Commentary

Argentine ‘Bank Robbery’: U.S. Looks the Other Way

This article appeared in the Wall Street Journal (Online), March 21, 2003.

Your March 7 editorial “Property-Rights Lesson1” correctly concludes that the Argentine Supreme Court’s decision on March 5 was a victory, albeit a partial one, for property rights. After all, the court just affirmed what all Argentines knew: The Convertibility Law of 1991 contained a redemption pledge. Specifically, the government was obliged by law to back pesos with U.S. dollar reserves and to redeem them at the rate of one peso for one dollar. When President Duhalde issued a decree on Jan. 6, 2002, that pesofied the economy at several exchange rates, that law was thrown in the dustbin and people who held pesos were robbed.

But there’s more to this sordid story.

In the interest of promoting its often-neglected strategic engagement with Latin America, the Bush administration urged the IMF to bail out Argentina in January 2003. The IMF complied by rolling over $6 billion in Argentine debt. In addition, during a recent meeting with Argentina’s new ambassador to the U.S., President Bush pointedly heaped praise on the Duhalde government’s good works and reaffirmed the U.S. commitment to Argentina.

By turning a blind eye toward the Duhalde government’s two great bank robberies — which amounted to a whopping $30.4 billion — and the utter collapse of the Argentine economy, which has sent millions into abject poverty, the Bush administration jettisoned the principle of property rights and took leave of common sense itself. Sadly, Argentina is yet another example of the Bush administration’s incoherent approach to international economic relations.

Steve H. Hanke is a senior fellow at the Cato Institute.