In the face of sharp disagreements between Argentina and the International Monetary Fund (IMF), the Argentine government decided Aug. 8 to temporarily suspend negotiations. The government says the IMF is putting pressure on issues that go beyond its mandate.
Economy Minister Roberto Lavagna said the IMF is interfering unacceptably in Argentina’s internal affairs by insisting that issues with private creditors must be resolved first, before an understanding can be reached on renegotiating goals to manage the country’s foreign debt.
Among the “creditors” who purchased the bonds of Argentina’s private debt are individuals and companies from Europe, Japan and the United States. Lavagna called on the IMF to stop pressing Argentina to repay the private investment sector debt.
Said Alberto Fernandez, head of the Cabinet: “Argentina is clear about its responsibility because it knows that it is in debt to the private creditors, but no international institution or third countries should interfere in that issue.”
Lavagna said many see the IMF as largely responsible for the debacle of the last few years in Argentina because of its “gross errors in the past.”
The IMF backed to the hilt the plan, which established an exchange parity between the Argentine peso and the dollar. This led in 2001 to a traumatic devaluation and, incredibly, to the IMF turning its back on Argentina. The IMF demonstrated that it was weak or ill-intentioned by not immediately taking action in the 1990s when fiscal goals were not met. The IMF was forced to acknowledge these two aspects after an internal audit.
In that context, Argentine President Néstor Kirchner harshly criticized the financial agency by pointing out: “It is very easy for it to talk of Argentina from peaceful salons. But its errors have resulted in us having more than 15 million poor.”
Now the IMF is trying to take what is owed from state reserves. According to The Financial Times, the IMF is demanding that Argentina accelerate structural reforms in the framework of a three-year agreement with the institution. But if it were to do that, the country would be left highly vulnerable and virtually without funds, thus repeating the circumstances of 2001, which resulted in the Argentine economy shrinking by over 20 percent, and brought national bankruptcy and poverty for thousands of people.
The unemployment rate still stands at 14 percent, and some 15 million people have been forced into begging or living on the streets. But the IMF is still demanding payment of $700 million, with the first payment to be completed by the end of this year.
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