Sovereignty or dependence: Six reasons to not pay the IMF

When the payment of debt seems to be the only way forward, voices within the ruling party argue why, at the very least, debt should be suspended and denounced in international organizations

January 20, 2022 by Emmanuel Alvarez, Franco García Dellavalle
To have a future without dependence, Argentina must not repay IMF loans

1. Debt and US ambitions in Latin America

The disbursement of USD 55 billion to Argentina in the Macrista era represents the largest loan in the history of the International Monetary Fund (IMF). The IMF continues to be an instrument of imperialist domination aimed at subjugating the sovereignty and economic independence of the countries of the “third world” and Latin America in particular.

Macri was a strategic ally to the IMF in support of the coup d’état in Bolivia, the persecution of former Argentinian president Cristina Fernández and former Brazilian president Lula Da Silva, and the isolation of Venezuela in the shameful legitimization of Juan Guaidó. The United States forced the IMF to violate its own bylaws to control Argentina’s actions regarding the US geopolitical conflict with China. Our country is important in the region because Argentina has the potential to deepen trade, financial and technological agreements with the Asian superpower. The debt problem is not a technical-administrative problem, but a deeply political one.

2. IMF “debt” is a fraudulent and illegal scam

IMF “debt” is bad credit that the IMF gave to the government of Argentina during the Macri era, against the IMF’s own statutes, and against international law.

The right-wing argues that the loan was the consequence of the financial imbalances inherited from the last government of Cristina Fernández, despite the fact that, in the words of former Minister of Economy Nicolás Dujovne himself, Macri’s administration inherited a country with no debt and almost no external financial commitments.

The trickery takes place when the country that receives the credit puts it towards capital flight, instead of investing it in the sustainable reconversion of its economic infrastructure or the construction of hospitals, schools, or other social spending. No importance was paid to “stabilizing the macroeconomy” and putting accounts in order.

Furthermore, the $55 billion loan violated the IMF’s own Articles of Agreement. Article VI states that a member nation “may not use the general resources of the Fund to meet a large or sustained outflow of capital” and that that the IMF “may request a member exercise controls to prevent such use of general resources”. The same article states: “If, after receiving such a request, a member fails to exercise appropriate controls, the Fund may declare the member ineligible to use general resources”.

Despite the evidence of capital flight, the IMF continued to lend money to Argentina. Meanwhile, the dollars that entered the country went to private debt creditors, to companies that paid dividends abroad or to short-term investors that entered and left the country speculating with the exchange rate, bleeding the dollar reserves.

In fact, the Central Bank of Argentina prepared a report that was approved in 2020 by the Bicameral Commission for debt monitoring (currently on pause), which details how the borrowed dollars were squandered in capital flight, along with the names of the individuals and companies involved. This list is public and exposes the real beneficiaries of the public debt.

The UN and the International Court of Human Rights must denounce this fraud and the violation of the IMF’s own statutes.

3. The IMF means dependence

One of the most frequently heard arguments is that we must urgently reach an agreement with the IMF and present a multi-year economic plan for the “growth” of Argentina. This is the argument of the Minister of Economy, Martin Guzman, and President Alberto Fernandez. This is a fantasy, firstly, because the debt is unaffordable now, and will remain so in 3 or 4 years’ time.

Any agreement that moves the expiration dates of the loan forward will add to the debt payment commitments with private creditors in 2024 and 2025, when estimated amounts of between $12 and 16 billion USD per year will expire, amounts that are impossible to pay.

This “delicate balance” of the Argentine economy will be strictly supervised and controlled by the “missions” to be sent by the IMF, where it is foreseen to put a ceiling on economic growth after the rebound in 2021.

What awaits us? As happened in Greece, since we are unable to pay the debt, we will go from negotiation to negotiation with increasingly tougher demands. The same thing that has happened in Argentina’s 22 previous agreements with the IMF. Every single one of these agreements failed as a macroeconomic stabilization tool.

4. Suspending debt payment is an opportunity for sovereignty

A campaign of fear and terror is currently under way, led by the right, and accompanied by an important sector of spokespersons for the government, who maintain that if Argentina defaults on the loan, hell awaits us. The objective of this campaign is to convince us that there is no alternative but to agree to the IMF’s terms and pay. But what is not mentioned is that the path of recognizing and paying the debt leads us to an even more complicated situation.

It is said that there is no history of non-payment, despite the fact that in 2001 there was a cessation of payments, proclaimed by the National Congress, that allowed the weight of the debt to be relieved in the following years, freeing the economy of Argentina. In fact, thirty nations defaulted on their payments to the IMF in the last 50 years (and none were declared in default by the IMF or expelled from the organization).

5. Agreeing with the IMF electorally harms Frente de Todos

The electoral defeat of 2021 showed us the consequences of society exhausted after four years of Macrismo and two years of a pandemic. The economy was one of the triggering factors that resulted in a vote against the current government.

It is impossible to live with inflation of more than 50%, poverty over 40%, economic growth without redistribution, and a whole range of unsatisfied demands such as access to housing, work, education and healthcare.

2021 showed how elections can be lost after the withdrawal of the Emergency Family Income (IFE), the release of tariffs, the lack of control of food prices, and the deterioration of real wages. It is not enough to show that this current government is not as bad as Macri’s. The people need a perspective towards progress.

The current national government is not effectively communicating how the opposition is responsible for the drama in which we are immersed. Despite this, the opposition will use all weapons to weaken and hit an already weak government.

6. Those who deceived the people must be held accountable

The opposition, which is responsible for the debt, has called for complete unanimous agreement of all political sectors with regard to a possible agreement reached by Frente de Todos. This call for unanimity completely casts a shadow over the scam which was the IMF agreement, wherein no actor in the system questions the debt, the fraud, or the political force that allowed it. Arturo Jauretche put in plainly: “If the gringo who buys us is bad, the Creole who sells us is worse”.

Our political forces, at least those who make up Frente de Todos from people’s movements, cannot tolerate the fraud.

We cannot be part of an agreement that allows the illicit enrichment of a social sector through a scam which the Argentine people as a whole must now pay for.

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The payment of debt to the IMF should not be negotiated. There is no future, short or long term, bound by a vile agreement designed for dependency. The people of Chubut showed us the spirit of those who refuse to live on their knees, twenty years after 2001. In Chile, after more than thirty years of Pinochet and conservative status quo, the people were victorious against all liberal hopes.

Our America is not yet defeated or surrendered, a rebellious thread has been revived and a new wave of governments has been ushered in by peoples’ struggles, a wave that resists neoliberal restoration and the emerging fascist reaction.

The popular movements must rise to the occasion and be the rearguard of all those who resist looting, surrender and outrage.

Emmanuel Alvarez and Franco García Dellavalle are militants of the People’s Movement of Our America – Frente Patria Grande.

This piece first appeared in Spanish on ARG Medios.

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