by Gustavo Maranges, published on Resumen Latinoamericano, May 15, 2022
The history between Argentine and the International Monetary Fund (IMF) is more than troublesome. Last week, the Argentine Senate passed a bill aimed to settle the last chapter, which was opened after former President Mauricio Macri (2015-2019) borrowed US$44 billion (90% of the country’s Gross Domestic Product). Both the bill and the loan have interesting details to talk about.
This bill is the second step of the government coalition to pay the immense debt left by the previous neoliberal administration. According to the bill, the debt will be canceled with the hard currency that flew the country and remains undeclared by major enterprises and their owners. The intake of this measure is to hold accountable those who benefitted from Macri’s loan, instead of letting the burden land on pensioners or the state’s social budget, as it happens under neoliberal administrations.
The new measure plans to create a fund to host 20 to 35% of the repatriated hard currency, which should account for US$20 billion. This is the first flaw of the bill since it will only cover around 50% of the payment to the IMF. However, the real question has to be how does the government will locate that money?
The bill also creates a new legal figure called “collaborator”, who is a sort of financial bounty hunter that can be both a person or an institution. These collaborators will be awarded money coming from the above mentioned fund too for their findings. The shares they will get remain unclear, but, judging by the estimated undeclared foreign currency abroad, it might be a relevant amount of money. On top of this, some aspects of the Law on Financial Entities will be changed, specifically in the area of the bank, stock exchange, and tax secrecy, so the state could have more information to trace the money.
This last method entails an additional obstacle because it is necessary to reform an existing law to make the new one work. It is precisely another weakness since history has shown that financial assets are hard to find, especially when it comes to off shore secret bank accounts.
This bill comes bill after the huge discontent generated by the government’s decision to pay back the IMF. President Alberto Fernandez’s administration negotiated an extension of the grace period until 2026 and acceded to reducing the fiscal deficit and inflation. Argentines saw this as treason since they will have to pay for something that most of them did not benefit from. Now, the government is trying to have it both ways, which is really difficult in some cases.
Nevertheless, if this effort turns into law and its mechanism finally works, it will be good news for Argentina. But we must not be too optimistic until we see what happens in the House of Representatives, where it should find more resistance.
The opposition criticized the bill after considering it as a cover for money laundering. There has been general cynicism ever since they passed an openly branded money-laundry law a few years ago and considered it a perfect move to foster economic growth in the country. Some of them have even stated it was not necessary to pass the bill because Argentina already has a law to deal with this phenomenon. But the truth is that they do not want to lose the perks they got when Macri allowed them to loot the country’s finances.
Most of those $44 billion were sold to the rich so they could save their money after Macri started to devaluate the local currency. Inflation shook Argentina even harder after the pandemic, so nobody wants to lose those dollars. The opposition, allied to the most neoliberal sectors of Argentina, is trying to steal from the government and the people all at once.
The IMF Loan and the Neoliberal Strategy
Looking carefully at that monstrous IMF loan, you can see it was all planned to happen this way. Macri knew those dollars were not going to turn Argentina into a more productive and developed country, even though he took it and accepted IMF’s hard conditions. Why did he do it if he knew it was impossible to pay?
The first and easiest answer has already been explained: basically greed; save the wealthiest people from the economic doom they created. Although this loan is not a common one, it is the biggest one in the IMF history, which means that it was carefully thought out before being approved. It means that not only Macri, but the IMF knew Argentina would not be able to pay it back, but that’s no problem since it was the main objective.
Part of the strategy was to take away Argentine’s financial sovereignty and indebt the country to the point of making it again the slave of the masters of neoliberalism. By doing so, they assure returning Argentina to its status before 2006, when Nestor Kirchner paid the whole IMF debt. A country in debt always brings a lot of challenges to deal with and makes everything more difficult, limiting even so called progressive governments to fund social projects.
Leaving a broken country to a progressive government is the best strategy when you know everything is lost, as Macri and his partners realized in 2018. It allows you later to show everyone that there is no viable model beyond neoliberalism. This is probably the worst part of the strategy since it prevents Argentina from developing a successful alternative model while impeding it could help the region to overcome the neoliberal age. Thus, Macri’s loan was destructive in both manners economically and symbolically speaking, so Argentina could not be an example to anybody.
The current government is trying to solve the problems Macri created without getting kicked out of the international financial networks, something that Argentina certainly needs to deal with in the current harsh economic international situation. The neoliberal opposition is hampering the bill because they know it entails risks to their strategy of keeping the country suffocated.
On the other hand, it can work as a remedy to heal the wounds created by Alberto Fernandez’s decision to give in to IMF pressure, and the opposition does not want a united progressive movement either. So, the new bill might have many cons. Maybe it is not the best way to solve the debt problem, but it shows a will to protect the people, and that does matter.
*Featured Image: Alberto Fernandez, ~Reuters