Argentina and the International Monetary Fund

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Flag of Argentina Flag of Argentina.svg
Flag of Argentina

Argentina joined the International Monetary Fund (IMF) on September 20, 1956 [1] and has since participated in 21 IMF Arrangements. [2] The first Stand-By Arrangement (SBA) began on December 2, 1958, and the most recent Stand-By Arrangement began on June 20, 2018, and expired on June 19, 2021. [3] The most recent arrangement approved Argentina to borrow SDR 40,714.00 million, of which Argentina has borrowed SDR 31,913.71 million [4] as of December 10, 2019. Over the past 63 years, Argentina has frequently used the resources of the IMF and holds the record for the largest loan distributed, reaching nearly $57 billion in 2018. [5] However, in 2006 under the leadership of Néstor Kirchner, Argentina was able to pay off its debts, thus escaping IMF program conditionality. In 2016 under the leadership of Mauricio Macri relations between the IMF and Argentina were reestablished [5] due to the continuous decline of the country's GDP, leading to the 2018 arrangement.

Contents

2001 Economic Crisis in Argentina

President Adolfo Rodriguez Saa Adolfo Rodriguez Saa-2.JPG
President Adolfo Rodriguez Saá

November 30 marks the beginning of the 2001 economic crisis in Argentina [6] caused by the rising fear at how rapidly the Argentinian peso was being devalued. This crisis was caused in part by the extensive borrowing Argentina implemented during the presidency of Carlos Menem, and the governments dwindling tax revenue. [7] On December 5, 2001, the IMF made an announcement that they would no longer provide aid due to Argentina's inability to meet the conditionality set by the IMF to receive loans. President Adolfo Rodríguez Saá resigned shortly after the announcement of Argentina's default. [6]

2018 Stand-By Arrangement

The 2018 Arrangement allowed Argentina the option to immediately purchase US$15 billion (SDR 10,614 billion) while the remainder of the funds would be disbursed at the discretion of the Executive Board's quarterly review throughout the three year arrangement period. [8] As of 2018, Argentina is ranked the 24th largest economy with a GDP of US$518,475 million, [9] however, the GDP has continued to decline throughout the Macri presidency. [10] The goals of the 2018 Stand-By Arrangement are "to strengthen the country’s economy by restoring market confidence via a consistent macroeconomic program that lessens financing needs, puts Argentina’s public debt on a firm downward trajectory, and strengthens the plan to reduce inflation by setting more realistic inflation targets and reinforcing the independence of the central bank [11] ". Furthermore, the goal of the Arrangement is intended to bolster social spending and continue on the trajectory of spending for healthcare that is currently implemented. [12]

2019 Presidential Election

President Alberto Fernandez Alberto Fernandez 2019.png
President Alberto Fernández

As of October 27, 2019, Alberto Fernández won the presidency in the general election (by 48.1% of the vote) against Mauricio Macri among others. Fernández's presidential term begins December 10, 2019. [13] In a 2019 press briefing with the IMF, it is stated that Alberto Fernández "hopes the IMF will help Argentina pay down its debt". [14] Many account Fernández's victory to the economic failures of his predecessor Mauricio Macri [15] and the fear that Argentina may default on their 2018 SBA as they did in 2001 after mass economic decline within their economy. [16] As of 2019 in Argentina, 25.4% of households live under the poverty line and 35.4% of the general population is living in poverty. [17] Recent telephone communication between the IMF Managing Director, Kristalina Georgieva, and president-elect Alberto Fernández indicate that both parties hope to “pursue an open dialogue for the benefit of the Argentinian people”. [16]


IMF relations during Javier Milei's presidency

On November 19, 2023, Javier Milei succeeded in defeating Sergio Massa to win the presidency of Argentina. Upon receiving news of his victory, Milei promised drastic changes to the nations economic policy. [18] In part because of the Covid-19 pandemic, the Argentina economy had inflation of over 140% in the year prior to the election. The BBC reported that this painful economic position led to the election of Milei, who they described as a 'far right outsider' . [19] During a speech to the World Economic Forum in 2024, Milei argued that the economic challenges of Argentina and the broader western world were due to 'radical feminism', 'Neo-Marxism', and movement away from Neo-liberalism. [20]

6 months into Javier Milei's presidency, Argentina's economic position has yet to improve. The inflation in Argentina rose heights of 250% in December 2023, whilst the annual percent change in GDP growth has fallen to -2.8%. [21] To avoid further economic troubles, Melei and the IMF struck a deal that would allow for US$44 billion dollars of funds to go the country. This deal helps keep the Argentina government solvent, but it will only last for 30 months. Upon breaking the news about this deal, the IMF reported there are deep seated challenges in the Argentinian economy holding the country back from stable economic growth. [22] On June 12, 2024, Milei successfully pushed through 2 liberal economic reform bills through the senate, in an attempt to draw in foreign investment. [23] Foreign investment in Argentina has been low for the last decade, in part because of low confidence in the Argentina peso . [24] Argentina has a debt to GDP ratio of 80%, and owes more to the IMF than any other nation. [25]

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References

  1. ↑ "List of Members' Date of Entry". www.imf.org. Retrieved 2019-11-23.
  2. ↑ "Argentina and the IMF". IMF. Retrieved 2019-12-02.
  3. ↑ "History of Lending Arrangements: Argentina". www.imf.org. Retrieved 2019-12-02.
  4. ↑ "Financial Position in the Fund for Argentina as of October 31, 2019". www.imf.org. Retrieved 2019-12-02.
  5. 1 2 "Argentina and the IMF: What to Expect with the Likely Return of Kirchnerism". NACLA. Retrieved 2019-12-02.
  6. 1 2 "The Argentine Crisis 2001/2002". RaboResearch - Economic Research. Retrieved 2019-12-02.
  7. ↑ "Argentina's Crisis Explained". Time. 2001-12-20. ISSN   0040-781X . Retrieved 2019-12-10.
  8. ↑ "IMF Executive Board Approves US$50 Billion Stand-By Arrangement for Argentina". IMF. Retrieved 2019-12-02.
  9. ↑ "Gross Domestic Product 2018" (PDF).
  10. ↑ "Can Argentina's new president save the country's economy?". World Economic Forum. Retrieved 2019-12-02.
  11. ↑ "IMF Country Report No. 18/219".
  12. ↑ "Update on Argentina". IMF. Retrieved 2019-12-02.
  13. ↑ "Alberto Fernández", Wikipedia, 2019-11-27, retrieved 2019-12-02
  14. ↑ "Transcript of IMF Press Briefing". IMF. Retrieved 2019-12-02.
  15. ↑ Pribble, Jennifer. "Argentina elects new president on promises to fix economy and unify a struggling nation". The Conversation. Retrieved 2019-12-02.
  16. 1 2 "Argentina to Spur Growth and Pay Debt, Fernandez Tells IMF". Bloomberg.com. 2019-11-20. Retrieved 2019-12-02.
  17. ↑ "INDEC: Instituto Nacional de Estadística y Censos de la República Argentina". www.indec.gob.ar. Retrieved 2019-12-02.
  18. ↑ "Javier Milei: Presidential Election Victory Speech (English transcript-video)". www.americanrhetoric.com. Retrieved 2024-07-28.
  19. ↑ "Javier Milei: Argentina's far-right outsider wins presidential election". 2023-11-19. Retrieved 2024-07-28.
  20. ↑ "Davos 2024: Special address by Javier Milei, President of Argentina".
  21. ↑ "Argentina and the IMF". IMF. Retrieved 2024-07-28.
  22. ↑ "IMF Executive Board Approves 30-month US$44 billion Extended Arrangement for Argentina and Concludes 2022 Article IV Consultation". IMF. Retrieved 2024-07-28.
  23. ↑ "Argentine Senate passes Milei reform bill as protests rage outside". Reuters. June 12, 2024.
  24. ↑ "Argentina's Struggle for Stability | Council on Foreign Relations". www.cfr.org. Retrieved 2024-08-03.
  25. ↑ "Javier Milei has turned Argentina into a libertarian laboratory". The Economist. ISSN   0013-0613 . Retrieved 2024-08-03.
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