details about financial assistance to Argentina - The TaxPayers ...

Existing international pressure
In September 2011 Marisa Lago, Assistant Secretary for International Markets and
Development at the US Treasury, said:
“The US will oppose lending to Argentina in the two multilateral development banks
in which Argentina participates – that’s the World Bank and the Inter-American
Development Bank. We will make exceptions in those rare circumstances in which
the proposed loan would be targeted very effectively and very narrowly on very poor
and vulnerable populations because we don’t believe they should be suffering
because of their country’s activities”.
Earlier research by Graham Mather at the European Financial Forum describes the
background to that decision by the Obama Administration. 5
Argentina defaulted on its debts in the largest default in history and has subsequently failed
to come to an arrangement with its remaining creditors – owing $15 billion (£9.55 billion) to
international private creditors and over $6 billion (£3.79 billion) to the Paris Club of
government creditors – despite having considerable financial reserves.
There are established rules which govern how a country is expected to behave even in the
event of a sovereign default. Those rules are important because they ensure that investors
can act with confidence that, while they can lose money, there is at least some protection
against being treated unfairly. That means they are more likely to lend to countries with a
relatively poor history as creditors and less likely to panic in the event of a default. Ignoring
those rules could make it harder for other struggling economies such as Greece to restore
the stability of their public finances.
The concern in the United States is both that Argentina has treated its creditors unfairly and
that it has set an example which undermines the effective function of the financial system.
Other countries have also recently strongly criticised Argentinian policy. In May 2012, the
European Union filed a suit against Argentina’s import restrictions with the World Trade
Organisation. Trade Commissioner Karel De Gurcht argued that “Argentina’s import
restrictions violate international trade rules and must be removed” and that they “are
causing very real damage to EU companies – hurting jobs and our economy as a whole.” 6
5 Mather, G. The strange case of Argentina’s debt, European Financial Forum Background Bulletin, February 2012
6 Moffett, S. & Miles, T. EU files WTO suit over Argentina’s import restrictions, Reuters, 25 May 2012
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