Paint it green
Argentina is using the national debt as an excuse to not act on climate change. You shouldn't be fooled by this gambit.
During this week’s G20 and COP26 summits, Argentina has one clear narrative: “we do care about climate change and the environment, but we can’t do anything about it because we have to pay off the national debt”. The problem is, this isn't a new narrative, it’s not even remotely true, and they're not fooling anyone.
Let’s start with the newness of the claim. Naive, sensitive progressives who want to avoid a rerun of the 1980s might be inclined to believe that the external debt, mainly in hard currency, is unsustainable. But the claim that “we can’t do climate action without taking care of the debt” isn’t new - it’s at least 17 years old:
We warn that the countries with incredible debt burdens in financial matters constitute a true environmental reservoir, that receives no compensation from environmental debtors. Financial creditors who are relentless in their demands for payment do not accept a responsibility for the environmental debt they have contracted with less developed nations.
Nestor Kirchner at the 10th International Conference on Climate Change (2004)
So yeah, the Peronist party has been trotting out this excuse “we just owe too much money to care about such long-term issues” for literally 16 years in a row - talk about a COP out. In fact, there isn’t anything exceptional about Argentina’s debt (the government just renegotiated it, in fact), and proposals of exchange debt reductions for environmental policies have a shaky track record. Not to mention, the government is already borrowing lots of money from China to build nuclear power stations - a laudable act, although it very much undermines the case for debt vs CO2.
But why is there so much debt? Because of the deficit - in particular, the 2007-2015 deficit. The government overspent roughly 4% to 5% of GDP every year of that period, and funded this bonanza by printing money. After inflation started steadily growing (from 0% in the 1992-2001 period to about 20% in the Kirchnerist timespan), the Peronist Party was replaced by a centre right businessman, who proposed a gradual deficit reduction spaced out by borrowing. Because of inflation, and the chance of an internal default of sorts, most of the debt was issued in US dollars - nobody wanted to take a chance on lending pesos. After a sudden stop in capital inflows brought the economy into a traditional Krugman (1979) Balance of Payments crisis, the country borrowed from the IMF to ensure liquidity and make debt payments.
So the “excessive hard currency debt” the government bemoans is just “excessive spending relative to tax revenue” - and what is that spending on, precisely? 75% of the deficit in 2015 was used to finance electricity subsidies, i.e. literally making it cheaper for rich people to consume fossil fuels. State owned companies in highly polluting industries, such as the national airline and the oil and gas company, receive billions of dollars a year in transfers. The automotive sector, and other not particularly green industries, like textiles or construction, receive billions in subsidies and aid, and are among the most protected of the economy. So the very reason the government can’t afford environmental action is that the government spends too much money subsidizing massive polluters. In fact, the current Energy Department is a cesspool of regulatory capture and lobbying by the oil and gas sector, the Environmental Minister is an incompetent stooge with no qualifications, and the current administration gutted funding for renewable energy , and made existing solar and will investments through intense regulations on imports and capital flows, in its first months - because it “didn’t contain enough national science”.
But the whole “give us money or face climate anhiliation” extorsive gamble is predicated on a patently false tradeoff: that preventing/mitigating climate change implies sacrificing economic growth. I’ve previously written that this is wrong - renewable energies like solar and wind are much cheaper than oil and gas already, which would be a booster, not a drag, on growth. Moreover, not acting on climate change costs a bundle, and economic growth is not inimical to action on the climate - quite the contrary, in fact.
The political angle is awful - a new epic struggle between evil foreigners who want to impose their anti-growth agenda, and virtuous nationalists trying to upset their plans. After similarly framed conflicts (“quarantine respecters vs COVID deniers”, “sovereign vaccines vs Pfizer”, etc.) failed, initiating a new Manichean struggle might come at a high cost. If the government remains such a pathetic failure in all of its endeavors, then glomming onto environmentalism as a rationale for more economic nationalism might not only not help the authorities politically, but also make climate change politicaly toxic by lending credence to such irrational actors as libertarian economist and reactionary conspiracy theorist Javier Milei.