The volume “Sovereign debt diplomacies” aims to take stock of the normative, moral, and political issues raised by relevant debt disputes since the rise of foreign debt markets during the nineteenth and twentieth centuries. The book investigates the actors, instruments, and outcomes of historical change and global asymmetries of power and colonial history. The authors base their analysis on a series of sources, indirect such as worldwide reviews and journals and research by the University Press of Chicago, Stanford, Oxford, and Cambridge, and direct sources such as the US Government Printing Office, London Council House, International Law Commission, and O’Connell’s works, with particular regard to the many direct sources on Mexico’s chapter. The diversity of the author’s research field leads to a dynamic structure, dividing the chapters into four sectors, each written by researchers from various fields, including political science, law, economic history, and sociology. We can better understand this volume through the help of the Varsori manual “International History“, which proposes a new vision of contemporary international relations with a more inclusive approach in which economics, above all, finds its place. “Sovereign debt diplomacies” offers an original contribution to the ever-present issue of sovereign debt.
Special attention is reserved to the dawn of globalization, when we saw the emergence of bondholder committees like the famous CFB, with global actors incapable of managing sovereignty control such as, among others, the League of Nationsthat began its activity in Geneva in 1920, from its first efforts to resolve a series of upheavals, especially in the economic field[1]. The chronological structure shows the evolution of debt and how geopolitical dynamics influence the characters of the negotiations, which first saw the use of military forces.
The first analysis brings attention to Latin America’s governments turning to external loans, in the 19th century, as a means to support their financial needs, with Great Britain securing the collaboration of governments to favour their interests through a high private interest connection: Mexico, Peru, and Venezuela are three very different examples (Chapter 2). Nonetheless, Britain, the dominant global actor at the time, exercised dominance over Egypt after financing the Suez Canal’s construction with its debt; France also adopted a similar scheme in Tunisia (Chapter 3). The constant comparison in the colonial sphere will always be seen from the perspective of the Balance of Power. Even following the stock market crash, France and Great Britain believed they could defend themselves more easily thanks to their control over vast colonial empires. However, these choices only decreased international trade, exacerbating the economic recession[2]. Furthermore, it emerged that whether a country remained part of the empire, its default risk was the same as one of the colonial powers. A critical issue immediately following this passage is the little significance given to the Wall Street crash in 1929 and the US economic crisis that spread to Europe, triggering a series of relationships. Mexico is an example of how geopolitical interest influences international debt disputes; it was the only Latin American country unable to comply with its debt commitments. However, thanks to the central weight of the United States’ geopolitical strategy, with the first visit of a US president and the signing of the Good Neighbour Agreement in 1942, Mexico’s foreign debt was reduced to less than 10 per cent of the original amount (Chapter 5), which brings to light the true importance of geopolitics and its superiority in some contexts, compared to public or private finance. Varsori’s book agrees with the volume on the significance of Roosevelt’s role in the post-war creation and concern for an open and efficient economic system in which Washington and the American currency would play a leading role.
Moving forward, the analysis of the German post-war case study shows the collective pressure of creditors, essential actors in sovereign debt disputes, the intervention and influences of diplomacy in the resolution of the German credit disputes, the establishment of the London Debt Agreement on German Debts (LDA), and the reintegration of Germany in European trade (Chapter 6); thus, the book realizes the normalization of financial relations was a prerequisite to reintegrating Germany into the Western economic system. The conference of Bretton Woods dealt with the will to create an economic system based on free trade and the great importance of the return to the gold exchange. What is crucial in the book from these contexts is understanding each chapter’s dynamics to arrive at a broader understanding of the historical, political, and geopolitical change in debt diplomacy. The book states that German potential was so great that it could restart Germany and contribute to the economic rebirth of Europe, confirmed then by Varsori. Creditors increasingly sought the mediation of their governments; they developed new modes of legal reasoning that would drastically alter future debt restructuring episodes. If states refused to lend creditors diplomatic support, creditors turned to international courts (which usually rejected the causes), expecting these courts to be the primary enforcers of broken contracts. Now, the volume provides an outstanding broad analysis based on the law perspective, contributing simultaneously to give an empirical answer from the point of view of different subject areas (Chapter 9). With O’Connell and Bedjaoui (one of the foremost scholars on the law of state succession), a significant contribution in the volume was the approach of Russian lawyer Alexander Sack, who claimed debt disputes should be considered case by case and analysed the doctrine of “odious debt“. Hence, the “theory of universal succession” and the “clean-slate” theory arose as extreme positions on a spectrum that came to the fore at the height of decolonization in the 1960s and 1970s. The book describes the setup in 1964 of the United Nations Conference on Trade and Development (UNCTAD), based in Geneva and closely linked to the G77 group of developing countries and, as reported by Varsori, which coincides with the period between 1968 and 1980 in which the “Third World” massively intervened in western society. It is no coincidence that the first shock that hit the capitalist system was Nixon’s decision to interrupt the convertibility between the dollar and gold, thus ending the Bretton Woods system[3].
Then, the work highlights the so-called “entangled and disentangled problematization of debt” in the local contexts of over-indebtedness (Chapter 10), masterfully explaining the difference by focusing on the main point of the differences between the two problems. The book seems to show empathy in providing the chronological details of the UNCTAD, gradually becoming a specialized agency to assist developing countries (in difficulty due to the high indebtedness and the weakness of their currencies), with the mandate to produce expertise at the macro-level shifted in favour of traditional bodies such as the World Bank and the International Monetary Fund and the idea that states should become ‘market players‘. At the end of the decade, what was about to emerge as a reaction, was the belief in the free market that would lead to the neoliberal revolution of the 80s with Reaganomics[4]. In this regard, a critique could be centered on the fact that neo-liberal politics are often mentioned but never fully discussed from a merely political point of view. The book also focuses on how the laws aim to restrict holdout creditors’ ability to pocket more money than they paid for the debts in contention, protect highly indebted developing countries, and make it harder for sovereign property to be seized despite immunity waivers; the UK, Belgium, and France are the most remarkable examples (Chapter 11). Maduro bonds case then, represents a decisive step in the history and culture of debt, whether or not its borrowing might be subject to legal challenge under subsequent, presumably better, governments. Supposing the markets perceive a significant enough risk of future repudiation, the book figures in that case, will increase the cost of borrowing for the current government, as Varsoriclaims, that the Venezuelan economy demonstrated a series of contradictions, so much so that soon the proceeds from the sale of oil were no longer able to support the economy of the country that was heading towards a great crisis. The book closes with Puerto Rico’s financial crisis (Chapter 13), in which a significant role was played by the US Congress, which had the power to approve all cabinet officials and veto any laws of Puerto Rico’s legislature. Furthermore, Puerto Rico operates under US monetary and tariff systems, and hence, it presents a unique legal setting as it is a Commonwealth territory of the United States with an elected governor and legislature while also being an unincorporated territory under the ultimate control of the US Congress.
Acknowledging that these concepts are moving targets, a criticality is that the conclusions could offer a more thoroughly satisfying degree of precision, even given the broad work and the various tasks. The conclusion clearly states that there is and should be diplomacy in speaking and writing about sovereign debt diplomacies themselves. There is an awareness of the need for diplomacy to be more concerned with and contribute to this issue, to carry out in-depth studies to achieve theoretical and practical solutions. The book “Sovereign dept diplomacies” is undeniable of far-reaching academic importance; it does a unique work of its kind, intersecting loads of fields that complement one another. The main objective is to survey meaningful regularities and changes in the management of sovereign debt disputes across different historical periods; it does this well by offering a wealth of thoughts, data, and sources for further investigation and a broader understanding of the problem of sovereign debt from colonial empires to hegemonies.
Francesco Gallo
[1] Varsori A. Storia internazionale Dal 1919 a oggi. 2020, Il Mulino, 53-56
[2] Varsori A. Storia internazionale Dal 1919 a oggi. 2020, Il Mulino, 61-63
[3] Varsori A. Storia internazionale Dal 1919 a oggi. 2020, Il Mulino, 287-291
[4] Varsori A. Storia internazionale Dal 1919 a oggi. 2020, Il Mulino, 335-338