We’ve been here before: recession, growing poverty, high inflation, billions of dollars in debt, a looming deadline for repayment and simmering anger toward the International Monetary Fund.
These are crucial days for Argentina, which this week began hosting an IMF mission team for talks on restructuring US$44 billion in debt owed to the lender. All involved are anxious to avoid a replay of 2001, when Argentina defaulted on about US$100 billion in debt during the worst economic crisis in its history.
It’s a balancing act for President Alberto Fernández, who seeks a deal with the IMF that does not alienate his base, as represented by Vice-President Cristina Fernández de Kirchner.
“I think the Fund is willing to help Argentina, but in order to do that, it’s necessary for the Argentine authorities to steer away from interventionist and heterodox policies and show clear willingness and ability to improve the fiscal situation in no more than two to three years,” said Alberto Ramos, chief Latin America economist for Goldman Sachs.
At the time of the 2001 default, the relationship between Argentina and the IMF grew increasingly strained. Fund officials later acknowledged shortcomings, including a failure to identify vulnerabilities in the Argentine economy during its boom years.
Martín Guzmán, the economy minister, told Congress on Wednesday that the IMF is partly to blame for Argentina’s current debt crisis, though progress is being made in debt meetings. He said the country needs more time.
“To be able to pay the debt, Argentina needs to grow and to be able to grow, the weight of a suffocating debt needs to be lifted,” he said.
As he spoke, demonstrators who favour a hard line on the nation’s creditors marched toward the local offices of the IMF in Buenos Aires in protest.
“When workers in Argentina hear the term IMF, they know that long periods of darkness lie ahead,” said Damaris Rolón, a protest leader. He said the IMF should get out of Argentina and that the government shouldn’t pay back its debt.
A new IMF programe would reassure bondholders that Fernández has a good plan to balance the budget, lower inflation and pay debts, said Benjamin Gedan, director of the Argentina Project at the Wilson Center in Washington.
“Politically, it might be appealing for Fernández to demand concessions not only from private creditors, but also from the IMF,” Gedan wrote in an email to The Associated Press.
“After all, the Fund is loathed by Argentines who remember its role in the 2001 economic catastrophe,” he said. “But a clash with the IMF would be foolhardy, and immensely complicate Argentina’s efforts to claw its way out of its latest debt morass.”
Kristalina Georgieva, the IMF’s managing director, said her organisation shares the same goals as Argentina’s government.
“In this regard, the measures adopted thus far go in the direction of restoring macroeconomic stability and protecting the poor,” Georgieva said after meeting Argentina’s economy minister in Rome last week.