Debt-for-Education Swaps: Part II

World's first debt museum?! This past week I finally made the trip to Argentina's Foreign Debt Museum at the University of Buenos Aires' School of Economics.

The blue light box displays the faces of the Ministers of Economy who presided over the debt explosion during the dictatorship (1976-83). The wall is covered in press clippings reporting political developments.

A corner of the museum is dedicated to ex-President Carlos Menem's golden age of indebtedness, privatizations, pegging the peso to the dollar, and his surgically enhanced smile.

Never again. We are convinced that this tragedy cannot be allowed to repeat itself. We have to generate a collective consciousness so that we can be aware of the economic decisions taken by our leaders. Indebtedness has not only resulted in sending great quantities of resources overseas (resources which could have been used for health, education, help for the poorest etc.), but it has also been the main weapon used by concentrated capital to carry out neoliberal reforms which have destroyed the country’s productive structure.

Brochure from the External Debt Museum, Buenos Aires (inaugurated April, 2005).

‘Never again’ (Nunca más) is an internationally used slogan to condemn genocide and crimes against humanity. In Argentina, the term nunca más is synonymous with the forceful response to the 1976-83 military government which systematically killed and disappeared 10,000-to-30,000 ‘subversive’ Argentines.

By invoking nunca más, the creators of the External Debt Museum want to make a powerful, often overlooked link: “The military dictatorship did only dedicate itself to the disappearance, the torture, and the murder of thousands of persons, but it coordinated these crimes with policies which forever modified Argentina’s productive and social structures in the interests of the dominating sectors.”

Indeed, the debt incurred by the military regime is a criminal act on its own. When the dictatorship took power in 1976, the country’s debt stood at $8,3 billion. When the regime fell in 1983, they had indebted the country to a whopping $45,7 billion. Not surprisingly, most documents and records of the debt had been destroyed.

The museum uses World Bank data to show where these loans ended up: 44% of the funds were used to finance capital flight, 33% went to paying interest to foreign banks, and 23% were used to import arms and non-identified goods. It is also estimated that the military nationalized $15 billion private sector debt; that is, bailouts for businesses friendly to the dictatorship.

There is a growing international consensus that debts incurred by illegitimate governments, like Argentina’s military junta, are odious and shouldn’t be recognized.

However, given Argentina’s weak justice system, there is an ongoing 20-plus years judicial process to determine how much of Argentina’s debt is odious, and who exactly should be held responsible. Similarly, more than two decades after the gross human rights violations, many with blood on their hands continue to enjoy immortal impunity.

The central point I am trying to make is this: economic policies are not carried out in a vacuum by Finance Ministers or World Bank economists. It is essential to understand that the major social, economic and political changes initiated in Argentina, Chile, Paraguay, Bolivia, Brazil, and Uruguay around three decades ago grew from the barrel of a gun.

The explosion of Latin American debt is a case in point. The debt crisis is much more than a problem of irresponsible lending and borrowing. Debt initially skyrocketed under the auspices of anti-democratic, corrupt, and criminal practices. Not surprisingly, the crisis has been accompanied by several policies which have failed to create sustainable growth, employment, greater equality or reduce poverty for almost three decades.

In 2004, Latin America’s debt stood at $780 billion, making it the most indebted region in the world. The region is caught in a development trap since it must choose between paying its debt or increasing social spending.

As I mentioned in my previous post, debt servicing exceeds education spending in over half of the region’s countries. This trend must be reversed.

Yet I am not sure if blanket debt forgiveness is part of the solution.

While I view the recent G8 deal to forgive the debt of 18 of the world’s most poorest countries as a promising step forward, there are reasons to be cautious. Oddly enough, Africa’s richest man makes some reasonable arguments on the hazards of simple debt cancellation and increasing aid.

In my next post, I will expand upon the problems with blanket debt-forgiveness, and how debt-for-education swaps offer an alternative.

Debt-for-Education Swaps: Part I

Tec de Monterrey, Mexico.
When I studied there in 2002, I was stunned by the state-of-the-art facilities and the pristine campus which featured colourful peacocks.

This will be the first of three entries on the subject of debt-for-education swaps in Latin America.

For the past five months I have been working at the Organization of Iberoamerican States, developing a booklet that explains:

a) The importance of investing more in Latin America’s education systems,

b) The burden of the debt, particularly on education spending, and

c) Debt-for-education swaps as an innovative solution to the debt and education crises.

This entry will focus on the first argument: The importance of investing more in Latin America’s education systems.

Latin America faces two enormous obstacles to development: extreme inequality and enormous debt. Indeed, Latin America is the world’s most unequal and most indebted region.

These impediments reinforce one another: as governments dish out more dollars to service their debts, they have less money to spend on social services, such as education and health.

In over half of Latin America’s countries, more money is spent paying back the debt than on education.

The region is caught in a development trap. Debt-for-education swaps attempt to tackle both of these issues at the same time. Before analyzing the debt problem, it is necessary to address the following question:

How important is investing in education to the development of Latin America?

First and foremost, education is a fundamental human right. Article 26 of the Universal Declaration of Human Rights states: “Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory.”

From an economic development perspective, there is a consensus that investment in efficient, effective and equitable education leads to greater employment, higher wages, higher productivity, and greater economic growth for both individuals and society.

From a social development perspective, education serves a broad range of functions, from saving lives (ie early detection of disease and illness) to empowering vulnerable populations, such as women, the poor, and indigenous populations to overcome discrimination.

From a political development perspective, investment in education means having a stronger foundation for democracy. Anyone who has been frustrated by how a populace can elect an dumb person to power, will usually find a difference among the education levels of those who voted for each of the candidates.

In sum, education is probably the single most important investment governments, societies, families and individuals can make.

For anyone who has been to Latin America, the unequal access to quality education is shocking.

For instance, Tec de Monterrey in Mexico, with its luxurious commodities (all students have laptops and access to wireless internet anywhere on its picture-perfect campus), is light years ahead of the countless shantytown schools that lack books, electricity and are rat infested.

The rich have unbounded privileges to progress, while the poor remain trapped in a vicious cycle of exclusion, illiteracy, hunger, disease, and insecurity.

The region invests at best less than half as much as do developed countries (comparing Chile with Spain) and at worst one thirtieth as much (comparing El Salvador with the US).

As well as raising funding levels, many difficult policies need to be implemented. For instance, the well respected public universities are generally tuition-free. While the intention behind this policy is a noble one, the reality is that these universities are often filled with privileged students who attended superior private and public schools that better prepare them for the competitive entrance exams. Since it doesn’t cost these students anything to study, many have little incentive to complete their degrees on time, and many drag a four year diploma into seven years of wasted time and resources.

Latin American societies are essentially subsidizing richer students to study at the highest level, while many of the poor who never make it that far, remain discriminated against.

The question of discrimination cannot be overlooked.

Nowadays, when a government institutes discriminatory policies against a race, it is openly and justifiably called racism. However, when exclusion is colour blind and not declared as official policy, few people dare utter the word classism (fittingly, my spell checker tells me that the word doesn’t even exist).

I am drawing this parallel because I recently read Nelson Mandela’s autobiography, A Long Walk To Freedom. Given the project I am working on, several paragraphs jumped out at me:

Mandela eloquently states: “Education is the great engine of personal development. It is through education that the daughter of a peasant can become a doctor, that the son of a mineworker can become the head of the mine, that a child of farmworkers can become the president of a great nation. It is what we make out of what we have, not what we are given, that separates one person from another.”

Mandela goes on to describe the apartheid education policies that helped institutionalize racism. Prior to apartheid, the United Party provided curricula for both whites and blacks that were essentially the same and all students were instilled with what were considered ‘liberal’ values at the time. Although Mandela studied under extreme racism, he recognizes that “we were limited by lesser facilities but not by what we could read or think or dream.”

Once the apartheid Nationalists came to power, “the disparities in funding tell a story of racist education. The government spent about six times as much per white student as per African student…The Afrikaner has always been unenthusiastic about education for Africans. To him it was simply a waste, for the African was inherently ignorant and lazy and no amount of education could remedy that.” (Long Walk to Freedom, 166).

In Latin America, the poor (whether they are black, indigenous, mestizos or white) face institutionalized classism. The far inferior level of education they receive is proof of this discrimination. While racism is undeniably a serious problem, it is essential to address all forms of discrimination in an integrated manner. Only through quality, equitable education can this be achieved.

Certainly, improving education is not the cure-all for the region. But it is probably the single most important step today’s leaders can take.

Almost two years ago Latin America’s Ministers of Education declared a regional movement in favour of education. However, if these countries continue to spend more on servicing its debt than on education, such a promise will be hard to keep.

This past year Argentina took an innovative approach to breaking out of this trap. The government announced that it will be conducting a debt-for-education swap with Spain. Money freed up by cancelled debt will be injected into the nation’s poorest neighbourhoods. About $78 million will be converted into 200,000 scholarships for children who have been excluded from the education system.

Argentina vs. Brazil

Brazilian and Argentine Speakers at a Debt-for-Education Swap Seminar

Last night I returned from a two-day work trip to São Paolo. It was my second visit to Brazil after a meeting in Brasilia about a month ago.

My busy schedule and fatigue due-to-illness left me with no time to sight-see. Nevertheless, I gained some more insight into a culture that fascinates me.

Argentine Spanish vs. Brazilian Portuguese

Unlike the pork-chopped peninsular Portuguese, Brazilian Portuguese, particularly if spoken or sung by the right person, is one of the most beautiful sounds in the world.

I am able to read and understand about 95% of the Portuguese text I come across. Understanding Portuguese when spoken is another story. I comprehend about 50-70% of the Brazilian variety. I barely absorb any of the Peninsular brand.

I put my poor Portuguese skills to the test earlier this week. On Tuesday I was participating in a seminar on Debt-for-Education Swaps held by the Brazilian Ministry of Education at Bovespa (the Brazilian Stock Exchange). Before arriving, I wasn’t sure if simultaneous translation services were going to be provided.

I thought back to my meeting in Brasilia a month ago. Everything was going smoothly. The other participants in the meeting were kind enough to speak either in Spanish or Portuñol - an improvised hybrid of Portuguese and Spanish.

However, the last speaker spoke in a very congested, hasty Portuñol. I managed to capture about half of what he was saying. It was simply too awkward to stop him every time I didn’t understand something.

This time around in São Paolo, I was bit more worried about the language barrier. There would be around 100 people in attendance. I was to present on a panel of five ‘experts’ on the somewhat technical issue of debt-for-education swaps (a subject I will discuss in another post). Thankfully, arrangements had been made to provide personal translation devices to those in attendance.

I then noticed something peculiar.

I have long thought that Spanish is a much easier language to understand than Portuguese. But I also knew that my position on the matter was quite biased. My evidence had been based on the chafing sandpaper sounds I’ve heard (and mocked) in the streets and shops of Toronto’s bustling Acorean and Portuguese neighbourhoods. I have repeatedly pestered my Portuguese friends that their language is simply a drunken Spanish dialect.

However, this time I had some objective proof. Firstly, the Argentines in attendance had a harder time understanding the Brazilians’ Portuguese than the Brazilians’ had understanding their Spanish. Secondly, the other Argentines on the panels simply conducted their presentations in Spanish (even if they knew enough Portuguese to muster up some Portuñol). They knew that practically none of the Brazilians in the audience would require the translation devices.

I later overheard several conversations between Brazilians and Argentines. I realized that even though we were in Brazil, it was the Brazilians who were making the effort to speak Portuñol as their southern neighbours spoke in their native tongue. A part of me thought – ‘Wow, this is quite arrogant (even for Argentines). Why is it that Brazilians are the ones going to greater lengths to communicate when we are the visitors in their country?’

I knew that Spanish was easier to understand for Portuguese speakers than the other way around. Yet it was still strange to experience this type of receptiveness to another nation’s language - especially, when it’s a neighbour that you’ve long considered a rival.

Argentine Fútbol vs. Brazilian Futebol

The beginning of Argentina vs. Brazil in Buenos Aires (on this occassion Argentina played an incredible game and won 3-1).

As I waited for my return flight to Buenos Aires at the São Paolo airport I had the misfortune of witnessing the devastating 4-1 loss of our national side to the Brazilians in the Confederation Cup final.

What made the blow-out that much more unbearable was that only a month earlier I had attended a World Cup qualifying match in which Argentina handed Brazil a 3-1 bruising.

That victory had brought Argentina and Brazil even in their historic head-to-head record (33 victories apiece, and 22 draws). It also injected the country with a strong dose of pride.

Wednesday’s spectacular display put on by Adriano, Ronaldinho, Kaká, and company not only put Brazil ahead in this bitter rivalry, but also embarrassed an Argentine squad that appeared over-confident from their previous victory.

Brazil’s performance revealed that although the head-to-head record is a close one, when it comes to big games, they are in a class of their own. They have been crowned World Cup champs five times. Argentina has only claimed the honour twice.

Perhaps the hardest part to swallow about the defeat, is that the verde-amarelos celebrated the Confederation Cup (a relatively unimportant tournament) as if it were a World Cup final. Having humiliated Argentina may have had something to do with their jubilation.

While I have yet to visit any beaches, carnaval or Rio, I am already convinced that the most beautiful thing about Brazil is the way in which their eleven best footballers can soundly defeat any opponent, with unparalleled creativity, style, and sportsmanship. They do all of this under 180 million microscopes and still manage to maintain enormous smiles on their faces.