Argentina adds new chapter with IMF after almost 70 years of tortuous relationship

Argentina added this Friday, after announcing that it reached an agreement with the International Monetary Fund (IMF) to refinance a millionaire loan granted in 2018, a new chapter in its conflictive history with the organization, which began at the end of the 50s of the last century, when the country received its first loan.
After more than a year of intense negotiations, the government of Peronist Alberto Fernández announced that it reached an understanding with the IMF, which, if endorsed by Congress, will allow to reform the loan payment of more than 44,000 million dollars contracted during the mandate of Mauricio Macri (2015-2019), and largely clear the black panorama that drags the national economy.
But this is only the last of many agreements since Argentina joined the multilateral credit agency in 1956, during the military regime that overthrew Juan Domingo Perón.
According to a study by economist and researcher Noemi Brenta, from its accession to the IMF until 2021, Argentina signed 21 “strong conditionality” agreements — which entail measures that governments commit to adopt within the framework of an adjustment program — and also took other types of financing.
A relationship of back and forth, of crisis and adjustments – added to the also conflictive history of defaults to private debt creditors – that has left chapters as tortuous as the one that the country experienced during the serious crisis of the ‘corralito’ of 2001, when it ended up declaring the largest cessation of payments of its external debt: $102 billion.

It was in April 1957 when the IMF made its first loan to Argentina, for 75 million dollars, during the de facto government of Pedro Eugenio Aramburu (1955-1958).
Since then, Executives of all kinds of tendencies, democratic or de facto, turned to the agency either to face recurrent crises or to sustain their economic programs.
According to data from the Museum of The External Debt of Argentina, at the end of the last civic-military dictatorship (1976-1983), the debt had increased by 449% – from 8.2 billion in 1976 to 45 billion in 1982 – a heavy inheritance that would receive the first president of the current democracy, Raúl Alfonsín (1983-1989).
In the 1990s, during the government of Carlos Menem (1989-1999), characterized by its policy of economic opening and privatization of public enterprises, the role of the IMF was key to maintaining convertibility between the peso and the dollar. And the ball of foreign debt continued to grow.
A situation that erupted during the mandate of Fernando de la Rua (1999-2001), when a ‘shielding’ was agreed in exchange for a strong fiscal adjustment. However, the IMF ended up suspending the disbursement of funds for not meeting the goals, which was the beginning of the end in the midst of the chaos: on December 20, in the midst of the worst political, social and economic crisis in Argentine history, the president presented his resignation.
According to Brenta, until 2006, when Néstor Kirchner (2003-2007) decided to cancel in a single payment all the debt with the IMF – for a total of 9,500 million dollars – only for nine years – with governments of different colors – the country was not under agreements with the organization.
During the governments of Kirchner and his wife, Cristina Fernández (2007-2015) – current vice president – Argentina stopped submitting to annual economic reviews by the IMF, but in 2016, after Macri came to power, the relationship with the IMF returned.
It was in 2018 when the country acquired the largest loan that the agency has granted in its history. The same as now, although with greater ease if the new agreement reached by the Fernández Government is materialized, continues to bring headaches to a country that has been submerged in a loop with its debt problems for decades.

The International Monetary Fund (IMF) also detailed on Friday that the agreement reached with Argentina includes a “path” for fiscal consolidation with the aim of improving “gradually and sustainably” public finances and reducing monetary financing.
That “path” to fiscal consolidation will also increase spending on infrastructure, science and technology, and protect specific social programs.
The Fund offered in a statement those details about the understanding already announced early in the morning by the president of Argentina, Alberto Fernández, to refinance the loan of more than 44,000 million dollars that the agency granted to the country in 2018, when the liberal Maur governed.icio Macri.
Both sides, according to the IMF, agreed to include in the agreement a “strategy” to reduce energy subsidies progressively.
An understanding was also reached on the framework for the implementation of a monetary policy as part of a “multi-pronged approach” to tackling high inflation in Argentina.
That framework will aim to secure “positive real interest rates” to support domestic financing and strengthen stability, the agency said.
Just after Fernández announced the agreement on Friday, Argentina’s risk premium fell by 3.8% and the main indicator of the Buenos Aires Stock Exchange rose by around 4.20%.
The IMF communiqué is signed by the Deputy Director of the Western Hemisphere Department, Julie Kozack, and the Chief of Mission for Argentina, Luis Cubeddu, who have played a crucial role in the negotiation.
In the note, without offering many details, they explained that it has also been agreed that “additional financial support from Argentina’s international partners” would help bolster the country’s external resilience and its efforts to ensure “more inclusive and sustainable” growth.
In the coming weeks, IMF staff and the Argentine authorities plan to continue their work to reach an agreement at the staff level.
The final agreement, as always in these cases, will be subject to approval by the IMF Executive Board.
The announcement of the agreement comes after months of intense negotiations, marked by the need for the Argentine government to extend payment terms amid the complicated economic scenario.
The country has been dragging for four years diminished reserves in the Central Bank, high inflation, an accelerated devaluation and the conviction of the Executive to achieve an agreement that does not entail adjustments that hinder growth.

Original source in Spanish