WASHINGTON, Jan. 10 (UPI) -- The International Monetary Fund gave Argentina a desperately needed pat on the back this week, praising its government's fiscal discipline for finally stabilizing the economy after four long years of recession. But cash-strapped Argentina isn't out of the woods yet by a long way.
Back in November, the Argentine government defaulted on its scheduled $805 million in debt payments to the World Bank, the country's only remaining extant creditor after its catastrophic default a year ago in January 2002 on most of its $141 billion foreign debt. But President Eduardo Duhalde's decision to authorize only a nominal $80 million in interest payments to be paid to the World Bank was a doomed attempt to propitiate hard-hearted international lending institutions while striving to buy time to strike a private deal with the IMF, a normally arrogant institution which now finds itself as embattled as the Argentine government, due to its traditional insensitivity to the plight of the non-G-7 world.
Duhalde's action -- or lack thereof -- still looks all but certain to compromise Argentina's international credit-worthiness in the short to medium term. Argentina still faces a Jan. 17 deadline to repay a $1 billion IMF loan and the IMF has not yet said that any agreement to allow Buenos Aries to keep up repayments on that is imminent.
These problems could halt in its tracks what little progress the Argentine economy managed to make last year while generating even more political and social upheaval at home by prolonging the country's status as an economic pariah, Yet it still may be more desirable for Argentina to follow Duhalde's playing for time path rather than risk an internal explosion that could consign the nation to civil strife or even civil war.
Had Argentina and the IMF successfully negotiated a deal to refinance Argentina's foreign debt by Nov. 14, it would have paved the way for a similar agreement with the World Bank and other lending institutions, which would have boosted investor confidence and eased some of the pressure on the country's cash-strapped economy. As his recent statements show, Roberto Lavagna, Argentina's minister of economy, was overly optimistic in claiming that an agreement with the IMF was in its final stages. If this was Lavagna's thinking, he was proving himself to be foolishly unrealistic, because it would take far more than an $80 million payoff to the World Bank to clinch the deal.
IMF officials Anne Krueger and Anoop Singh, however, appeared not to share Lavagna's irrational confidence. They wanted Argentina to put an end to amparos, in which citizens have successfully removed their funds from otherwise frozen bank accounts by arguing their cases in court, because the two senior IMF staffers consider the regulations under which such litigation can be carried out to be essentially detrimental to monetary reform.
Though the actual success rate of such amparos is minimal, Argentines can resort to few other recourses to access their money, and Duhalde's administration, long in a deadlock with the government's judicial branch, cannot force the Supreme Court to overturn its decisions which allow such a process.
IMF officials, doubting that the meager performance of the Argentine economy in recent months will generate real growth, are advocating increases in utility rates to help stimulate a budgetary surplus, but the Argentine Congress and Ministry of Justice will likely oppose any rise in taxes or service rates as politically untenable.
But there is another grim fact of life that Duhalde must face: that as a leader with single-digit popularity ratings, he cannot expect to long remain in office if he imposes additional burdens on a population already being faced with an unemployment rate approaching 30 percent, widespread starvation, an unraveling of civil society and the virtual disappearance of the middle class.
The IMF has taken a particularly hard-line stance against the Argentine central bank, calling for the government to downsize the institution and implement stricter financial policies to control its often questionable activities. While that notoriously corrupt institution well deserves this kind of public thrashing, it ill-behooves the IMF, an institution that never had a word of reproach over the killings of thousands of innocent civilians during the period of Argentina's "dirty war" in the 1970s to feel emboldened to call for more sacrifices by an already desperate populace. Also, even if the Duhalde administration was willing to carry out such reforms, it lacks the support in Congress to push such action. Furthermore, elections, scheduled for May 2003, may install a president even more hostile to the IMF's neo-liberal prescriptions.
"Democracy is hanging by its fingertips in Argentina," notes Richard McCormack, former U.S. under-secretary of state for economic affairs. "Sufficient moneys from outside and sustainable economic policies are needed to assist growth."
But merely tinkering with the country's fiscal and monetary knobs are not likely to do the job if they in any way add to the already insupportable daily burdens facing Argentines. Ernesto Aldo Isuani, a professor with the Facultad Latinoamericano de Ciencias Sociales, also known as FLACSO, contends that economic growth should not be considered the only way to alleviate Argentina's social crisis, stressing that improving education and expanding social policies are essential for reducing poverty. If anything, the aforementioned almost understates what is an alarming situation.
Even more so, Argentina requires a radical departure from its present almost vanished policy of tending to the basic human needs of the population. Argentine political movements, currently divided into dozens of small, self-interested factions, would also do well to form broad, but binding alliances so that a wide sweep of social concerns could be represented. An additional benefit from this would be that the nation would be speaking with a single voice abroad, which is mandatory if Buenos Aires is to be successful in generating the additional clout derived from being seen as a nation that was victimized by an international financial system that has its own priorities.
While Argentina has been skewered by a global fiscal and monetary system managed by the G-7 nations, this doesn't mean that it is not blameworthy for its own multiple self-inflicted wounds, most notably a smugness, a persisting neo-Nazi strain in its political culture, moral relativism that can tolerate such a sleazy politician as ex-President Carlos Menem in its pantheon of heroes, and a propensity for massive corruption that has proven ruinous to the country.
(Larry Birns is director of the Council on Hemispheric Affairs, a Washington-based independent, non-profit, research and information organization. Katherine Ruddick is a COHA research associate. Outside View commentaries are written for UPI by outside writers on subjects of public interest.)
