PRESS RELEASE

Date: 25^th September, 2001

Contacts: London: Ann Pettifor 0 207 089 2853/64 Mobile: 07770 886 146 Washington: Liana Cisneros (from Tuesday evening) 001 713 478 8594. Buenos Aires: Alejandro Olmos Gaona: 00 54 11 4786 7247

The global economy cannot afford a chaotic Argentine default, says Jubilee Plus, in new Report. Argentina should be test case for new, just, international insolvency process,

In a report issued today - "It Takes Two to Tango - creditor co-responsibility for the crisis in Argentina " - Jubilee Plus notes that in order to repay $75.3bn of debts by 2003 Argentina has to triple exports, halt all imports and divert one quarter of GDP away from domestic consumption to foreign creditors. "As this cannot conceivably be achieved" says Ann Pettifor, director of Jubilee Plus at the New Economics Foundation, "Argentina is effectively insolvent".

The looming global recession makes an Argentine default more dangerous for the global economy, as Argentina represents 25% of all emerging market debt. "Given a global economy already rocked by the attacks on NY's Trade Centre Towers, the world cannot afford the additional threat of a chaotic Argentine default" says Pettifor. "Argentina should be the test case for a new, orderly and transparent, international insolvency process. One that is accountable to those repaying the debts, Argentina's poor".

"For too long money lenders have dominated globalisation" said Pettifor, "extracting and transferring assets from poor to rich countries and exacerbating inequality, poverty and conflict between north and south. While getting richer, Wall St, the City of London and Washington-based creditors have dodged the wrath of market forces and been bailed out by taxpayers. Its time now for discipline, order and justice in international financial relations. Its time for money rights to be subordinated to human rights - in Argentina and elsewhere".

Alejandro Olmos Gaona, who is mounting a legal challenge in the courts of Buenos Aires, to the corrupt and illegitimate nature of much of Argentina's debt said: "Almost 20% of these debts were negotiated corruptly by the military dictatorship of 1976-83. At the same time losses and liabilities were transferred from big private companies and banks on to the shoulders of Argentina's poor. A court of law would surely dismiss the claims of creditors that made loans to a dictatorship known to be corrupt; and it should also dismiss private claims and liabilities transferred, by the whim of ministers and without public consultation, to the public sector".

Jubilee Plus's long-standing campaign for an orderly international insolvency process, based on Chapter 9 of the US legal code (which applies bankruptcy law to municipalities) was last week endorsed by US Treasury Secretary Paul O'Neill in evidence to a Senate Committee (see www.jubileeplus.org)

Liana Cisneros, Latin American co-ordinator of Jubilee Plus said: "The IMF and other international creditors have dominated Argentine economic policy for the past 50 years. Recurring bail-outs have done little to remedy major policy flaws. Argentina's huge unpayable debts are a forlorn monument to an economic system designed to suit the interests of foreign creditors, not the people of Argentina".

The report notes that the debts of big privately owned companies were nationalized during the 1980s by the current finance minister Mr. Domingo Cavallo, and that this nationalization of private liabilities has added to the country's burden. The most corrupt borrowing took place during the period of military dictatorship between 1976-1983, when the debt rose from $7.8bn in 1975 to $46bn in 1984 - and no records were kept of the negotiations or of how the loans were spent.

Notes for editors:

• Copies of the Report "It takes two to Tango - creditor co-responsibility for Argentina's crisis - and the need for independent resolution", can be obtained from Noemi Emery at Jubilee Plus on 0207 089 2853.
• Argentina's total public external debt, which includes a very high proportion of nationalized private debt, stands at $160.2bn. Argentina's total debt, domestic, external, provincial and private amounts to more than $211bn. In 1992 Argentina transferred $5bn in debt service payments to foreign creditors. By 2000 this rose to $23.6bn.
• There is no international insolvency procedure to deal with relationships between international creditors and sovereign debtors. Sovereign governments are deemed not to be able to become insolvent. In fact, many poor countries are effectively insolvent, and simply default on their debts, a fact quietly ignored by the international financial community, while bail-outs are routinely arranged by the world's de facto Receiver, the IMF. The IMF, however, is itself a major creditor.
• Chapter 9 of the US legal code allows for municipal authorities like Orange County and New York city to arrange orderly re-structuring of their debts, when these debts become unpayable, while ensuring that losses are not transferred to local taxpayers or employees.