The IMF Attempts a Final Cut in Argentina

At the end of last month Argentina and the International Monetary Fund announced they reached an agreement that will, among other things, increase the institution’s total loan package to the country to USD $57.1 billion. Business-friendly President Mauricio Macri sought the IMF’s help in May — despite overwhelming opposition from the Argentine people — after a precipitous decline in the value of the Argentine peso.

The loan is a “stand-by credit facility” (“SCF”), a short-term loan designed to help a country overcome temporary balance of payment problems and stabilize its currency. As with other IMF programs, Argentina must meet certain conditions to remain eligible for an SCF including, at a minimum, “a set of policies that will help them achieve a stable and sustainable macroeconomic position in the short term.”

The IMF says the policies it hopes to implement in Argentina are aimed at “restoring financial market’s confidence” and cutting government spending on social programs and energy subsidies, fighting inflation and increasing central bank independence. But the IMF’s policy prescriptions, standard for the institution, have historically been met with tremendous resistance in Argentina.

The county’s last military dictatorship, which ruled the country from 1976 to 1983, called itself the “national reorganization process” (proceso de reoganización nacional). The junta pushed the country to cater to international financial markets, all against a backdrop of state violence and skyrocketing inequality.

The dictatorship was only partially successful in implementing its neoliberal goals — Argentina is still home to the strongest labor movement in Latin America and a resilient and militant civil society that proposes a distinct vision for the country, one that’s at odds with the future that the IMF seeks to create.

In order to satisfy the IMF, Macri’s task is not so much to cut subsidies or wages to obtain a certain level of inflation — those cuts were made a long time ago. To be successful by the IMF’s standards, the president must destroy the foundation of Argentine civil society — seen by financiers as a truly unique source of instability — in a way that the military governments of the twentieth century never could.

Between 1975 and 1977, the year after the military took power, average real wages in Argentina were cut in half and they have never recovered. The cuts were deliberate. Addressing the nation shortly after the coup, Economic Minister José Alfredo Martinez de Hoz stressed that wage negotiations and scheduled increases were to be frozen and replaced by periodic increases dictated by the military government, based on “increased global economic productivity” as opposed to local conditions.

The wage structure of the economy was permanently changed. The pro-worker Kirchner government of the 2000’s raised wages, but even at their post-dictatorship peak, wages never commanded a larger share of the national income than in their lowest years between the 1940s and the dictatorship.

In light of these tremendous unrecovered losses during the dictatorship it’s easy to understand popular resistance to further cuts. And social movements in Argentina still hold a degree of veto power over unpopular policies that is unique in the Americas. Since the restoration of democracy in 1983, every non-Peronist president has been removed from office without completing their term due to popular unrest.

Thanks in large part to this organized power, Argentines continue to enjoy many of the tremendous policy gains won by popular movements. Argentina offers free college education to all and some of the least expensive, highest quality post-graduate education on the continent. While many Argentines receive supplemental health coverage through their employer, free hospitals provide medical care to all who visit. Families receive a universal cash benefit per child, and subsidies keep energy and transportation costs relatively low.

Undergirding all this is a national collective bargaining system that covers more than half of the country’s workforce under union contracts. This vision of society has been built and maintained over the opposition of the country’s traditional agrarian elites, who do not require a robust internal consumer market or a skilled labor force in order to produce for export, and international financiers.

The IMF in particular has always faced popular opposition in Argentina. Nearly every other Latin American country joined the institution by 1946. But Argentina did not enter until a decade later after a military coup toppled the government of Juan Perón, whose movement bristled at the loss of economic and currency independence that membership in the Fund entailed.

This contention around the IMF played out for decades, most saliently in 2003 when, while leading the country out of a deep depression that began in 1998, President Nestor Kirchner made history by rejecting the IMF’s crippling policy demands and defaulting on Argentina’s loans — something that no middle-income country had done at that point. His move paid off, and the Fund rolled over the debt. In 2006 Argentina paid off its entire outstanding debt to the IMF at tremendous cost, freeing itself of the institution’s oversight. Though the country paid a substantial fiscal cost for its independence, 70 percent of Argentines supported the move.

Once again Argentines are preparing to resist the IMF and the Macri government’s cuts. On September 25th, the country’s unions held their fourth general strike during Macri’s three years in office, shutting down the country’s schools, banks, transportation, production and healthcare services in protest of the government’s economic policies and the demands of the IMF.

Argentina is scheduled to hold elections next October, and — assuming that Macri is able to serve out the remainder of his term — he will be running for office in the midst of a deep recession. Mainstream commentators predict following the IMF’s policies could potentially spell doom for the administration.

In this political climate, judges have issued a barrage of legal charges against former President Cristina Fernandez de Kirchner, who remains a standard-bearer for the opposition. Mirroring the impeachment of Dilma Rousseff in Brazil, the Argentine courts may hand the right a degree of power they could not attain at the ballot box.

At a time when the left and workers’ movements are in retreat across South America, Argentines are at a decisive movement for their democracy. When international financial markets and the IMF decry Argentina’s instability, they’re not simply referring to the country’s interest rate policies or energy subsidies. They’d like to stand against its people and their capacity to defend their vision of a different Argentina.

In order to achieve the kind of stability that investors are looking for, Macri and his allies seek to extinguish that vision, but ongoing civil resistance, economic decline and the upcoming elections present opportunities to ensure they do not succeed. The investors are, after all, correct in their analysis: within the lifetime of most Argentines the country has toppled governments, defied the IMF and won, and there is good reason to believe they can do it again.