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Request for an Advisory opinion to the International Court of Justice on the legitimacy of the External Debt -

Request for an Advisory opinion to the International Court of Justice on the legitimacy of the External Debt -

By Alicia Castro - Alfredo Villalba - Francisco Gutiérrez - Daniel Carbonetto

If the excess of interest paid above a normal rate were considered and that excess was charged to amortization of the principal, the entire debt would have been paid in 1988. But the story of the "old debt" does not end there. The "icing on the cake" is the nationalization of private debt.

EXPTE. No. 6242-02

Article 1º.- Instruct the National Executive Power so that within a maximum period of 60 calendar days and through the Ministry of Foreign Affairs, International Trade and Worship, urge and promote, before the General Assembly of the United Nations, the media necessary to request an advisory opinion from the International Court of Justice in order for it to determine the legitimacy of the Argentine Foreign Debt.

Article 2.- Create the Bicameral Commission for the Follow-up of the Advisory Opinion to the International Court of Justice. This Commission will be composed of six deputies and six senators, who will be appointed in such a way as to ensure the integration of minority blocs.

Article 3.- Within a maximum period of 90 days from the publication of this document, the National Executive Power must inform the National Congress about the presentation made before the International Court of Justice. The National Executive Power will present reports on the status of the proceedings before the Bicameral Commission, every 30 days. Any act or presentation, other than those of mere formality, carried out without prior consultation with the Bicameral Commission will be null and void.

Article 4.- Of form.

Alicia Castro - Alfredo Villalba - Francisco Gutiérrez - Daniel Carbonetto

Fundamentals

Mr. president:

Argentina is devastated by the greatest crisis in its history. Hunger, poverty, unemployment, social exclusion are part of an economic model, the "planned misery" during the civic-military dictatorship of 1976. It is possible to follow some of the common threads that led to the current situation. The most significant of the clues is the foreign debt, understood as a cause, consequence and guarantee of the current system.

To remember what debt is, it is useful to go back to the times of the Minister of Economy of the dictatorship (1976/83), José A. Martínez de Hoz. We share with professors Alfredo Eric Calcagno and Eric Calcagno the denomination of this process of external indebtedness as "old debt", like that relative to the commitments contracted since 1976. It is also necessary to analyze the debt boom since 1991 and its ties to convertibility to have a vision of the so-called "new debt".

The debt increased from 7,875 million dollars in 1975 to 45,087 million dollars in 1983. Such indebtedness was unnecessary, because Argentina was enough with exports to buy all the necessary imports and pay the interest on the initial debt of 1976. This "debt old "has two aspects. The first is the action of the international financial system, which boosted debt to meet the requirements of transnational banks. It was not a question then of satisfying the needs of the underdeveloped countries, but of placing the dollars that the oil-producing countries had deposited in the banks when the price of oil multiplied several times (the developed countries were in recession and could not absorb them). It was a business requirement.

The second aspect was the Argentine economic policy. After the financial liberalization and the foreign exchange delay policy established by Martínez de Hoz, domestic interest rates became much higher than external ones. For large companies and local banks it was good business to borrow abroad to put that money in domestic financial assets. When the risks of devaluation became apparent, capitalists deposited their funds, augmented by high interest rates, in banks abroad. With the tranquility of the player who has already won good money in the casino and put it to safety, the great native capitalists took advantage of the high interest rates to bet their winnings without risk. Using deposits abroad as collateral, they obtained loans from foreign banks, changed that money to pesos, placed it in the short term, bought dollars again, deposited them abroad, obtained new loans ... and started over. It was what at that time was called the "financial bicycle", thanks to which these private agents, through capital flight, constituted important balances abroad. The counterparts of "sweet silver" were the decrease in international reserves and the strong indebtedness of the State.

The situation changed with the rise in external interest rates ordered by the US authorities. The Libor rate (on which the debt service was determined, contracted at floating rates), went from 5.6% in 1979 to 16.8% in 1981. Then it was necessary to start borrowing to pay interest, which It did nothing but inflate the debt with "snowball" effects. As always happens in such processes, at some point there is a crash and subsequent spillage. The debt crisis of the "emerging" countries broke out in 1982, when Mexico went into default. From that moment on it was more difficult to finance the payment of interest with credits and a brutal adjustment ensued. The credits, now with a dropper and from different sources, came with strong conditions from the IMF and the World Bank.

The burden of interest was enormous. So much so that if the excess of interest paid over a normal rate were considered and that excess was charged to amortization of the capital, the entire debt would have been paid in 1988. The "icing on the cake" is the nationalization of the debt private. The privatization theorists made the Central Bank pay the private debts, through an exchange insurance system that in the end transformed the private debt into public debt. The festival cost the Argentine State 14,500 million dollars between 1981 and 1983. What makes it even more scandalous is that most of the generously granted insurance (always with very low costs and in some cases retroactively) were unnecessary, since the companies and capitalists that declared debts also had large balances of financial assets abroad (that is, in net terms they were not in debt in dollars).

The consequences of this debt process were catastrophic. Between 1981 and 1990, $ 33.2 billion left the country in interest payments and net profits. Of course, this was reflected in the overall economy: in 1990, per capita GDP was 21% lower than in 1981.

These are the costs. What were the supposed benefits? Between 1976 and 1982 this indebtedness was distributed as follows: 44% to the financing of capital flight by private, national and foreign agents; 33% to the payment of interest to foreign banks and 23% to buy unregistered imports (which, according to the World Bank, mostly consisted of military equipment). At the same time, Brazil contracted a strong debt, but to become an industrial power. In turn, Mexico had capital flight, but it also built an oil infrastructure in record time. Argentina got into debt only for the dominant groups to swell their accounts abroad. Afterwards, the State assumed the private debt (later democratic governments did not innovate on this point).

In summary, the results sought in this stage by the predominant sectors were achieved: transfer of funds abroad and concentration of economic power. The public companies - which, of course, were not allowed access to exchange insurance - were left over-indebted and weakened: they would then be easy prey for internal and external economic groups.

The "old debt" was thus the axis of the installation of the neoliberal model and the emergence of a new structure of political power.

At this point, it is possible to differentiate the indebtedness contracted until 1991 from that produced after that date and which we call "the new debt."

External debt grew at a much slower rate between 1983 and 1991 (just under $ 1.7 billion per year on average). But in 1991, another stage of abundant supply of external financing began for Latin America, which gave rise to new debt. Following the analysis carried out by Alfredo Eric Calcagno and Eric Calcagno, we can determine that "this debt is in good health", as it grew at a dizzying rate: it went from 58,588 million dollars in 1991 to 144,657 million in 1999.

Includes much of the old debt converted to Brady bonds in 1992, to which are added the new commitments.

The renewed access to external financing coincides with the Argentine convertibility plan, an avid consumer of foreign currency, which would not have been imaginable without this external framework. Between late 1991 and the crisis of early 1995, net capital inflows averaged $ 10.8 billion annually. 30% of this amount came from operations carried out by the public sector (especially privatizations) and the remaining 70% went to the private sector (especially short-term flows that were oriented towards interest-bearing loans, portfolio investments and stock Exchange). As of 1995, the situation changed substantially. External financing needs increased to $ 12.7 billion annually, despite a sharp decline in the growth rate. The public sector contributed 68% of the external financing, through external debt placements. In the private sector, the importance of foreign direct investment grew, but short-term capital flows and portfolio placements turned negative; on average, they left 2.5 billion dollars per year.

The private sector also increased its external debt from the low levels it had in 1991 (old private debt had already been nationalized). However, there are much greater assets abroad. At the end of 1999, the non-financial private sector had assets of 89,271 million dollars, compared to a debt of 36,224 million.

This new debt is of a different nature than the "old debt". First of all, the creditors are others. The old debt was with the transnational banks that had committed their capital several times in these operations; a default could bring down the international financial system. Now it is mostly debt in bonds held by mutual and pension funds of the United States, whose portfolio is highly diversified (only 0.2% of its placements are in bonds of the debt of underdeveloped countries): the financial system It is no longer in extreme danger due to defaults on the payment of foreign debt.

The same panorama shows the debt process in other Latin American countries:

According to the report of the "World Bank Global Development Finance 1998" in the mid-1970s, the external debt of Latin America amounted to about 60 billion dollars. In 1980 the Federal Reserve Bank ordered successive increases in interest rates, which jumped from 6 to 22%. The creditors unilaterally applied these rates to the credit contracts and activated the trigger: the debt rose to 204 billion at the end of that same year; it increased to $ 443 billion in 1990 and was estimated to reach $ 706 billion in 1999.

The total external debt of all Third World countries today is estimated at more than 2 trillion dollars.
"The external debt results in a net transfer of resources from the south to the north: in 1998 the 41 most indebted poor countries (HIPCs) transferred to the north 1.68 billion dollars more than they received and in the same year all of the Third World countries made a net transfer of resources to the north of 114.6 billion dollars "(TOUSSAINT, Eric, June 2001, pp. 211-212, cited by TEITELBAUM, Alejandro," The External Debt ", October 2001).

Only for the concept of servicing its external debt, between 1982 and 1996, the Latin American region paid 739 billion dollars, that is, a figure higher than the total accumulated debt.

As an illustrative data, in 1986, Latin America had a favorable trade balance of 37.6 billion dollars. In that same year, in interest, it paid $ 37.2 billion to the creditor banks. So, for its development, all of Latin America had only 400 million dollars available in that year.

By mid-1995, more than half of the value of Latin American exports was going to pay the foreign debt. The British newspaper "Financial Times" indicated that the current account deficit of Latin America in 1998 was going to be 71.800 million dollars and in 1999 75.600 million dollars.

In real terms, in terms of interest and services, a good part of the debt -if not the total- has been effectively paid off, as can be seen with the data that appear in the following statistical table and whose source is ECLAC [Statistical Yearbook of Latin America and the Caribbean, Editions of 1992 (pp. 430 and 431) and 1994 (pp. 438, 439, 504 and 505)]:

LATIN AMERICA: capital movements and interest paid,
in the official sector and in commercial banks, 1980 to 1990
(cumulative total in millions of dollars)

(Includes Argentina, Bolivia, Brazil, Colombia, Costa Rica, Chile, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Dominican Republic, Uruguay and Venezuela)

I. Loans received
Official sector
Loans received309.177,4
Amortization(- 174.991,9)
Loans net of amortizations134.185,5
Commercial banks
Loans received74.687,2
Amortization(- 58.755,3)
Loans net of amortizations15.931,9
Total loans net of repayments150.117,4
II. Interest paid
– 418.622.0
(Refers to the total interest paid and does not discriminate between the
Official and commercial sector. Also includes loan interest
before 1980.)
III. Amount of global external debt claimed:
1980228.236
1990441.486
1994553.765
Subsequently, the figures are as follows:
1996646.048
1998746.020
1999749.310

(Refers to the total interest paid and does not discriminate between the official and commercial sectors. It also includes interest on loans prior to 1980.)

There is a vast bibliography on the tragic consequences of foreign debt that is accurately summarized by Professors Bonilla and Ortiz Ahlf:
"Foreign Debt, as has been widely recognized, is destroying everything: the possibility of development of underdeveloped countries, domestic production, the standard of living of populations, employment, national budgets are increasingly restricted and limited in Sometimes the expenses that cause the debt. The education and health systems are destroyed, the cities deteriorate and misery strikes, even nature itself enters a progressive system of destruction. The payment of the debt does not allow the care of anything, neither of human life nor of the living conditions of nature. "

In this order, it is necessary to deepen the legal vision of the problem in order to seek contributions towards a just and equitable solution that would allow resuming the path of progress and the well-being of the peoples of the debtor countries in a more rational international economic context.

In line with this vision and in the face of the worsening situation, the Latin American and European Parliaments, at the XII European Union-Latin America Inter-Parliamentary Conference, held in Brussels between June 19 and 21, 1995, on the basis of a project presented by Professor André Franco Montoro, adopted the following resolution:
"27. Reaffirms the resolution of the XI EC / Latin America Inter-Parliamentary Conference (Final Act, paragraph 26), regarding the problems generated by the Latin American external debt. Likewise, and based on the analysis of its origin, already introduced by the opinion approved by the Economic and Social Committee of the European Community in 1985 (Doc. CES 931/85 CAL / DM, section 7), in the approach of the Latin American Parliament and in the legal analysis of various academic and scientific entities, asks the Member States of the two Parliaments that take the appropriate initiatives, seeking the support of other countries in the world, so that the General Assembly of the United Nations requests an advisory opinion from the International Court of Justice in The Hague to address the problem. of the external debt in accordance with the general principles of contemporary international law (Statute of the Court, Art. 38 c.) ".

The transcribed statement collects and reaffirms the thesis formulated in 1984 by Dr. Miguel Ángel Espeche Gil, which was adopted at the XV Congress of the Hispano-Luso-American Institute of International Law (IHLADI), which took place in Santo Domingo, in March of 1989. In this presentation it is argued that Public International Law should guide the treatment of the problem of foreign debt through the consultative procedure before the International Court of Justice.

The relevance of the treatment of the external debt problem within the framework of Public International Law has been the subject of numerous works, forums and seminars and has inspired declarations, such as the one transcribed above, and legislative projects in various countries recommending, to the respective governments, the presentation of the proposal in the General Assembly of the United Nations.

His Holiness Pope John Paul II, in his catechesis on the spirit of the Jubilee of the year 2000, once again demanded greater justice between creditors and debtors. In November 1999, he said:
"The problem is complex and does not have an easy solution. Now, it must be clear that it is not only economic in nature but affects fundamental ethical principles and has to find space in international law, to be adequately addressed and resolved. according to medium and long-term perspectives. It is necessary to apply an ethic of survival that regulates the relations between creditors and debtors, so that the debtor in difficulties is not pressured by an unbearable weight. The aim is to avoid abusive speculations, to arrange solutions through which those who lend are guaranteed and those who receive feel committed to concrete global reforms in the political, bureaucratic, financial and social aspects of their countries?

"Today, in the context of the globalized economy, the international debt problem becomes even more thorny, but globalization itself demands that the path of solidarity be followed if we do not want to face a general catastrophe."

There are clear grounds that would allow a claim before the International Court of Justice.

In an article published in Chasqui (1988), Alfredo Eric Calcagno stated:
"That the interest charged was exorbitant. For example, in the case of Argentina, which paid similar interest to the other Latin American countries, if the historical interest rate had been applied (estimating as such the inflation of the United States plus 1%) , and it would have been considered as amortization of capital to the collection with reasonable interest rate, at the beginning of 1989 the total of the external debt would be of 3,400 million dollars, instead of 56,800 million ".

In the same sense the art. 38.1, subsection c) of the Statute of the International Court of Justice, which is a constitutive part of the Charter of the United Nations, recognizes that these general principles of law are also valid in the sphere of the law of nations. They are those that repress usury and abuse of rights as well as those that constitute the excessive supervening onerosity of benefits, the theory of risk, the necessary equivalence of benefits, illicit enrichment, objective good faith, the objective purpose of the contract , the enormous injury, equity, the theory of unpredictability, the joint responsibility of creditors, the favor debitoris, the inviolability of human rights, particularly the right to life, and so on.

Said norm reads in its pertinent part: "1. The Court, whose function is to decide in accordance with international law the questions that are submitted to it, shall apply:
to. international conventions ...
b. international custom ...
c. the general principles of law recognized by civilized nations; ".

Article 96 of the UN Charter:

"1. The General Assembly or the Security Council may request the International Court of Justice to issue an advisory opinion on any legal question."

Article 65 of the Statute of the International Court of Justice:

"1. The Court may issue advisory opinions on any legal question, at the request of any body authorized to do so by the Charter of the United Nations, or in accordance with the provisions thereof.
2. The questions on which an advisory opinion is requested shall be submitted to the Court by means of a written request, in which the question on which the consultation is made is formulated in precise terms.

All documents that may shed light on the matter will be accompanied with said request. "

Article 68 of the Statute of the International Court of Justice:

"In the exercise of its advisory functions, the Court shall also be guided by the provisions of this Statute that govern contentious matters, to the extent that the Court itself deems them applicable."

On the other hand, arbitrary increases in interest rates - applied to credit agreements unilaterally by creditors - also violate customary rules of general international law such as the rebus sic stantibus (fundamental change of circumstances) to which the Article 62 of the Vienna Convention on the Law of Treaties, 1969.

It also corresponds to the approach to the legitimacy of the debt, from the point of view of human rights, it should be noted that proposals have been made to initiate actions in international Human Rights forums on the basis of the incidence of the External Debt in the violation of those rights.

More than 30 member countries of the United Nations Commission on Human Rights presented a draft resolution that was adopted on April 17, 1998 regarding the:
"Consequences of the economic adjustment policies caused by the foreign debt in the effective enjoyment of human rights and, especially, in the application of the Declaration on the right to development. Resolution of the United Nations Commission on Human Rights, 1999 / 22 ".

The eighth point of that resolution

"Requests the Special Rapporteur on the consequences of foreign debt for the effective enjoyment of economic, social and cultural rights, to present an analytical report to the Commission every year on the application of this Resolution, paying particular attention to:

a) The negative consequences of external debt on the effective enjoyment of economic, social and cultural rights in developing countries and the policies adopted to deal with them;
b) The measures adopted by governments, the private sector and international financial institutions to alleviate these consequences in developing countries, especially the poorest and heavily indebted countries. "

These are the reasons that determine prestigious professionals and professors of the legal field gathered in the Faculty of Law to express:

"The urgency required for the effective protection of these rights (life, health, education) that affect the dignity of our inhabitants requires the adoption of immediate measures. The legal operators who sign this document normally assume the commitment to undertake a thorough analysis of the legal profiles of Argentina's foreign debt in these aspects:
1) The coherence of the practices used in the calculation and negotiation of the external debt with the framework of the general principles of Law, human and peoples' rights;
2) Specifically, the possible contradiction of practices with the principles of the common good and those that condemn usury and enrichment without cause; abuse of rights; the excessive onerosity that ensues; and those that establish good faith in the formation, interpretation and execution of contracts, the necessary equivalence of benefits, the objective purpose of the contract, injury, equity, weak favor, lack of cause, benefit of competition and the legal solution of insolvency "

For this reason, it is essential that the international community have the opinion of the International Court of Justice in everything related to the legitimacy or illegitimacy of our foreign debt. We come to recover for the National Congress an attribution that the National Constitution has conferred on it, that is, to fix what is conducive to the payment of the public debt of the Nation (art. 75 inc. 7). We are going through a process of restructuring the foreign debt of underdeveloped countries, and we need to build and adopt a renegotiation policy that considers the supreme interests of the Nation. We need to determine, first of all, the legitimate or illegitimate nature of the foreign debt, and for this we turn to the institutions of international law.

For the reasons stated, I request the approval of this project.

* Alicia Castro - Alfredo Villalba - Francisco Gutiérrez - Daniel Carbonetto


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