Argentina, the largest debtor to the IMF, goes for a new pact after many failures

Argentina, the largest debtor to the International Monetary Fund (IMF), is seeking a new agreement with the financial institution, dragging on its back a history of failed programs that have largely led to the eventful future of the second largest South American economy over the last six decades.

The IMF, which turns 75 this Tuesday since the beginning of its operations, added Argentina as a partner on September 20, 1956 and in 1958 granted its first loan

Since then, Argentina has signed 21 programs with the IMF, according to the records of the organization itself, although other sources count 28 if compensatory financial facility agreements are included in the list.

The omnipresence of the IMF in Argentine economic life is indisputable: of the 65 years of relationship with the organization, in more than half the country has been under the parameters of a program with the organization.

“On average, every two and a half years Argentina turns to the IMF since there is a relationship between the two. It is an anecdotal data but, in turn, it shows the degree of dependence of Argentina with the Fund”, said the economist Mariano De Rosa, creator and executive director of the More Investments portal.

According to the expert, this dependency stems from Argentina’s chronic problems in financing its public spending: with poor administrations, inability to increase exports, lack of access to international markets and capital flight, the country ends up knocking on the doors of the IMF again and again for financial relief.

“Argentina has a pathology: permanently resorting to fiscal deficit and going to seek resources from the external sector,” De Rosa observed.

complicated history

The relationship between Argentina and the IMF has been almost one of “love and hate” in all these years. There were moments of tension and others, such as in the neoliberal 1990s, in which Argentina was a “good example” for the IMF of the economic opening policies that the organization recommended.

The role of the IMF in the enormous Argentine crisis of 2001 is still highly questioned in the country, particularly in sectors related to the late former president Néstor Kirchner (2003-2007), who in 2006 canceled all the debt with the IMF, for US$ 9,500 million, to gain “degrees of freedom for decision making”.

Since then, Argentina has been free from the annual reviews of its economy by the IMF, until in 2018, in the midst of strong financial tensions, it once again resorted to the organization for record loans of US$56.3 billion, of which some were disbursed. $44.5 billion.

The agreement signed with the then president Mauricio Macri (2015-2019) failed in its objectives, and Argentina, plunged into a severe recession since 2018, requested in 2020, already under the Government of Alberto Fernández, to negotiate a new program in the face of the inability to face the repayment between 2022 and 2024 of the astronomical loans granted by the agency.

Skepticism

With this history, Argentines have become accustomed to permanent negotiations with the IMF for agreements whose goals have hardly been met and which have often included conditions that, for a large part of the population, have been synonymous with “wild adjustment” impositions. .

According to a recent survey by the consulting firm Clivajes, 61.3% of Argentines are in favor of a new agreement with the IMF, but with more than poor expectations: 30.3% believe that the economic situation will worsen and 26.4% do not expect changes in the complex Argentine economic scenario after the signing of a new pact.

“There are no expectations that there will be a substantial improvement in the economic situation from the agreement. Although many see that there is no choice but to agree, it is not believed that this will generate a change and that is why it is viewed with so much skepticism”, said Esteban Regueira, director of Clivajes Consultores.

In addition, according to the survey, three out of ten Argentines show concern about how the Government will meet the goals of reducing the fiscal deficit agreed with the IMF without applying an adjustment.

“There is a portion of the population that takes it for granted that there is going to be an adjustment. There is mistrust due to the experience we had in Argentina, especially at the end of the 1990s, with the agreements with the IMF because they were not fruitful, they have deepened the crises and because they imply an adjustment for which we are not prepared,” he added. Regueira.