Dictatorship
Dictatorship (1976-1983)
When Argentina's debt started growing
An illegal military regime took power in 1976, with Rafael Videla as a leader, ousting the constitutionally elected government. The armed forces repressed the population using inhuman torturing measures and censorship. Most of the military repressors were trained in the U.S. financed School of the Americas.
By then, the external debt was only U$S 6 billion. The new economy minister, Martinez de Hoz, immediately after seizing power, implemented a series of highly destructive and illegal economic and financial policies making the debt increase from U$S 6 billion to U$S 46 billion. However, all this cash in-flow was not invested in infrastructure, but in speculative markets.
Some of those destructive economic implementations were:
- Open up the market completely.
- Increase private and public companies debt.
- Decrease national industry activity by 25% to reduce the 300% inflation of 1976 compared to 1975.
- Allow every bank to choose the loan interest rates they prefer, which cause interest rates to increased by 135% by 1977. Consequently, companies preferred to borrow money from international creditors since they had much lower rates. Hundreds had to give their houses to the dictators because they couldn't pay back the ridiculous interests.
- Spend U$S 500 million in hosting the '78 WorldCup.
This speculative model destroyed the country’s economy. Most of the loans came from American banks. Every national company was forced to borrow money from these banks. One example was the largest national company, YPF’s external debt went up to U$S 372 million (17% of 1983 total external debt). Seven years later, they were owing U$S 6,000 million. However, the money the company was borrowing wasn’t for them, but for the regime. The military leaders and the IMF were backing up this massive borrowing as a way to increase their reserves in a foreign currency to maintain an open market economy. 83% of these reserves, which were managed by the army, were all deposit in foreign banks. The interest they got from those reserves was still lower than the interest they had to pay for the debt.
The main purposes of the dictators were:
- Get money for themselves.
- Increase international reserves to sustain the huge increase in imports, mainly weapons.
- The open market model and the debt recommended by the IMF allowed the dictatorship to have a better image with the US. The Federal Reserve was encouraging the debt since most of it was deposit in American banks.
Violations to Civil and Political Rights
On top of all those damaging economic implementations, the regime also apply other illegal policies:
- Frozen workers' salaries and control them from the state. Forbid the right of demonstrations.
- Genocide, torture and censorship.
- Dissolve the Congress, all the political parties, the Justice Supreme Court, labor unions.
- Declare war on England.
Realization that these Economic Policies are not Appropriate
In 1978, Hoz's plan showed to be an absolute fraud: inflation increased to 160% and GDP decreased by 3.2%. In 1979, prices went up by 139.7% and consumption decreased shockingly. Companies, because of this, had to even borrow more money from outside the country due to the extremely high local rates.
In february of 1981 the currency was devaluated by 10% with respect to the dollar.
Invasion of Malvinas Islands & The End of the Dictatorship
In 1981 they decided to devaluate the currency again by 35% with respect to the dollar. The Real Wage decreased and GDP also decreased by 6% that year.
In 1982, USA raised interest rates, so now companies' situation was even worse. That year GDP decreased 5.7% more.
Apart from economic problems, charges of corruption, public revulsion in the face of human rights abuses and, finally, the country's 1982 defeat in the Falklands War discredited the Argentine military regime.
The dictatorship left a destroyed nation in bankruptcy: in the 7 years of the regime the external debt quadrupled. Most of the capital were sent outside of the country and the production and employment drastically decreased. Besides, it also increase the wealth gap between the richest and the poorest by 50%.
Sources
Center for Research on Globalization
Ernesto Hadida
Argentina Government Education Department
Introduction | Raúl Alfonsín | Carlos Menem | Fernando de la Rúa
Interim Presidents | Néstor Kirchner | Graphs | Final Analysis
