CASE STUDIES/201expansion. At the time of the 24 March 1976 military coup, YPF's
foreign debt was S3 72 million. Seven years later - when the dicta
torship fell - it owed S6 billion. Its debt had been multiplied by 16 in
seven years.
Hardly a cent of the borrowed foreign funds actually went into the
company coffers; the money lined the regime's pockets. Under the dic
tatorship, productivity per worker at YPF jumped by 80 per cent; the
total number of workers at YPF fell from 4 7,000 to 34,000. In order
to boost its own earnings, the dictatorship reduced by 50 per cent the
subsidy it gave YPF for petrol sales to the population. Moreover, YPF
was obliged to have the oil it extracted refined by private multina
tionals (Shell and Esso). Given its sound financial health before the
dictatorship, it could have had its own refinery. By June 1982, not a
cent of company assets was debt-free.
Government Debt
The IMF and those in charge of the dictatorship's economic policy
argued that massive government debt was justified, since the country
needed to boost its hard currency reserves if it wanted to open up the
economy from a position of strength. A sound economic policy would
have sought increased foreign reserves in the country's international
trading activity. Instead, the dictatorship obtained its foreign
currency by going into debt.
These foreign reserves were neither managed nor supervised by
the central bank. In fact, the huge sums borrowed from the North's
banks were usually deposited right back into the same banks; or at
least into competing institutions. In 19 79, 83 per cent of these
reserves were deposited in foreign banking institutions. The reserves
were worth S10.1 billion; deposits in foreign accounts totalled S8.4
billion. That same year, foreign debt rose from SI2.5 billion to S19
billion (Olmos, 1990). Of course, interest earned on these foreign
deposits was lower than interest owing on the borrowed amounts.
The Argentinian authorities pursued this line of action for the
following reasons: first, individuals in the regime grew rich off the
commissions offered by the North's banks; second, increased foreign
reserves meant a significantly increased capacity to import - in
particular, to import arms; third, the policy of economic liberalisation
and debt accumulation recommended by the IMF, improved the dic
tatorship's credibility with the main industrialised countries,