Paraphrasing the song of Los Redonditos, given that “all loans are political”, the Government should not repeat this argument too much to criticize the credit granted by the International Monetary Fund (IMF) in 2018 or to take advantage of the current negotiation.
Basically, for three reasons: because the IMF is an essentially political body, because Argentina has managed to postpone the payment of its debt in the past for more diplomatic than technical reasons, and because the Government could also require international politics to close the agreement. you need before April 2022 if you do not reach a consensus with the agency’s staff.
The clearest case, before the multimillion dollar loan granted to the government of Mauricio Macri for the support of the Trump administration, was the agreement of the end of 2002.
In those circumstances, the staff technician led by the managing deputy director, Anne KruegerIt considered that the conditions were not in place for the Fund to postpone the payment of its debt with the main multilateral credit organization.
Krueger, Ph.D. from the University of Wisconsin and a Minnesota professor of alumni such as Jose Luis MachineaIt did not want to carry the burden of another failed program, as had happened with the one granted by the IMF in 2000, within the framework of the “shield” to the government of the Alliance.
After the 2001 explosion, the academic promoted the displacement of the head of the Argentine case, Thomas reichmann and his boss, the director of the Western Hemisphere Department, Claudio Loser.
His replacements would be the Indian Anoop Singh and the british John dodsworth, a team that he had played a questionable role in the handling of the Asian crisis of 1997 and that he did not know the reality of Latin America.
Thus, Krueger and the managing director, Horst kohler, they took revenge inside the organization by carrying out a “clean-up”, after the failure of the rescue of August 2001 granted in the management of Domingo Cavallo and, at the same time, they provided a signal about the distant attitude they planned to take in future negotiations with the country.
In the Duhalde government, Krueger let the then Finance Secretary know, William Nielsen, which would put all its effort into ensuring that the board of directors led by Köhler did not approve the postponement of the country’s maturities, despite the fact that it did not ask for “fresh money.”
But the Bush administration’s Treasury Department, led by Paul o’neill Y John Taylor, He considered that the country had already suffered too much since the outbreak of the convertibility crisis at the end of 2001.
Furthermore, Washington believed that with the emergence of Lula da silva in Brazil and Hugo Chavez in Venezuela, it was better to contain Argentina among its allies.
Krueger screwed up with the minister’s tour Roberto Lavagna around Europe to convince IMF shareholders and called Nielsen to express his displeasure. “I am opposed to the agreement and therefore it will not come out”The hard work warned him, while the Finance Secretary carried out complicated maneuvers with his car in the Belgrano neighborhood, to avoid a protest demonstration of the piquetero movement and to be able to reach the minister’s house with the intention of celebrating Christmas Eve. At that time, sovereign debt stood at USD 137,320 million.
After suffering in 2002 an inflation of 40%, an increase in poverty from 35.4% to 54.3% and a recession of 11% -which in accumulated terms stretched to 20% since 1998- the threat of Krueger was half done.
A whole year after reneging and kicking, the IMF board agreed to leave its traditional canons and sign an eight-month program with Argentina to refinance USD 6.87 billion in exchange for unambitious goals in fiscal matters and structural reforms.
In a case that seems to have no other antecedents in the history of the organization, the approval —which was achieved with the vote of the majority of the directors and the abstention of the Netherlands, Belgium, Sweden and Australia, among other countries— occurred, although the staff formally proposed to the managing director to recommend the opposite decision to the board.
Furthermore, the report that Krueger prepared for the meeting ruled that the blessing would allow Duhalde to obtain “advantages” to perpetuate himself in government, a premise that turned out to be incorrect.
Why would a “club” that boasted of being so strict alter its principles to rescue a country that supposedly did not comply with its rules?
Perhaps the clearest answer has emerged from his gut: the agreement was signed out of fear of the unknown. Faced with a government like that of Duhalde that claimed to have met all the requirements to aspire to a new refinancing of its debt and a staff that, with extreme rigidity, raised the opposite, the members of the entity’s “directive commission”, The G7 countries wondered what could happen if Argentina completely shed the tie of the multilateral credit organizations. What consequences would it have for the country and for the matrix of the institutions that emerged from Bretton Woods?
In 2002, in the midst of the crisis, Argentina paid some USD 4,500 million to the IMF, the World Bank and the IDB, although it accumulated a total level of arrears of USD 11,842 million due to the partial default.
The main auditing body in the world was not willing for the third largest Latin American economy to continue accumulating unpaid bills and generate a strong incentive for other members to follow the same path of rebellion. And, for this reason, more political than economic, it agreed to close an emergency agreement, which could serve as an example for the negotiation that the Government must close in the next three months.
KEEP READING: