“If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him.”
Argentina has struggled with paying foreign debts since the country’s economic depression of 1998. The economic crisis witnessed Argentina default on its foreign loans, which eventually allowed for the restructuring of the debt and the government to make partial payments.
In 2001, some financial entities saw an opportunity to make a profit off of Argentina’s economic depression by quickly buying large amounts of the country’s debt. Since it was forecasted that Argentina would not be able to pay off the loans, the financial entities, notably the U.S. hedge fund NML Capital, were able to buy the debt cheaply. NML Capital bought the debt without a plan to restructure the payment. A Supreme Court ruling on June 16 allows them to make maximum profit at the expense of Argentina by demanding full repayment.
Who are the real victims of NML Capital holding Argentina’s economy hostage? The 24.5% of Argentineans who, according to The Economist, live in poverty. In the event that NML Capital succeeds and Argentina is forced to pay the debt, it is likely that Argentina’s government will have to cut current social programs and privatize public services. Unfortunately, there is a precedence of countries having to cut social programs in order to pay of foreign debt. In 2007 Zambia had to withdraw $15.4 million worth of funding from social programs in order to pay off debt.
In order to improve the condition of the poor and ensure an economy that provides for the common good, countries entangled in the debt crisis need debt relief and a fair and transparent debt arbitration process.