"In Argentina, the IMF thought that its intervention would be enough to reassure the markets. The opposite is true "
CHRONIC. The dogmatism of the International Monetary Fund has turned out to be counter-productive with a return to square one: the return to control of capital and the Peronists at the doors of power, explains in his column Stéphane Lauer, editorialist at the "World".
The aphorism is probably as old as the banking system. "If you owe 100 euros to your bank that's your problem. If you owe him 100 billion, it becomes the problem of the bank. While the Argentine debt crisis threatens to become out of control, it is already a serious concern for the main creditor, the International Monetary Fund (IMF).
Argentina is also known for its tango as for its defaults. The country already has eight and has called the IMF twenty-one times to the rescue. But a ninth would be embarrassing for Christine Lagarde, its director general, as she prepares to take the reins of the European Central Bank. "She organized things as a fait accompli and the council could not decide if it was to go ahead. She had a casual attitude , "said a source close to the case in the Financial Times recently.
"It was the only option , " defends the woman. "There was no one else at the time to invest in the recovery process that the government had decided to undertake, and given the challenge, we had to think big. The proximity of Argentine President Mauricio Macri to Donald Trump, the IMF's largest contributor to the IMF's budget as President of the United States, did the rest.
To see big, the IMF saw big in June 2018, giving a beleaguered Argentina a credit of 50 billion dollars (about 45 billion euros), carried three months later to 57 billion, the largest loan never granted by the institution. This one was in confidence: Mr. Macri, who came to power at the end of 2015, was considered a good student, ready to apply the recipes of the Washington Consensus, this corpus of liberal-inspired measures applied to the economies in difficulty.
Encouraging Argentina to blindly put itself in the hands of international markets has proved disastrous
In the case of Argentina, the first step was to abolish capital controls. Next, to put an end to public subsidies in energy, water or transport, which served as a social buffer in a country where the poverty rate is 32%, but which, according to the IMF, disrupted the smooth operation economy. Finally, the country was asked to substitute the financing of the public deficit by the central bank for the benefit of borrowing on international markets.