Your Money or Your Life!

204/YOUR MONEY OR YOUR LIFE!

most of the nation's wealth at rock-bottom prices. It is estimated that
the country lost S60 billion in the process. Menem argued that
Argentina's state-owned companies were deeply in debt in order to
justify the sell-off. Yet their poor financial position resulted from the
debt load they had been forced to take on by the dictatorship; most of
the borrowed funds never made it into company coffers.
Menem asked the US investment bank and brokerage firm Merrill
Lynch to determine the value of YPF. Merrill Lynch deliberately
underestimated company oil reserves by 3 0 per cent in order to lower
YPF's paper value before privatisation. Once the privatisation had
been carried out, the hidden reserves were factored back into the
company's assets; financial operators who had bought company
stock at a low price made huge profits when YPF share values subse­
quently rose. The windfall also led many to vaunt the superiority of
private companies over state-owned ones.
It is interesting to note that in 19 9 7 Brazilian president Fernando
Henrique Cardoso asked the same US firm, Merrill Lynch, to
determine the value of the country's main state-owned concern, the
mining company Vale do Rio Doce. A number of Brazilian members
of parliament have accused Merrill Lynch of undervaluing the
company's mineral reserves by 75 per cent (0 Globo, 8 April 1997).
Apart from YPF, another Argentinian gem was sold for a song:
Aerolineas Argentinas. The airline's Boeing 707s were sold for a
token sum - S1.54, to be exact! A few years on, these planes continue
to work the routes of the now privatised company. The value of the
company's rights over certain routes - S800 million - was estimated
to be only S60 million before privatisation. The company was sold to
the private sector for S130 million in cash; the rest was made up of
debt write-offs. State-owned companies were privatised free of debt,
which was instead absorbed by the public purse.

The Dictatorship on Trial

After the fall of the dictatorship, the debt scandal did not fail to attract

public attention. The first civilian government established a parlia­

mentary commission, which was dissolved after 18 months of

deliberations. Its findings were considered to be too threatening to

Alfonsin's economic policy, given that in the meantime he had

decided to nationalise the debt. Menem, the current president, had at