Much of Argentina’s current economic crisis is home-made. But it is also the result of a misguided policy by the country’s international creditors headed by the IMF. The ground rock of Argentina’s huge mountain of debt totalling US$ 132 billion were the loans taken up in the 1970s by the military dictatorships of those years. When the Alfonsin government took office in 1983 it felt compelled to acknowledge the creditors’ claims stemming from illegitimate business with the military dictatorships, and in view of the abysmal situation of public budgets it declared a moratorium on the country’s debts. The IMF and the international donor community, however, did not react with debt relief but with rescheduling, which, in the interests of the creditors, shifted the problem to the future. The consequent compulsion to save and a high-interest regime fostered a policy oriented on financial speculation rather than on productive investment, and with it corruption and cronyism among Argentinian politicians and the country’s finance oligarchy.
The restrictive economic policy under President Menem (1989-99) worsened the debt crisis, and the joint responsibility of the IMF is also to be seen against this background. It did not only begin in the last months of the de la Rúa government, when it became clear that the neo-liberal cycle ("sweet money" - structural adjustment - economic crisis) would repeat itself. Even the pegging of the peso to the dollar introduced in 1991 and the clinging to it were IMF ‘remedies’. The debt crisis extended itself to the collapse of the Argentinian economy when Brazil, Argentina’s leading trade partner, devalued its currency and Argentinian exports became so expensive that they came to a standstill.
For a long-term solution to the Argentinian debt crisis a fair and transparent procedure would be necessary. True, Anne Krueger, the IMF deputy director-general, has basically spoken out for such a procedure, but she wants to take three years to implement it - which will be too late for Argentina. It is to be feared that the IMF and the international creditors will once again solve the current crisis only temporarily and at the same time lay the foundation stone for the next one. The Argentinian government, therefore, is well advised to resist the hard line not only of the international creditors but also of the country’s finance oligarchy - which hold a great part of the loans to be serviced - and take its own initiatives. A lasting solution to the Argentinian crisis calls for far-reaching debt relief.
It is true, the devaluation of the peso by the transitional government under President Duhalde does, in fact, involve great risks and is connected with costs which to date the country’s wage-earners have always borne via hyperinflation and the dropping of real wages. But the examples of Chile at the end of the 1980s and Brazil in the 1990s have shown that things do not have to be so, that a currency can be devalued and productive investment promoted without - as the IMF fears - triggering galloping inflation. With the help of supporting measures such as controls on the movement of capital, the goal of economic stability can be achieved. But the precondition for that is far-reaching reforms in the political sector. Thus the power of Argentina’s provincial governors and their federal representation, the Senate, must be limited. Too often in the past, reform approaches by Buenos Aires have been boycotted or thwarted in the provinces.
It has not yet been decided whether Argentina, as President Duhalde announced, has really come to the end of its neoliberal epoch. The clincher is how the IMF and the international creditors will behave. Either they start the next neoliberal cycle, aimed at maintaining the country’s ability to service its debts, or they admit their share of the blame and support an investment policy which will create jobs. A radical reform of domestic political and economic structures and extensive relief for its intolerable foreign debts are the conditions for a fresh start in Argentina.
Dr Pedro Morazán is a scientific researcher of the Institute for Economics and Ecumenics (Südwind), and spokesman of the NGO alliance Erlassjahr.de
