Argentina, the IMF and the Big Debt

By Gustavo A. Maranges – Mar 27, 2022

Sometimes we make decisions only thinking about the immediate situation, while forgetting the repercussions they may have in the next 5-10 years. We think that it will all just work itself out. We tend to be optimistic at best, but the reality is that we are inconsistent. When it comes to the decision of an individual, the consequences of that decision rarely affects a considerable amount of people. However, when it comes to that of the government of a country, a single measure can change the lives of millions for generations to come.

Argentina is a country that knows what this means, especially when we talk about the economy. The South American country’s economic history has un-erasable footprints of Neoliberalism and the International Monetary Fund’s (IMF) associated policies.

Recently, President Alberto Fernandez’s government completed a re-negotiation with the IMF on the payment on a $44 billion loan, even though he was not responsible for it, but now it is his administration’s biggest problem. The debt was acquired by former President Mauricio Macri (2015-2019) only one year before he finished his term. Today, three years later, Argentinians have seen very few benefits, compared to the large amount of problems this loan has generated.

Thanks to the recent agreement with the IMF, Argentina will have four and a half years before paying back the loan to the financial institution. However, the challenges are not small. Not a single penny of the foreign currency received from the loan remains in Argentinian banks. Therefore, financing the debt will require a lot of effort from the national economy, which shows recovery signs while it is also facing rising inflation and lower-than-usual employment growth.

According to government statistics, between 2007 and 2019, each point of the Gross Domestic Product (GDP) growth generated 45,000 new jobs. However, the 10.3% GDP growth in 2021 only created around 190,000 jobs, meaning just 19,000 new jobs per percentage point.

In February of this year, the level of employment slightly exceeded the pre-pandemic levels (February 2020). However, this figure does not take into account the decline in purchasing power or the precariousness of the conditions of the working class. It means that the country’s economic growth does not turn into better living conditions for the workers and their families as it did before.

On top of that, inflation has skyrocketed in Argentina. In the last month alone, prices rose by 7.7%. This set off alarms since during the whole of 2021, and in the first two months of 2022, inflation had remained below 2%. Now, the government will have an additional problem to control while implementing the Productive Development Plan towards 2030.

The plan was designed to guarantee the necessary stability and economic growth to fund the multi-billion-dollar IMF loan. Alberto Fernandez’s strategy aims at developing the national productive forces and not only for the economic growth. However, his tenure ends in 2024, and nothing guarantees that the return of a neoliberal government will keep this plan running.

Macri came to power in 2015 and broke 12 years of real transformations in the redistribution of wealth in Argentina. It is incorrect to say that in his four years in office the country went back to 2003 levels, although we can say for sure that he revived the darkest moments of Argentina’s national financial history. The new Plan for Productive Development towards 2030 intends to create the foreign currency incomes to replace many of what Macri’s allies sent abroad and squandered in private debt payments.

Alberto Fernández’s strategy seems to be tuning into Argentina’s real conditions. However, its success or failure will largely depend on the outcome of the 2023 Presidential Elections. Then, it is convenient to review recent history lessons and carefully analyze the consequences of the decisions of the political actors. The only thing that will move them away from their alliances with the oligarchs and reliance on the IMF, is a united movement of the people with a leadership that has their best interests at heart.

Featured image: Unions march against IMF loan in Buenos Aires, photo: Bill Hackwell

(Resumen Latinoamericano – English)