Without much shame, the government published “The 10 truths of the agreement with the Fund”, which gives the impression that it was written by the expert communicators of the International Monetary Fund itself, with a lot of experience in disguising the consequences of its plundering “agreements”.

By Jorge Marchini and Aram Aharonian

The Decalogue seems to outline a heroic deed, which leaves a lesson for the whole world: there is no other way than to abide by the IMF’s conditions. In other words, “abandon all hope”. “We had an unpayable debt and now we have a reasonable agreement. With this agreement we can grow, honour our obligations and make Argentina fairer,” he says. Short sentences, without further explanation: disdain for the ability of citizens to understand what it is all about, a destiny that cannot be postponed.

According to the current schedule, Argentina must pay 19 billion dollars by 2022, a figure it cannot afford. For this reason, the Extended Facilities programme that the government intends to agree with the IMF postpones repayment of the loan until 2026, when someone else will be president.

Experts are particularly struck by point six of the government’s new decalogue defending the IMF agreement, which states that it is based on “the world’s confidence in our capabilities”. What is remarkable is that exactly the same argument was used by the IMF to justify the record credit of 57 billion dollars to Argentina to the government of Mauricio Macri.

The government is resorting to the same arguments that in 2018 were put forward by the IMF to justify “support for Argentina”. Could it be then that the IMF agreement at the time was not as bad as the president and the vice-president have made it out to be in countless speeches?

Or what many fear: that the current government has decided to go down the same route as Macri’s neoliberal administration, but much more harshly, as the IMF auditors of the previous credit indicated as a criticism.

One can understand that a government that defines itself as Peronist, as progressive, has a hard time finding 10 justifications for this turnaround. The first point, for example, “to pay, first you have to grow. That is why today we have reached an agreement that will allow us to sustain growth and the path of development with inclusion”. Reality belies the above: first we pay and then we will see if there can be growth and/or development.

And he continues with his fallacies and half-truths: It is an agreement that we made preserving the interests of Argentines, that does not restrict or condition the rights of our pensioners. It is an agreement that protects investment in public works, which is one of the pillars of economic recovery and job creation. Finance Minister Martín Guzmán added that there would be “no labour reform” and “no privatisation of public companies”.

“We negotiated in a sovereign manner, that is why this agreement does not impose us to reach zero deficit, nor does it oblige us to carry out a labour reform. It does not impact on public services, it does not relegate our social spending and it respects our plans for investment in science and technology”, states the fund-monetarist decalogue signed by the Argentine government.

And then it throws the ball out: “The debt was taken irresponsibly by the Macri government and today we, as we have done on other occasions throughout history, take charge of this problem and solve it. Agreeing means being able to access new financing to continue growing and for this recovery to reach every home and every family”.

The Argentine government’s dialogue with the IMF had become the trigger for numerous fights even within the ruling coalition, Frente de Todos. According to the press, Vice-President Cristina Fernández de Kirchner headed the sector most reluctant to accept any conditions from the Fund that would imply an adjustment.

“The president promised to send the agreement with the IMF to Congress. I wish that in the past the size of the debt had passed through this Congress to protect our democracy. Perhaps it was cowardice that they did not send the bill here,” said Deputy Máximo Kirchner.

After the agreement on a new programme with the Fund, the agreement will have to be ratified by Congress, where the opposition’s victory in the legislative elections on 14 November left the government without the control it had in the Senate – despite retaining a majority – and with only two more legislators than the opposition Juntos por el Cambio (Together for Change) in the Chamber of Deputies.

Almost a year ago, International Monetary Fund (IMF) managing director Kristalina Georgieva said it was “a very important moment” for Argentina to implement policies for a successful restructuring of its debt, while Pope Francis warned that insensitive solutions can harm societies.

Appearing unexpectedly at the Vatican conference at the Pontifical Academy of Social Sciences, which included US economist Joseph Stliglitz, Argentinean finance minister Martin Guzman and the head of the IMF, the Pope called for “new forms of solidarity” to help indebted countries, noting that “we are not condemned to universal inequality”.

Francis added that a country’s debt policy “can become a factor that damages the social fabric”. Today, analysts wonder what influence the Argentine pope had on the agreement that was finally signed with the IMF.

Stiglitz, Guzmán’s mentor, said at the time that the current Argentine debt crisis gave the world an opportunity to “demonstrate that there is an alternative approach to the one that has repeatedly failed in the past” and called for “a framework that both appeals to notions of economic rationality and to our sense of social solidarity, a common humanity, which at this moment in history seems so under attack”.

The sector of the Frente de Todos that answers to President Alberto Fernández presents the agreement as an achievement and celebrates because “it does not include adjustment policies”, as Minister of Economy Martín Guzmán said. This statement clashes with reality when, at the same time, it is anticipated that there will be increases in public service tariffs, a significant new devaluation of the peso and an increase in bank interest rates, measures that will hit the population hard. What is the truth?

For the time being, there are those within the ruling coalition who are not very happy. Alicia Castro, former ambassador to the UK and Venezuela, warned that “only someone who is very fanciful can think that after this the president will be re-elected. We are experiencing this as a duel, with great concern”.

He deeply regretted that the government did not want to receive the proposal to set an example by bringing the IMF to account before the International Court of Justice, which was the opportunity to say ‘enough’, to obtain better conditions in the negotiation.

With the agreement, the Argentine people are being forced to pay for a swindle,” said Castro, who described as “unethical” the attitude of “saying that there will be no adjustment, that zero spending will be from 2025” because “they are rejoicing because obviously this will happen during the administration of another government,” added the former trade union leader.

The origin of the debt

Why did the debt originate and what was done with it? Everyone knows that Argentina is a country rich in resources of all kinds and has a large and skilled workforce, with a high level of education and training, which can be further trained.

The previous government’s foreign debt was generated when it decided to take on foreign currency debts to cover the 2015 fiscal deficit, which was in national currency and approximately 4.5% of GDP, some 216 billion pesos. And dollars were taken for this, explains economist Horacio Rovelli.

To this must be added the payment to the vulture funds led by Paul Singer, for 9.3 billion dollars, plus the fiscal deficits caused by the reduction of withholding taxes on soya and derivatives and the elimination of all other export duties, plus a plan to reduce income tax that generated a fiscal deficit that was also covered by placing government securities in foreign currency, including a 100-year bond.

The foreign currency came in and, as the National Administration had to meet domestic expenditure in pesos, it gave the foreign currency to the Central Bank (BCRA) and the monetary authority exchanged it at the official rate for pesos, which the BCRA, based on the financial reform of 1977, also sold at the official exchange rate to private individuals, mainly large companies.

And as the neoliberal government raised the maximum amount that could be bought and even eliminated that limit in September 2016, it allowed 100 companies to buy 24,769 million dollars in the four years of Cambiemos’ administration.The other problem is that those 100 companies did not pay income tax on the amount they bought.

None of these 100 companies managed to pay half of the dollars they bought, which means tax evasion and capital flight for the buyers and non-compliance with the laws, including money laundering for the banks, which sold these dollars from the BCRA and did not take the necessary precautions regarding the origin of the funds (demonstrated because they did not declare profits or any other type of income for the 24,769 million dollars).

At the same time, the Macrista government, which prioritised the negotiation of the foreign debt over the promotion of the national economy, production and employment, obtained a grace period with the private holders of debt securities until the second half of 2024. The interest will be paid.

But with the International Monetary Fund, the debt that was taken on without prior authorisation from the Congress of the Nation, was not only validated from the beginning of the current government of Alberto Fernández, but even the first two instalments of capital were paid which, added to the interest, meant disbursements of 6,359 million dollars in the first two years of his administration.

And on Friday 28 January 2022, interest of 731 million dollars more was paid and an agreement was reached that must be endorsed by the National Congress next March.

The National Administration’s public spending is 22.1% of GDP, one of the lowest in the last 75 years, and they want to bring it down to 18.7%, which is clearly impossible, said economist Horacio Rovelli.

“Then they are going to demand that natural resources be sold at a vile price. They are coming for the Argentine subsoil and for what the country grows, in order to buy it at a bargain price. For this they are going to use the dollars that they leaked during the Cambiemos administration and those that the Central Bank “happily” sold them in the last two years, during this government, he added.

The loan to Macri did not help the country, says the IMF

The IMF admitted that the loan to Macri failed to restore market confidence or reduce fiscal imbalances. “The programme’s strategy and conditions were not sufficiently robust to correct Argentina’s structural problems, including fragile public finances, dollarisation, high inflation, weak monetary policies, a limited financial sector, and a narrow export base,” the technical assessment report on the stand-by programme said.

The $57bn credit that the IMF extended to the Argentine government in 2018 – of which $44bn was disbursed – did not meet its main objectives. “The programme’s strategy and conditions were not strong enough to correct Argentina’s structural problems, such as fragile public finances, dollarisation, high inflation, weak monetary policies, a limited financial sector, and a narrow export base,” the report notes.

The then managing director of the IMF, Christine Lagarde, congratulated the Argentine authorities for reaching the agreement and emphasised the need to accelerate the reduction of the country’s deficit. “The government’s economic plan revolves around a rebalancing of the fiscal position. We fully endorse that priority and welcome the authorities’ intention to accelerate the pace of deficit reduction in the federal government, restoring the primary balance by 2020,” she said.

Lagarde added that the IMF supports “redoubled efforts” to reduce inflation, which “eats away at the foundations of Argentina’s economic prosperity and falls directly on the most vulnerable segments of society”.

Today the IMF also attributes part of the responsibility to Macri’s government: the absence of measures regarding debt operations and controls on the movement of capital were detrimental. The IMF also criticises the existence of communication problems and an excess of optimism in economic expectations, including inflation: the Macrismo government predicted a price increase of 15% for 2018, but that year inflation was 47.6%, the highest in the last 27 years.

The agency admits that the credit did not succeed in progressively reducing Argentina’s balance of payments tensions or in protecting the most vulnerable sectors of the population. The Argentine economic crisis that began in 2018 and worsened in the following two years hit those with the least resources particularly hard. Between 2018 and the end of 2020, poverty rose from 32 to 42 per cent of the population.

If the agreement with the IMF is approved in Congress, behind closed doors, with the excuse that “there is nothing else to do”, the sincere expectation and the enormous original hope generated by the current government will be frustrated – with further blows to the living conditions of the citizens.

The “understanding on key policies” for an IMF agreement managed to avoid default until 2024, but not to reduce the surcharges and the permanent, omnipresent tutelage of IMF officials. “We have achieved a deferred default and not a solution to the debt (…) There is a monumental cession of sovereignty and extremely precise goals for the immediate 2021-2024 juncture,” said Claudio Lozano, director of the Banco de la Nación.

This government, in the 2019 Electoral Platform of the Frente de Todos, pledged to combat as a priority “the growing poverty, destruction and precariousness of the labour market, a marked fall in the purchasing power of wages in a context of accelerating inflation, a tariff scheme that has deconfigured the economy, adjustment policies imposed on the State, and foreign debt that conditions the actions of a future government administration”.

Was this commitment just an electoral publicity stunt without taking into consideration the real dimension of the challenge of the brutal indebtedness left by the previous government? Was it thought with incredible innocence for more than two years that the IMF “is not the same”, agreeing to carry out confidential negotiations while washing away its clear responsibility? Why were other voices and serious proposals that were not just slogans or expressions of desire not consulted and listened to?

Argentine society will have to face reality actively against deception and demoralisation in order to defend its living conditions and its future. It can and must do so.

*Marchini is Professor of Economics at the University of Buenos Aires. Coordinator for Latin America of the International Debt Observatory, researcher at the Latin American Council of Social Sciences (Clacso). Aharonian is a Uruguayan journalist and communicologist, Master in Integration, creator and founder of Telesur. Both are analysts at the Latin American Centre for Strategic Analysis (CLAE).