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Debt auditing is among top issues on the agenda of Latin American social movements working in favor of a legitimate and sustainable external debt. The Citizen Commission on Public External and Internal Debt Auditing (CCADE, per its abbreviation in Spanish) organized an international seminar in Uruguay to share different views and experiences on this issue.

The volume of external debt has skyrocketed in most Latin American countries and the annual amounts allocated by governments to debt servicing are constraining social budgets in an alarming way. After more than fifty years, Latin American countries have paid massive amounts by way of external debt. However, debts are still growing.

On account of this, social movements of various trends and particularly the Jubilee Network, promote debt auditing as a policy tool that allows for the involvement of civil society in order to prove that the external debt has impaired development in poor countries..

This effort was officially encouraged by the Government of Ecuador when an External Debt Audit Commission was set up by decree in April, including Hugo Arias of the Jubilee Network as one of its members. This fact brings new light to the force of this initiative and allows to strengthen Latin American integration by means of the exchange of experiences among countries in the region. In this sense, the cases of Argentina, Brazil and Peru will serve as input for this new process. Notwithstanding this, civil society proposes to continue its activities beyond this specific fact, demanding actions to support audit results.

Civil society activities

Aiming at sharing different views and experiences on external debt and its audit, civil society has developed different activities.

The 4th International Seminar on External Debt was carried out in November 2005 by organizations taking part in anti-debt campaigns in Spain, "Quién le Debe a Quién" (Who Owes Whom) and "Sin duda Sin deuda" (No doubt No debt). A few months later, numerous organizations attended the World Social Forum in Caracas and took part in different activities related to the external debt, its audit and the activity of IFIs in Latin America. Then, in April, once the Commission to audit the external debt in Ecuador was set, a seminar entitled ‘A methodology for public debt auditing’ was held mainly aiming at providing more and better elements for the members of such Commission to carry out their work.

In view of all the above, the Citizen Commission on Public External and Internal Debt Auditing (CCADE) organized last May in Uruguay a seminar entitled ‘Debt Auditing in Uruguay and Latin America: Why? What for?’. The event was attended by:

* Ec.Joaquín Etchevers (Uruguay)
* Marcelo Abdala (Uruguay)
* Ec.Beverly Keene (Jubilee South - Argentina)
* Ec.Luis Becerra (Argentina)
* Ec.Oscar Ugarteche (Perú)
* Ec.Rodrigo Avila (UNAFISCO - Brasil)
* Ec.Rómulo Torres (Jubilee Peru - Latindadd)
* Historiador Alejandro Olmos Gaona (Argentina)
* Agr.Pablo Hernándrez (Uruguay)
* Ec.Antonio Elías (Uruguay)

During two work sessions (which included our participation), speakers shared Latin American experiences on debt auditing from different perspectives (economic, social and legal): the diagnostic, working tools, the results, the present situation and challenges ahead. The cases of Brazil and Argentina were once again put on the table.

Debt auditing in Argentina

As pointed out by Alejandro Olmos, Argentina’s bulky external debt evidences a fracture of the legal order which allowed the State to give in to all demands and intentions imposed by the financial institutions it had agreements with, either individual or multilateral institutions such as the World Bank, the International Monetary Fund and the Paris Club.

In the case of Argentina, as of 1976, the country was subjected to the will of foreign creditors by benefitting and supporting private companies and businesses – both local and foreign – to the detriment of state-run companies and corporations, which became gradually poorer. Then, during the 1990s, the debt became once again significantly increased, but this time under the Brady Plan (as stated by Olmos, entirely drafted in New York by two of Argentina’s creditors: Citibank and J.P.Morgan). This plan comprised the economic and political measures to be later implemented by the Argentine government: flexibilization of labor laws, privatization of the pension system and privatization of all state-run companies.

Finally, the legal case brought against the external debt in 1982 reached a final judgement in 2000. Such judgement had taken into account the debt audit carried out by members of the accounting body of the Argentine Justice and three scholars proposed by the School of Economic Sciences, who had decreed that: a) the external debt increase was excessive and damaging and lacked any economic, financial and administrative justification; b) there is responsibility of Economy Ministers involved in the process; c) those allegations in the case involving the above-mentioned offenses can be considered as proved.

However, as highlighted by Olmos, the results of the audit process which gave clear evidence of the fraudulent operations carried out against the State, raised alarm among the ruling economic authorities at the time who were not interested in getting to the truth of facts. Concerned about concealing all the operations being detected by means of their decision-making power, authorities led audit conclusions to a dead end. On account of that, says Olmos, they decreed a resolution disarticulating the auditing body and transferring its members to different destinations. Thereby, such private debt which nowadays accounts for half of the global public debt became legitimated, thus turning into one of the burdens currently borne by the population as a whole.

The experience of Brazil

In the case of Brazil, the historical experience in terms of debt auditing marks different stages within a long process. In his presentation, Rodrigo Ávila described the steps that made each one of these stages possible, as well as their methodology and results. The last official experience was the one developed by the parliamentary debt audit Commission in 1989. One of its first conclusions was to confirm that those agreements that gave rise to the debt had not been approved by parliament and therefore, in the opinion of the commission, were ‘unconstitutional’. Likewise, debt agreements entered into during the dictatorship (1964-1985) - the period of largest indebtedness - are not made available to parliament. On the other hand, the Commission concluded that 40 per cent of the debt financed amount forced Brazil to undertake a program with the IMF and World Bank; while 50 per cent (of the debt financed amount) was governed by a disclaimer of sovereignty clause.

However, the final report failed to be voted by the Commission due to lack of quorum and once at the plenary session of parliament it was defeated. Even more dramatic was the fact that its incisive conclusions were ignored by those negotiating the External Debt Agreement with private banks in 1994, when such questionable contractual debt was turned into bonds - a process which was called as ‘securitization’.

Some years later, after the 2000 plebiscite resulted in favor of debt audit as a previous condition to continue to pay, the Jubilee movement led (and is still leading) a citizen audit that aims at a historical reconstruction but also at a critical follow-up to current facts.

Some points that were common to all speakers:

* the external debt is an economic problem, but also a political problem
* funds available from external debt failed to benefit the poorest sectors
* a significant part of the total amount of debt owed by Latin American countries was undertaken by authoritarian regimes to finance their repressive policies
* the external debt burden on the budgets of Latin American countries poses an obstacle to investment and social development (social debt)
* debt auditing is an exercise that requires social and technical participation
* an audit is a tool that allows to know the reality and define an action strategy
* audits have better results when they are provided with power resources; therefore, social initiatives should find ‘allies’ within the political system
* an audit should produce the evidence required to enable legal actions against the debt
* the audit process should promote a historical review, but also carry out the follow-up to current facts
* poor countries should aim at a sustainable debt which could allow their development

Rómulo Torres, of Jubilee Peru, ended up his presentation by posing challenges and strategies for the activity of social movements.

Challenges

* to question the financial mechanisms that are used to manage the debt in favor of trade liberalization and investment
* to show the lack of coherence between economic-financial policies and the Millennium Development Goals (Goal No. 8: to develop a global partnership for development)

Strategies

* mobilization: debt auditing and international agreements in favor of debt cancellation
* international advocacy: related to the financial system, the treatment of external debt and its links to trade liberalization
* surveillance and advocacy at national level: new indebtedness levels, social expenditure and debt servicing within the budget

Finally, several people taking part in the event warned about the changes that are taking place in the international financial architecture and laid emphasis on the fact that poor countries should define a position in this respect.

The World Bank is strengthening its financing policy through private investment and infrastructure policies, while the International Monetary Fund is trying to re-define the role it plays in global geopolitics. In view of this, Latin American governments should aim at sovereign policies that would promote development at country level.

See Spanish version with the original speeches.

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