive branch without due authorization.

This what's called an odious debt, and it can occur not just under dictatorial regimes — as Minister Kulfas mistakenly affirmed — but also in a democratic context. The key is whether the debt runs counter to public interests, regardless of the nature of the contracting government. It's about how the government uses the money, not which type of regime contracted it. This argument should be enough to obligate the new government to, at the very least, revise the origin of the debt it insists on repaying.

Second, discarding this argument, there are other reasons for doubting the moral legitimacy of debts. I'll categorize the first of these "procedural" and the second "substantive." With procedural reasoning, certain decisions taken by democratic governments must first be authorized by parliament if they are to become binding for the state. This would be the case of contracting a public debt.

But in Argentina's case, at no point did parliament authorize the executive branch in the last administration to take on debt under the conditions in question, and certainly not for the amounts involved. Thus the debt contracted is not of the Argentine state as a state but one taken on by the executive branch, without due authorization, in the name of the State. The lenders could not claim they were ignorant of this fact since there is an established and well-known legal procedure for incurring debts.

The Ministry of Finance began its payment rescheduling scheme, Aug. 30, 2019, Buenos Aires, Argentina. — Photo: Maximiliano Ramos/ZUMA

Let us also suppose that a state has several, simultaneous commitments to its citizens and to creditors, and decides to seek a loan to meet its commitments to creditors while postponing commitments to its citizens. And what if this state burdens its citizens with the responsibility of financing its debts to privileged creditors, through higher taxes or by cutting their wages? In that case, the residents of the country could rightly protest, because not only have they not benefited from the said loan, but they are also being burdened with repayment.

Something like this happened with our last government, which used the greater part of the IMF funds to pay off preceding debts to foreign creditors while placing the burden of their repayment on the Argentine people. It is thus no longer a matter of ratification: Ratifying that debt means ratifying an injustice.​

We question the morality of our sovereign debt for affecting the population's most basic rights.

Separately, in the substantive argument, there are moral limits to debt repayment. So just as it is not acceptable to sell a close relative's body organs to pay off a debt (even with the relative's consent), it is not acceptable to repay a sovereign debt while sacrificing natural resources, national territory or the population's basic human rights.

If states reach a point where they must choose between defaulting with creditors or with their own people, we may conclude that they have become exceedingly over-indebted, and could no longer meet certain obligations without failing to honor others. In that case, the burden of proof is reversed. It is no longer states that must explain why they cannot honor their debts, but the lenders who must explain why they insist that over-indebted states keep meeting their obligations when it was evident from the outset that those states couldn't realistically handle the debt.

We can see then why the assertions of Fernández and his minister — that there can be no questioning the legitimacy of the debt they received — are dubious, to say the least. There are strong arguments to be made that, because of its origins, most of Argentina's foreign debt is odious (that is, non-binding). On top of that, there are also grounds to question the morality of our sovereign debt for not meeting a minimal level of procedural requirements, or for affecting the population's most basic rights and the state's integrity.

The government could use some or all of these arguments to defend the cancellation of debts in some cases, and reduction in others. Instead, it is starting with the assumption that all inherited debts are perfectly legitimate, and its negotiating strategy, as a result, is weak.​​

*Cristian Dimitriu has a PhD in philosophy from the University of Toronto.

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In Argentina, A Visit To World's Highest Solar Energy Park

With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.

960,000 solar panels have been installed at the Cauchari park

Silvia Naishtat

CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.

Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.

It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.

Abundant sunshine, low temperatures

The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.

Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.

It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.

Chinese engineers working in an office at the Cauchari park


Chinese want to expand

The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.

The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.

The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.

The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.

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