International lending, capital flight and financial reform under dictatorship: Argentina 1976-83

FLORENCIA SEMBER

Lisboa

Workshop; Giving Credit to Dictatorship. Authoritarian Regimes and Financial Systems in Europe and Latin America during the Twentieth Century; 2022

Instituto de Ciéncias Sociais and Research Center in Economic and Social History (ISEG ? University of Lisbon)

During themilitary government that lasted from 1976 until 1983, Argentina accumulated anunprecedented external debt. This article will examine the factors that led tothis result and the characteristics of such indebtedness. The dictatorshipunder examination -the last of the six military coups Argentina suffered in theXXth century -had some peculiar features that distinguish it from the previous dictatorships.The deepness of the economic reforms implemented, including financial reform,deregulation of capital movements, and external trade liberalization, wouldpermanently change the country's productive structure and the characteristicsof external debt.Even if theexternal debt had always been a feature of the Argentine economy, this timeexternal debt went together with capital flight of almost the same amount. Theperiod was characterized by a mechanism of financial valorization, whichconsisted of borrowing abroad, taking advantage of higher internal interestrates, and fly the capital abroad once the profits were realized. The change inthe productive structure and the comprehensive financial reform introduced in1977, made this mechanism possible, ending the second wave of the importsubstitution process and moving to rely on the primary and financial sectors. Implementingthese policies was possible thanks to the systematic repression and thecollaboration of civil public officials from research centres created ad hoc bybusiness groups to design policies that better suited their interests.On theexternal side, the international context contributed remarkably to thishigh-indebtedness/capital flight scenario. The article will address the role ofinternational financial institutions and private lenders. The IMF had a decisiverole as a lender only at the beginning of the period, and afterwards, it servedas a facilitator of private lending. The IMF promoted adjustment plans andpolicy changes that encouraged the private lenders to give credit, in the beliefthat these would make the debt sustainable. The articlewill be a re-elaboration of the work presented at  the online seminar "Giving credit todictatorship: authoritarian regimes and financial systems in Europe and LatinAmerica during the Twentieth Century" in June 2021. Some aspects that wereneglected in the first version of the work need to be studied in more detail. Inthe first place, one of the questions to be answered is to what extent thisexperience was peculiar to Argentina and to what extent it was a phenomenontransforming the world capitalist system as a whole. In the second place, Iwill try to characterize what were the peculiarities of the indebtedness ofArgentina compared to the rest of the region, and finally, what were thelasting consequences of the economic decisions taken in the period under studyfro the following decades.