ARGENTINA'S 'POLITICAL COURAGE'

Given such priority Arroyo has accorded to repaying the foreign debt amid an economy in crisis, Bello could only look to Argentina with marvel and envy for President Nestor Kirchner's “courageous act of essentially defaulting on most of that country’s foreign debt and channeling the money saved to domestic investment.” 

In his first year in office in 2003, Kirchner declared that Argentina was defaulting on its external debt (about $93 billion), regarded as the largest sovereign debt default in history. The government's firm stance consigned the country to a pariah in the global financial markets but eventually paid off as it allowed the restructuring of 76 percent of the defaulted principal, offering approximately 30 cents per dollar face value of old debt to its creditors, said to be the largest sovereign restructuring in history.

In 2005, the Argentine president announced the cancellation of the country's debt owed to the IMF by issuing a one-time payment of US$9.8 billion — an act that was meant to gain independence from the structural reform impositions of the lending institution.

As a result of these tough measures, Argentina was able to reduce its external debt burden to US$118 billion by September 2007. Moreover, the Latin American country of 41 million people has been enjoying a remarkable surge in real GDP growth — 8.8 percent in 2003, 9.0 percent in 2004, 9.2 percent in 2005, 8.5 percent in 2006, and 8.7 percent in 2007 — after the crippling recession years of the late 1990s up to 2002.

Of the Philippines's policy of automatic debt appropriation coupled with weak revenue generation (particularly in customs collections) as a result of its adherence to trade liberalization measures as radical tariff reductions, Bello says: “It requires no special intelligence to realize that the massive amounts of money that have gone to paying our creditors to service our constantly mounting external debt was money that could not go to development.”

As such, anti-debt advocates like FDC have been clamoring for nothing less than the repeal of the automatic appropriation law. FDC has also been pushing for the creation of a congressional commission on debt audit that would investigate all public-sector debts and contingent liabilities, as well as review all government policies regarding borrowings and payments of debts.

The proposals have the support of legislators like Rep. Lagman, who led Congress in reducing the debt service several times and allocating the reduced amount to social development during the Aquino administration. The Bicolano congressman has also been filing bills to repeal or amend the automatic debt servicing provision as far back as the time of the Ramos administration.

As it had done on many occasions past, Congress failed to assert its power of the purse more forcefully with respect to the debt problem.

Confronted with a presidential veto the last time, anti-debt legislators have been consigned to hoping that the Executive will conduct a thorough audit of loans challenged as fraudulent, tainted, and useless before effecting payments for principal amortizations and interest payments.

Hence, with this “suffocating policy framework” in place, Bello can only concede: “As long as it remains this country’s basic paradigm, it is difficult to see the Philippines emerging from its long night of stagnation.”