On the evening of Dec. 19, 2001, the Argentine masses responded to the astonishing site of President Fernando De La Rua fleeing the presidential palace in a helicopter.
“Get rid of the lot of them!” roared the indignant crowds in Buenos Aires’ main square, the Plaza de Mayo.
Once hailed by the International Monetary Fund as a poster-child for obedience to its formula of structural adjustment, austerity and neoliberal reforms in return for new loans during the 1990s, by 2001 the Argentine economy had collapsed and was on the verge of the largest public debt default in history (until Greece), totalling US$132 billion.
Half the population descended into poverty, including swathes of the middle class, a quarter were left unemployed and depositors had their life-savings confiscated as the banks went under. Amid the chaos that engulfed the country, millions of citizens were in revolt in city centers nationwide, seeking to rebuild grassroots democracy through neighborhood assemblies, worker-run factories and participatory budgets.
But aside from the banks, politicians, judicial system, political parties and the rest of the established order whom the population wanted to get rid of, a Latinobarometer poll at the time indicated that the IMF featured second only to “the government” in terms of whom the Argentines deemed most culpable for having caused the economic and political crisis.
Once the insurrectionary spirit of those extraordinary times had been placated by the election of a new left-leaning government led by President Nestor Kirchner in 2003, the remaining US$10 billion debt to the IMF was promptly paid off and the institution was soon expelled from the country.
Following the default, two-thirds of the outstanding debt was written off. Combined with favorable global commodity prices, prudent internal investment and Chinese demand for Argentina’s soya exports, the economy went on to become the fastest-growing in the Western Hemisphere, lifting 11 million people out of poverty while prosperity returned for many. Despite the initial pain and its immediate pariah status from the global markets due to its refusal to cede to the failed and detrimental IMF recipe, debt default proved the right thing to do.
Yet in September 2016, the IMF was back in Argentina to inspect the accounts. Invited by conservative, neoliberal President Mauricio Macri, who came to power in December 2015, the official brief of the IMF’s economists is “to assess the sustainability of the country’s fiscal and monetary policies.” In practice, its return is already stoking misery for Argentina’s embattled people.
In anticipation of the visit and eager to preempt its demands to liberalize the economy and deliver austerity in order to attract foreign investment and loans (“returning to the world” in Macri’s words), the president’s “shock doctrine” strategy to abruptly reverse many of former Presidents Nestor Kirchner and Cristina Fernandez de Kirchner’s policies, has rattled multiple sectors of society.
Firstly, currency controls were removed, provoking a sharp devaluation of the Argentine peso and provoking a punishing 54 percent increase in the cost of living. Secondly, export taxes on grain, beef, soya, mining and fish which had been used to fund both public spending and debt repayments and also ensure food sovereignty for the population were either slashed or ended.
Thirdly, mass public sector layoffs have commenced as 67,000 civil servants were fired and 200,000 redundancies made. This has brought unemployment to nearly 10 percent with a further 11 percent underemployed according to the National Institute of Statistics and Census of Argentina. Wage suppression has also seen average salaries decline by 12 percent in 2016.
Fourthly and perhaps most controversially of all, Energy Minister Juan Jose Aranguren announced that he would halved the US$16 billion subsidy bill. Gas tariffs have since quadrupled for most consumers, while those for electricity have increased six-fold in what has become known as the “Tarifazo.” As the policy is currently the subject of a legal challenge, 1.4 million citizens fell below the poverty line in the first four months since President Macri took office, according to a recent report by Argentina’s Social Debt Observatory, and that is before the impact of the utility price hikes are even included. The link between the IMF’s visit and increased hardship for the overwhelming majority of the population is clear.
Yet the specter of the IMF’s reappearance in terms of resurrecting a public indebtedness model for the country and how this is serving the interests of global finance against those of its poor and middle class must also be exposed.
Indeed, other than its valiant refusal to cede to the demands of the U.S. vulture funds which had been holding Argentina’s economy ransom after having successfully sued the state for extortionate profits on bond holdings in the U.S. courts, the previous Kirchner governments (2003-2015) never stopped being “serial payers” of the debt.
Having transferred sums of US$10 billion, US$5 billion and US$677 million to the Paris Club, to compensate REPSOL for its part-nationalization and for compliance with the International Center for Settlement of Investment Disputes rulings respectively (in addition to the US$10 billion it had already paid back to the IMF), a more principled stance would have been to suspend payment to all investors or speculators in the national debt and instead directly challenge its dubious legitimacy due to its odious origins dating back to the brutal 1976-83 military dictatorship which disappeared 30,000 Argentine citizens.
While a bicameral commission was established in 2014 to investigate these origins (needlessly duplicating Judge Ballesteros' “Olmos Case” findings in 2000 which already found the debt to have been accumulated “illegitimately, illegally and odiously”), it lacked teeth and was unable to even recommend that a full audit be conducted, let alone defaulted.
However, what we are witnessing under the Macri administration is profoundly more serious. Its economic policy blueprint represents nothing less than Argentina returning to the same fiscal deficit model that was financed by external debt and the associated instability it generates that operated in the 1990s under IMF tutelage.
The advantage now is that the proportion of public debt held by foreign creditors in foreign currencies is considerably lower (a positive legacy of Kirchnerism), while in recent months there has been a notable increase in loans from different investment funds overseas. Foreign capital has displaced large domestic exporters as the prime source of foreign currency accumulation in the power structures of Argentina’s economy, creating a path for progressive indebtedness which is masking creeping capital flight.
In a further move that seeks to satisfy global finance, the vulture funds were paid back on grossly unfavorable terms representing a profit of 1,270 percent. While ending the country's 2014 “technical debt default” which was arbitrarily declared by credit-ratings agencies, the move was paid for by issuing the largest bond sale of any semi-periphery country in the last 20 years. This yielded a healthy 7.14 percent return for the speculators involved and added US$ 15 billion to the public debt.
Indeed, finance capital’s renewed structural centrality is also evident in recent state spending agreements. The figures, taken from the Central Bank of the Republic of Argentina are mind-blowing. Private loan funding to service both debt repayments and for ongoing public sector projects for has increased tenfold in the first six months of the Macri government in 2016 compared to the same period in 2015. Such deals are tied to the vulture funds agreement and the associated bond issue.
Foreign currency accumulation achieved through 1) indebtedness and financial speculation; 2) the remittance of profits and dividends abroad (restricted by the Fernandez' administration) which has increased 13-fold year on year; and 3) interest payments which have more than doubled in the same timeframe, mean that current annual payments to foreign capital equate to US$10 billion. This will only increase in the foreseeable future. While the privilege of re-joining the IMF will mean that Argentina will have to indebt itself by a further US$400 million, the 2016 budget approved by congress will add US$40 billion overall to the 2015 debt.
The austerity regime that the government is imposing as the IMF peers over the president’s shoulder is being conducted in the name of “increasing competitiveness” — a euphemism for the growing profits for the large overseas financial conglomerates that are enveloping the country. Those who are suffering from this “renewed indebtedness model” are average Argentines.
However the current project is financially unsustainable. IMF intervention, once its nature is exposed, will surely prove unpalatable to the people. The havoc that it reaped in Argentina and across Latin America two decades ago is still fresh in people's memory. There may be a heavy political cost to pay for the current government if Argentines decide that the time has come to “get rid of them all” again.