Argentina, the IMF’s largest debtor, seeks new agreement after many failures

RIO DE JANEIRO, BRAZIL – Argentina, the largest debtor of the International Monetary Fund (IMF), is seeking a new agreement with the financial organization, dragging behind it a history of failed programs that have played a major role in the troubled evolution of South America’s second largest economy over the last six decades.

The IMF, which on Tuesday celebrates 75 years since the beginning of its operations, added Argentina as a member on September 20, 1956, and in 1958 granted its first loan to Argentina.

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Since then, Argentina has signed 21 programs with the IMF, according to the IMF’s own records, although other sources count 28 if compensatory financial facilities agreements are included in the list.

The Fund’s omnipresence in Argentina’s economic life is indisputable: in more than half of the 65 years of its relationship with the organization, the country has been under the parameters of an IMF program.

“On average, every two and a half years Argentina turns to the IMF since there has been a relationship between the two. It is an anecdotal fact but, at the same time, it shows the degree of Argentina’s dependence on the Fund,” economist Mariano De Rosa, creator and executive director of the Más Inversiones portal, told Efe.

According to the expert, this dependence 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 time and again in search of financial aid.

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

COMPLICATED HISTORY

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

The role of the IMF in the huge Argentine crisis of 2001 is still very much questioned in the South American country, particularly in the sectors of the late President Néstor Kirchner (2003-2007), who in 2006 cancelled in a single payment the entire debt with the IMF, for 9.5 billion dollars, in order to gain “degrees of freedom in decision-making”.

Argentina was since then free from annual reviews of its economy by the IMF, until in 2018, in the midst of strong financial tensions, it turned again to the agency for record loans for $56.3 billion, of which some $44.5 billion were disbursed.

The agreement signed with then President Mauricio Macri (2015-2019) failed in its objectives, and Argentina, plunged into severe recession since 2018, requested in 2020, already under the government of Alberto Fernández, to negotiate a new program in view 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 impositions of “wild adjustment”.

According to a recent poll 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 as from the signing of a new pact.

“There are no expectations that there will be a substantial improvement in the economic situation as a result of 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,” Esteban Regueira, director of Clivajes Consultores, told Efe.

In addition, according to the survey, three out of ten Argentines are concerned about how the government will meet the fiscal deficit reduction targets agreed with the IMF without applying an adjustment.

“There is a portion of the population that takes for granted that there will be an adjustment. There is a lack of confidence 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”, added Regueira.