Argentina is forging a new crisis under the counsel of the IMF

Argentina is forging a new crisis under the counsel of the IMF

President Mauricio Macri (right) asked, in 2017, to be judged on his success or failure in reducing poverty. Elections are to be held later in 2019. Over the last year and a half, poverty has risen from 28.2 per cent to 35 per cent. In 2018, Macri and the IMF – headed at the time by Christine Lagarde (left) – signed the biggest loan deal in the history of the Fund: US$56.3 billion (spread over three years).


It is election year in Argentina and ‘crisis’ is the word on everyone’s lips.

Candidates linked to the government are battling to distance themselves from the president – the first non-Peronist for over a decade – and his adjustment plan.

The justice system is in the process of deciding whether to jail his predecessor for corruption, and the Peronist opposition is arguing that he is the victim of political persecution.

The IMF admits that it has underestimated the scale of the crisis but is sticking to its economic formula.

The country risk indicator, reserved for countries in difficulty, is given as often as the weather forecast, while the constant outflow of foreign currency bears witness to the fact that Argentina’s rising external debt is financing capital flight, at untenable rates of exchange.

The recession is biting hard, and the opposition is calling on the population to fight against the economic programme. The government, meanwhile, is asking the country to have faith that the measures underway – structural adjustment, labour market flexibilisation, economic liberalisation, corporate tax cuts – will eventually restore market confidence. The right is also criticising the government, accusing it of being slow, ineffective and a ‘light’ version of its predecessor, its main election rival.

But, in December, just after its crushing electoral defeat, the government will restrict access to bank funds, drastically worsening the crisis. There will be protests and repression. Not long after, the Peronists – back in power once again – will stop all debt payments and head off in exactly the opposite direction, without the IMF.

The year in question is 2001. But what happened back then bears a striking resemblance with what is happening right now in Argentina, in 2019, and at other times in the past, with the marches and the neoliberal and interventionist counter marches often seen in the run-up to a crisis. It is a re-run of events worthy of the country that produced Jorge Luis Borges and his literary obsession with the concept of eternal return.

Argentine crisis, the 2019 model

The current crisis has been built on the mistakes and questionable decisions made by the Macri government, in power since 2015, and its ‘neoliberal’ agenda – adjustment, deregulation, economic liberalisation, tax cuts for powerful economic interests – comparable to those that caused the 2001 crisis, the default and the travesty of five presidents within two weeks, argue critics like Demián, a 38-year-old psychologist, dismayed by the number of patients who are having to stop their treatment because they can no longer pay the bills.

The Macristas hold a different view on which government is to blame (for the current situation). For 45-year-old Laura, the wife of a corporate lawyer, the crisis is the “legacy” of the “populist”, “corrupt” and “interventionist” government of Cristina Fernández de Kirchner (2007-2015).

The divide between Macristas and Kirchneristas is also carved by inherently controversial issues such as the legalisation of abortion – rejected in 2018 – equal marriage – approved in 2010 – or the subsidies paid to the poor – accused of being ineffective or being used as political tools – policies rejected by Laura, and Macristas in general, and supported by Demián and most Kirchneristas. The political landscape has long been divided between currents that use hostility towards the other side as the foundation for their support, to the extent that a major rift has been chiselled, pitting friends and relatives against one another.

For the few outside of this dichotomy, the blame lies with both governments: the simultaneously recessionary and inflationary austerity of today, and the regulatory distortions of the past, which turned a progressive experience – be it deemed real, partial or simulated – into an unsustainable one.

For 48-year-old Martín, a researcher at the University of Buenos Aires, the Macristas and Kirchneristas channel their energy towards confrontation rather than development.

Either way, the picture is grim. Unemployment rose to 10 per cent, after 13 years, one in every three Argentinians is poor, and industrial activity fell during the first quarter.

Trade unions such as the CTA-Autónoma see the decline in the social situation as part of a deliberate move to undercut workers’ wages, rights and bargaining power. They are proposing, as shock therapy, a reduction in working hours, like that adopted by France’s Socialist government in the year 2000, greater trade union democracy and a reversal of the adjustment measures.

Unemployment, recession, and procyclical adjustment (that moves in the same direction as the recession and intensifies it), have, for years, been accompanied not by deflation, as forecast by economic theory in the case of such imbalances, but quite the opposite. The interannual inflation rate in May was 57 per cent. For most pensioners, like 89-year-old Rosa, who worked as a secondary school teacher for 40 years, their income only covers half of the basic basket of goods.

The government claims that the high rate of inflation is due to insufficient neoliberal reform, but there is a strong correlation between the inflation and the increases in public utility tariffs and the high interest rates – both controlled by government economic policies – which push up production and consumption costs, and the excessive price increases in sectors investigated for anti-competitive practices, like supermarkets.

During the first three years of the Macri presidency, public utility prices were increased by more than 10 times above inflation and the devaluation, with the excuse that the tariff rises were long overdue.

Whilst at political level, the government’s priorities are being called into question – as they seem to benefit the economic interests concentrated in the hands of a few – at economic level, the macroeconomic disruption created by a fall in demand and production is also raising serious concerns.

The fact that the rise in utility prices is partly responsible for the inflation in Argentina has been recognised by the country’s Central Bank, an institution under the control of the Macri government, and whose powers and actions are increasingly subordinated to the IMF. Despite the Central Bank’s diagnosis that the inflation is not caused by the overheating of the economy, fiscal and monetary adjustments that nonetheless correspond to such a scenario are being applied, with interest rates that are currently the highest in the world. These interest rates, like adjustment, strengthen the recession and increase production and consumption costs, contributing, like the utility price hike, to the current scenario, that of stagflation, an abnormal combination of recession and inflation.

The return of the IMF and Peronism’s comeback

The IMF cast doubts on and then accepted this monetary policy. Like the same old tango played over and again, former IMF chief Christine Lagarde admitted that the Fund had underestimated the scale of the crisis but never really questioned the policies implemented, their recessionary effects or the rise in poverty since the signing of the loan agreement; an exact repeat, almost, of the low-level of self-criticism regarding its role in the 2001 crisis, which broke out under the “close monitoring and assistance” of the IMF and with the same policies imposed on its orders.

In what seems like a replay of the events that led to the 2001 crisis, the IMF is advocating or endorsing austerity policies in recessive contexts, combined with uncompetitive exchange rates, promoting a deepening of the recession and the level of debt.

In 2003, under the government of Néstor Kirchner, Argentina broke free from the tutelage of the IMF and went on to experience several years of high growth, enjoyed more than half of the budget surpluses seen since the year 1900 and paid off its debt to multilateral organisations. The IMF acknowledges the fact that its reform programmes increase inequalities and recession, and yet continues to press ahead with the failed policies it promotes, as denounced by the International Trade Union Confederation.

In 2007, Néstor Kirchner was succeeded by Cristina Kirchner, his wife, but also a long-standing politician, who was re-elected in 2011. The errors made during the second phase of Kirchnerism –the exchange rate and trade policy distortions, the falsification of statistics – led to a return to high inflation and devaluation and a fall in growth and the budget surpluses, problems that Macrism denounced and then, ironically, intensified after coming to power.

With regard to this year’s elections, whilst Macrism’s main weakness is the socio-economic indicators, that of its powerful rival, Peronism – led by its most progressive current, Kirchnerism, which governed from 2003 to 2015 – according to its critics and recent judicial rulings (which have already imprisoned ten former top officials and could do the same with the former president, Cristina Kirchner), is the high level of organised corruption.

Her defenders are arguing that she is the victim of a complex web of political persecution, similar to that allegedly waged against former president Luiz Inácio ‘Lula’ da Silva, in Brazil, currently being investigated by the justice system.

Cristina Kirchner, showing greater political initiative than the government, chose to stand as the vice-presidential candidate, safeguarding the formula (candidates for president and vice president) against her possible imprisonment and uniting a divided Peronism, leaving the presidential candidacy to Alberto Fernández, a former leader of her cabinet who went on to distance himself and to become a critic within the Peronist movement.

Kirchner’s act of ‘humility’ was not emulated by Macri, despite speculation that he might leave his post to María Eugenia Vidal, governor of his party in the crucial province of Buenos Aires and more popular than he. Macri is going for re-election, despite being associated with the crisis and also being suspected of corruption, and is running with Miguel Pichetto, former leader of the Peronist block in the Senate, as the vice-presidential candidate. According to a poll carried out by Ricardo Rouvier & Asociados, with 35.2 per cent of voting intentions, Macri is behind Fernández, who has 39.6 per cent for the first round, in October, but the almost certain second round, in November, is forecast to end in a technical tie similar to that which led Macri to power in 2015.

Peronism, also a cultivator of the eternal return, to the point that ‘Volveremos’ or ‘We Will Return’, was its battle cry during the 25 years it was banned, has made a comeback, and has been incorporated within the three main presidential teams.

Aside from the bulk of the Peronist party being lined up behind Fernández and Kirchner, and the fact that Macri’s second is a well-known Peronist, the candidate in a distant third place in the polls, Roberto Lavagna, is a Peronist who served as economic minister under two presidents, and succeeded in pulling Argentina out of the 2001 crisis, giving way to the longest series of consecutive growth and budget surplus years since 1900. Lavagna, running for a coalition of progressive parties, bringing together radicals and dissident Peronists, is presented as a national unity candidate and one not marred by corruption charges, but is given very little press – almost as little as the left. For some, like Sergio, a 45-year-old journalist, the media and corruption are key factors in driving the polarisation in the country.

Accordingly, more coverage is given to José Espert, an economist known for his strong media presence and his aggressive discourse, who is pushing the agenda of the most powerful economic interests, with an inflammatory ‘common sense’ campaign, making full use of social media platforms.

The polarisation is likely to persist, but in the context of crisis and the simultaneous discrediting of candidates on both sides of the rift, the election could go any way. You can come back from anything, except ridicule, as Perón used to say, but Argentina may be testing its capacity to return.

This article has been translated from Spanish.