PUBLISHED BY In little more than three years, his government has signed two agreements with the IMF. However, the report also points out that despite the widespread public opposition to the resurgence of neoliberal policies, “the protests have not been able to create a new electoral-political bloc that could channel the dissatisfaction of the people into the upcoming presidential election.”. The first Stand-By Arrangement (SBA) began on December 2, 1958, and the most recent Stand-By Arrangement began on June 20, 2018, and will expire on June 19, 2021 . Yet the IMF sticks to its policies, probably because those policies serve important and powerful interests in the U.S. and world economies. While the movement has emerged largely in response to the hardships and inequality that have grown even while IMF-type policies generated some economic growth, this opposition will gain greater legitimacy as growth is replaced by crisis as is now happening in Argentina. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. In spite of the current difficulties, the policies that the Argentine government has followed in recent years, and the similar policies pursued by the governments of many low-income countries, have delivered substantial benefits to local elites. Since Argentina’s debt trajectory is now clearly on an unsustainable path, some have said the sheer amount of payments due to the IMF in coming months will make the post-election scenario even more difficult for President-elect Alberto Fernández. In October 2001, about 60 days before it defaulted on its debts, Argentina borrowed $8 billion from the Fund. Phone: +256 414 531345 +256 752 366881 Email: [email protected] [email protected]. Argentina is providing one more example of the failure of IMF policies to establish the bases for long-term economic growth in low-income countries. Critics of the IMF-influenced budget proposal have pointed to Argentina’s long and turbulent history of failed IMF adjustment programs, arguing that the agency’s policies allow for the rich to prosper at the expense of the poor. Unsurprisingly, Argentina’s risk premium has soared. two potential outcomes for Argentina’s debt: failing to recognize debt restructuring needs when they are inevitable, raising taxes for the wealthiest Chileans, Center for Macroeconomics and Development, The Millennials Guiding Latin American Economies In Crisis, AQ Podcast: The Hard Choices Facing Brazil's Government. A 2017 report by Friedrich-Ebert-Stiftung, which assessed the role of international financial institutions in reducing economic inequalities, concluded that, “the least impressive performance has been that of the G20.”. In fact the deficit got slightly larger leaving Argentina at risk from anything that might make investors more inclined to pull their money out. Even the countries – like Chile, Peru, and Colombia – that have managed better during Latin America’s decade-long “hangover” have to some degree faced domestic discontent with political incumbents as a manifestation of popular dissatisfaction with inequality and slower improvement in social indicators. Yes, successful development has always been accompanied by extensive international engagement, but through regulated commerce and not free trade. To sum up, I do not believe that the outcome of IMF programs in Argentina and Ecuador can be understood as a lack of learning from past mistakes. But its recent performance has been more uneven. In Chile, President Sebastián Piñera has apologized and pledged a rise in the minimum wage, pension payments, health benefits and electricity subsidies that “will partly be financed by raising taxes for the wealthiest Chileans.” As of today, things still look far from settled. A democratic strategy would not ignore macroeconomic stability, but instead of seeking that stability in government cutbacks it would pursue expanding the government revenues (raising taxes) as a means to provide fiscal balance. It would, for example, push the private sector toward high-technology activity instead of production based on low-wages, and it would seek to provide support for local farmers to maintain their livelihoods and community stability. The currency board system appeared attractive because of absurd rates of inflation in the 1980s, with price increases of up to 200% a month. Changing policies will therefore require changing the balance of power. Furthermore, the dollars that the government sells to prop up the peso this year will be badly needed by the next administration to service maturing debt and interest payments in 2020. And there's a history. The government therefore has no budgetary need to use the IMF’s dollars to buy pesos. (The same context serves the interest of firms based in Europe, Japan, and elsewhere; so the U.S. generally has the support of its allied governments in directing the IMF.). As for avoiding risks entirely, that would only happen if the IMF fundamentally changes its mission – and stops lending to troubled countries entirely. For starters, by endorsing such folly and false arguments, the IMF will jeopardize efforts (including by me) to normalize relations between Argentina and the Fund. That has to be financed by foreign borrowing or investment, which is increasingly challenging at a time when US interest rates are rising. (There is a gap in the graph, where the IMF thought the official inflation figures unreliable). There is, however, a need and an opportunity for the opposition movement to go beyond denunciation of the IMF’s conservative policies and to articulate alternative strategies, strategies that would support a democratic, egalitarian form of economic development.

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