Argentina, and so many others need, urgently, clear definition of what are odious public-sector credits and borrowings

Sir, I refer to Benedict Mander’s “Macri is surrounded by former bankers as he seeks international investment” May 13.

I have always been convinced that most of debt that at any point of time gets to be qualified as “odious”, has had its beginnings in odious credits or in odious borrowings.

Odious public sector credits are those that lenders approve even though they know the resources will not be put to a good use, only because the risk-premiums are right. A really extreme example of this would be an oversubscribed public bond issue to finance something like the crematoria ovens of Auschwitz. 

Odious public sector borrowings are those carried out by governments, in lieu of real correcting measures, or because of other political short term interests, without any consideration as to how it is going to be repaid and who are going to repay, usually those of a generation down the line.

And so therefore I have always held that, no matter how important it was to introduce a Sovereign Debt Restructuring Mechanism (SDRM) that had to begin by defining clearly what should be considered as odious credit or odious public borrowings. That since these, for the good of us all, should not receive the same treatment as bona-fide credits.

And in this respect when I read that “luring money back into an economy starved of investment after a decade of interventionist policies” is considered “a vital element” I feel it might be time again for us to prepare to cry for Argentina.

And, just in case, this has nothing to do with who governs Argentina, in fact I very much welcome the recent change. It is what I have opined in my country Venezuela, pre-Chavez, during-Chavez, and that I will surely also opine after the long overdue Chavez/Maduro change comes into fruition.

To use a credit card to buy food and medicine for the people is understandable but, for governments to load up on credit card debt as a substitute for doing the reforms that are needed, or to finance new investments supposed to “take care of it all”, that is just immoral.

When it comes to public sector debt, and for instance capital requirements for banks, it would serve us citizens much better if ethic or good governance ratings were used instead of simple credit risk rating… a good credit risk rating resulting from the government receiving large oil revenues, is just to add salt to injury.

@PerKurowski ©