The waiting game continues as Argentina teeters on the verge of complete social and economic collapse. After two visits in less than a month by IMF Director of Special Operations, Anoop Singh, and high-level meetings at the IMF-Bank Spring Meetings in Washington, Argentina has come away empty-handed. The IMF claims it is offering “tough love” by refusing to release US$9 billion (of a requested US$25 billion) unless Argentina further reduces its deficit and eliminates the various government bonds which now account for over one third of the currency in circulation.
Following the failed talks in Washington came the resignation of Economy Minister, Jorge Remes Lenicov. US Treasury Secretary Paul O’Neill said Remes most likely resigned because “he realized he would be unable to push through the economic reforms the IMF and the United States were requesting.” He was replaced on 25 April by pro-free market Roberto Lavagna, the sixth economy minister in just over a year. In a desperate attempt to reach the ever-rising bar set by the IMF the Argentinian government’s latest plan includes agreements with each of the fifteen provinces to reduce expenditures. This is likely to spell layoffs for over a quarter of the provincial civil service.
Fierce opposition to the IMF‘s strategy for dealing with the Argentinian crisis is coming from all quarters. Speaking to the annual meeting of the Inter-American Development Bank in Fortaleza, Brazil this March, Brazilian president Fernando Henrique Cardoso criticized the Fund and its attitude toward Latin American countries. The usually diplomatic Cardoso accused the Fund of treating Latin American officials as “illiterates”. Former World Bank Chief Economist, Joseph Stiglitz, warns that the IMF‘s “continual use of contractionary policies that exacerbate economic downturns show that they have failed to learn the lessons of East Asia.” According to polling firm Catterberg and Associates, 63 per cent of Argentines think “it is necessary to carry out policy independently of what the IMF recommends”. Alfredo Avelin, Governor of San Juan province, summed up public sentiment: “The only thing lacking for us is to pull down the Argentine flag and replace it with the IMF‘s.”
When ‘Good Parents’ Go Bad: The IMF in Argentina (CEPR, April)