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Argentina Debt Showdown Tests Blackrock's Commitment on Corporate Social Responsibility

By:
Chris Gaetano
Published Date:
Jul 31, 2020
The world's largest asset manager, Blackrock, is among those actively trying to block a debt settlement deal with Argentina; to pay what Blackrock is demanding would limit the resources the country could use to fight the pandemic and alleviate poverty, said the New York Times.

The Argentinian people have long had a troubled relationship with foreign bondholders, particularly during the country's late '90s/early 2000s fiscal crisis, when the World Bank and the International Monetary Fund, on behalf of these creditors, imposed structural reforms forcing the country to severely cut social programs, among many other things. These reforms in turn set off a severe political crisis during which the country literally went through six presidents in one month, with the slogan "all of them must go!" becoming popular among the swelling ranks of protesters. Ultimately, the government chose to default on its debt obligations, as the numerous economic changes imposed by its creditors were seen by the people as a new form of imperialism that eroded its national sovereignty.

The government has since defaulted several more times, including this past May. It was then that the government asked creditors for a deal that Blackrock now vigorously opposes. It wants 56-cents-on-the-dollar back, while the government offered, at first, 50-cents-on-the-dollar and then, as negotiations continued, 53-cents-on-the-dollar. This is at a time when the country is wracked with crisis, when the payment the government is already offering would likely curtail its ability to respond and reduce its capacity to make future payments. Blackrock, on the other hand, says that it needs to think about its clients and so has been pushing creditors, many of whom back the deal, to instead oppose it and ask for more. The government, however, said that at this point, paying more would basically amount to taking food out of the mouths of children in order to transfer money to wealthy investors, and so its offer is final.

The Times said that this stance is quite contrary to Blackrocks recent public pronouncements of a kinder, gentler capitalism that's more engaged with issues of social and economic justice, such as not putting a country with rapidly rising poverty into a position of risking a potentially painful default. Blackrock denied this clashed with its principles, saying that the deal will allow Argentines to continue accessing international credit, which is an ostensible social good.