The IMF lost a bet: why repay them?


This article originally appeared in Spanish on Revista Mugica.

Translation by Néstor David Pasteur.

WEconomists tend to regard neoliberalism as a set of economic policies, the disastrous effects of which we know well in Argentina, and that to transcend it, it is enough to adopt macroeconomic policies. Neoliberalism, however, is much more than that. It is a system of political and economic domination which has profoundly transformed daily life in the capitalist countries. Social, political, judicial, media and economic structures have undergone almost irreversible transformations which guarantee the current financial imperialism to which marginalized countries have been subjected, despite the election of populist governments. There is also a strong ideological component instilling commonly held views that emphasize staunch individualism — that is, “run away” —and an extremely conservative fiscal outlook.

While certainly not the only one, the International Monetary Fund (IMF) is perhaps the best-known supporter of this new world order of financial imperialism. The conditions of IMF loans made available to member countries in crisis are still neoliberal economic reforms: financial and trade liberalization; privatization of state enterprises, public services and social security; deregulation of work (“flexibilisation”); and other reforms designed to empower international capital at the expense of workers and the state.

The ongoing negotiations between Alberto Fernández’s government and the IMF are a key example of the sordid elements of this system of domination. The granting of an IMF loan to the ailing government of Mauricio Macri has resulted in a number of serious irregularities that require discussion of its legitimacy, whether it should be repaid and, if so, under what conditions.

The multiple irregularities of the IMF loan

When international financial markets closed the first quarter of 2018, ending reckless debt contracted by the Macri government, Argentina was essentially faced with the reality of default. To avoid this and the inevitable crisis that would ensue, Macri desperately turned to the IMF. The IMF agreed to help, but in doing so committed multiple irregularities, violating its own statutes and standards to accommodate a government “friendly” to Trump and financial imperialism.

What are these irregularities and violations? First, the loan amount authorized in a stand-by agreement was $ 57 billion ($ 50 billion in the original agreement, then increased a few months later by $ 5.7 billion in a second agreement). According to the IMF’s statutes, the maximum amount of a typical stand-by loan should not exceed 145 percent of the annual installment, and the total amount cannot exceed 435 percent of the installment. Argentina’s remittance is 3,187.30 SDR, which in dollars is equivalent to approximately $ 4,460. That is, the loan amounted to a total of about 1,100 percent of the disbursement, well above the maximum limit established in the articles.

Second, the amount of the IMF loan managed by the Macri government exceeded 60% of its solvency, which is also prohibited by IMF regulations stipulating that a country’s aid cannot exceed 50% of the available funds allocated to this. end.

Third, the IMF agreed to lend money to the Macri government even when its own experts – in successive reports prepared before each tranche of the loan was disbursed – judged Argentina’s debt to be very unlikely to ever end. ‘be sustainable. In view of this analysis, it would have been appropriate for the IMF, before granting such an exceptional loan, to ask Argentina to restructure its private debt, a strategy that the IMF had implemented in other countries. Even so, this was not the case in Argentina. Rather, the opposite has happened: faced with the reality of unsustainable debt and virtual default, the IMF lent an additional $ 57 billion.

Fourth, as the IMF disbursed loans to the Macri government, it became evident that the disbursed funds were used to finance capital flight, as happened in the late 1990s. Article VI of the statutes of the IMF expressly prohibits the granting of loans for this purpose. Nonetheless, the IMF continued to disburse every tranche of the loan, effectively financing the flight of capital.

Alberto Fernández himself told the IMF delegation he met as a candidate in 2019, according to the press release regarding the meeting. In an interview with CNN, Macri even admitted that the IMF loan was made so that foreign investment funds could abandon their holdings in Argentine bonds and take their money abroad. The flight of capital and the active role of the IMF in this process are also documented in a survey conducted by the Argentine Central Bank. The report served as the basis for lawsuits, which unfortunately seem to have been overlooked in some law firms.

Finally, Mauricio Claver Carone, the current president of the Inter-American Development Bank and US representative on the IMF board under the Trump administration, bluntly said Macri’s loan to the IMF was a political favor. , since Trump was betting on Macri’s stay in power. In a recent interview, Macri himself said that the IMF loan was to secure a “transition,” that is, get through 2018 and 2019 smoothly and win the presidential elections. In other words, it was a direct contribution to Mauricio Macri’s presidential campaign.

As if that weren’t enough, in a recent interview, Macri had the nerve to claim that he would have fixed the “underlying problem” in five minutes. Many, of course, interpreted this as sarcasm, but in reality it was a very serious admission as Macri also said that the current deadline – nearly $ 20 billion in 2022, for example – had been deliberately agreed with the IMF for fear of a populist victory. In other words, it is explicitly recognized that the infeasibility of the payment plan was supposed to hinder the next administration if it was not that of Macri or another administration sympathetic to the IMF.

And now?

TThe IMF has strongly bet on keeping the Macri government in power by committing multiple flagrant irregularities and violations of its statutes. They played and lost. One might assume that Argentina is in a strong position to negotiate with the IMF. Does the loan have to be repaid? And if so, under what conditions?

The government has sent mixed and, in some cases, worrying signals on this matter. It would seem that the ultimate expectation is the elimination of interest charged to countries which receive loans in excess of the capacity allocated to them and extensions of payment terms. Nothing has been said about the conditions that the IMF normally imposes on any agreement or about the gross irregularities committed. In fact, the fiscalism demonstrated by the Ministry of the Economy, as highlighted by Vice-President Cristina Fernández de Kirchner, is a worrying sign in this direction.

The IMF maintains that a moratorium, the elimination of interest charges or an extension of the term beyond the decade is legally prohibited. Nonetheless, the IMF repeatedly violated its own standards for granting the loan. Now that it’s time to negotiate the refund, can’t they be flexible? The status is flexible when granting loans to governments aligned with economic imperialism, but not when it is time to repay those loans.

We believe that the conditions are ripe for a difficult negotiation, taking a stand based on the irregularities committed throughout the process. Regarding the IMF, do we have to pay? Plagued by irregularities, the IMF loan was a gamble on Macri’s retention in power and an explicit attempt to influence Argentine democracy. Fortunately, the IMF and Macri lost. Since when must the Argentine government and people assume responsibility for the losses caused by such a bet?

Faced with the inflexibility of the IMF, two options present themselves. The first is straightforward: not to pay the losses generated by their failed bet. The second is to pay, but to unilaterally decide on the terms of repayment. For example, zero interest (as a deduction) and a 25-year repayment plan with a six-year moratorium. As they say in Hollywood, take it or leave it.

Finally, even when it comes to paying, it is necessary to check capital flight and loan conditions. The people of Argentina should not have to shoulder a huge debt created by a few and not benefiting the majority. The Central Bank calculated the amount of capital flight. Barely 10% of buyers of currencies (referring to individuals) bought $ 47 billion, or 63% of the total purchase of this type of asset. It is essential to know the first and last names of these fugitives, the process of capital flight and whether it has been duly reported to the treasury. Based on this information, a complete debt assessment process can begin, along with how to proceed.

It is also essential to engage in a substantive debate, with at the center of the criminal charges – which the executive should push to continue sleeping with a clear conscience – against those who not only negotiated the loan, but who have publicly admitted to accepting it. deliberately conditions that would hamper future administrations through explicit violations of the constitution. It is impossible to generate the necessary consensus and reverse the allegedly unfavorable correlation of forces without dealing with urgent conflicts.

If we really want economic independence, social justice and political sovereignty, then these things have to be asserted, because no one is going to betray them. Now is the time to start moving away from economic imperialism imposed elsewhere and exercised by local politicians with foreign business interests.


Alain Ciblis is an economist and professor of political economy at the Universidad Nacional de General Sarmiento in Buenos Aires, Argentina.

German Pinazo is Professor and Director of the Department of Political Economy at the Universidad Nacional de General Sarmiento in Buenos Aires, Argentina.

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