The arrival of the far-right Javier Milei to the Casa Rosada inaugurates a new stage in Argentina's relations with the International Monetary Fund (IMF). Representatives of the organization have arrived in Buenos Aires to negotiate a possible rearrangement of the agreement that Argentina has had with the Fund since 2018, when the conservative Mauricio Macri went into debt for 44,000 million dollars, and the payment plan signed in 2020 with the Peronist Alberto Fernandez. The financing body will begin meeting this Friday with the technical teams and the meeting with government officials, which was scheduled for today, has been postponed until Monday, according to national media. Milei is confident that the negotiation will be successful because the spending cuts that he has already begun to apply are “harder,” according to his own assessment, than what he is asking for from the IMF. The Fund's doubt is whether the far-right will be able to put into practice this orthodox and pro-market plan, which has resistance in the streets and clashes with Congress and the courts.
Argentina must pay off the 44 billion debt assumed by Macri that soon became unpayable for the country. The Fernández Government, which succeeded Macri, agreed to a new payment plan in exchange for a series of fiscal and monetary goals. The current program had its last revision approved in August. The Fund considered that Argentina had not met the goals, but authorized a new disbursement because it assessed that the non-compliance was due to an “unprecedented drought and policy deviations.” Now a new review is pending that was to be done in December and was postponed due to Milei's arrival to power.
The current Administration considers that, since the country “did not meet” the objectives, the 2020 agreement is “virtually fallen.” But formally it is not and the representatives of the Fund will meet with the Chief of Staff, Nicolás Posse, with the Minister of Economy, Luis Caputo, with authorities of the Central Bank and with the technical teams to “redirect” the negotiations, according to the presidential spokesperson, Manuel Adorni. The Government has not mentioned the possibility of discarding the current agreement, which concludes in September, to sign a new one and has ruled out the arrival of new financing. Different analysts consulted by EL PAÍS consider that these options “are not very feasible,” although there are no certainties. The agenda of the meeting “is not predefined,” Adorni assured.
Monday's meeting, which was scheduled for this Friday, will be the first meeting in Buenos Aires of officials of this Government with representatives of the Fund after they met in Washington in December. Kristalina Georgieva, head of the International Monetary Fund, said then that the organization is “very interested” in supporting Argentina. Georgieva had had a videoconference conversation with Milei days before. “The Fund was collaborative,” said the president in a message on the X social network and described the talk as “excellent.” Because of this and the depth of the adjustment that Milei has already begun to implement – it devalued the currency by 50% and announced the removal of subsidies for transportation and energy, among other measures – the Government is confident that it will have the support of the IMF.
A successful agreement will allow the Government to strengthen the balance of payments, which is currently compromised, and send a message to international investors. Some analysts, however, point out that the very orthodoxy of Milei's economic program, which is partly based on measures imposed by decree or not yet approved in Congress, may cause differences with the IMF.
“The Government demonstrates commitment to implement the reforms it is proposing,” says Pablo Nemiña, a researcher in political economy at the National Council of Scientific and Technical Research (Conicet), the University of San Martín and the Latin American Faculty of Social Sciences (Flacso). ). But that is not enough, he adds: “It must also demonstrate that the policies are sustainable, that is, that they can be implemented because they have a certain degree of support.” In economics, he explains, we talk about ownershipwhich would be the “ownership or control” that a country has over the agreement.
That's where Milei has a problem. Although the far-right won in the second round with 56% of the votes and popular support is still broad, his party, La Libertad Avanza, is in a minority in Congress. The bill that she presented with more than 600 measures to reform the Argentine political, economic and social system must overcome the legislative obstacle. The megadecree that he imposed with more than 300 reforms and that is being questioned in court as “unconstitutional” – a court already suspended part of that decree this Wednesday – must also do so. The streets present another challenge: citizens from different parts of the country have come out to reject the measures almost daily and the country's main union center, the General Confederation of Workers, has already called for a general strike for January 24.
Nemiña believes that obtaining support for the measures will be key to framing the link between both parties. “Renovations can always be made. But society must be involved and the Government must be willing to have its ideas adapted. If you think society is wrong, you have to convince it. For that there is an extraordinary instrument called politics,” she points out.
“The IMF is more political and knows that it needs to have some type of negotiation that allows these reforms to advance, containing in some way the affected sectors,” says Francisco Cantamutto, doctor in Social Sciences specialized in Economics and researcher at Conicet. Cantamutto explains: “If the Fund accepts an ideological position like that of the Milei Government, it runs the risk of the program collapsing very quickly if society cannot tolerate it. On the other hand, if it seeks a smaller, but more socially viable program, it would be below the demands of the Government itself. “We are facing a relatively new situation, which the IMF has to study carefully.”
More stages will follow this approach. While the parties negotiate, Argentina's payment schedule with the Fund follows the pre-established path. After the IMF interrupted disbursements following the defeat of the ruling party in the November elections, the Milei Government agreed to a new bridge loan with the Development Bank of Latin America-CAF of 960 million dollars to meet December maturities. . The country will have to pay almost 7.3 billion dollars this year. The first maturity is this Monday, January 9 and the second one a week later, on the 16th, for a total of 1,900 million.
Harmony with the Fund
The IMF has intervened in the Argentine economy during periods of democratic governments and dictatorships, with liberal or protectionist administrations. President Juan Domingo Perón refused to join the list of associates of the organization when it was created in 1944 because he considered it “a putative new spawn of imperialism.” But ten years later, General Pedro Aramburu took the first credit after assuming power with a coup d'état in 1955. There began the country's history of encounters and disagreements with the IMF, an acronym that Argentines associate with unpopular
and deep adjustments. economic and social crises, such as the corralito crisis of 2001 and the default on a foreign debt of 144 billion dollars.
In 2006, with the Peronist president Néstor Kirchner, he settled the debt with the Fund and inaugurated an era of distancing. The organization closed its office in Buenos Aires and Argentina was exempt from periodic reviews of its technicians. For 15 years, the country did not ask for assistance. Until 2018, shortly before the end of his term, Macri asked for a new bailout.
The stage that Milei opens, more orthodox and pro-market, “is aligned with the strategy of neoliberal governments that have passed through Argentina before, but from a more extreme ideological position and moved to the right,” says Cantamutto. The economist points out two particularities. One is the “position of severe political weakness” that Milei has in Parliament and another is “a different international scenario.” “Today we are not facing the unipolar world of the 1990s. “The global hegemony of the United States is threatened by the rise of the BRICS at the hands of China,” he says.
New geoeconomic strategy
Argentina has just formally announced that it will not participate in the BRICS, the economic alliance made up of Brazil, Russia, India, China and South Africa to which Argentina acceded in August. The decision is in line with Milei's vision, which defends the closeness of his Government with the United States, Israel and “the free world” in general, far from the countries that he considers “communist.” China is on that prohibited list, but also Brazil. “This influences the relationship with the Monetary Fund, which is so influenced by the United States,” says Noemí Brenta, a doctor in Economics from the University of Buenos Aires and author of the book History of the external debt from the dictatorship to the present day. “I suppose that the Government is using this external repositioning as a means of pressure to receive more favorable treatment from the Fund,” he adds.
Brenta, however, sees it as “difficult” for the Fund to grant Argentina additional financing to the agreement that concludes in September 2024. “The agreement with the Fund is already 84% disbursed. We cannot expect much more than those 7,000 million dollars [que restan]. And that will be to pay the Fund itself,” he assesses. Then he continues: “What other financing options does the Government have? None of significant amounts. Relations with China have already cooled and China denied the activation of the new tranche of the swap [intercambio de divisas], so we can't count on that. The amounts that other organizations – CAF, World Bank, IDB – can lend us are minimal for the need for external financing.” Argentina's external debt amounts to almost 300,000 million dollars.
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