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April 2004

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Argentine President Faces Off With the IMF

By Roger Burbach
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P resident Nestor Kirchner of Argentina is emerging as the leading nemesis of the International Monetary Fund and the private financial speculators in South America. Assuming office in May 2003 with less than a quarter of the popular vote, he now enjoys 85 percent support in the opinion polls, due in large part to his determination to take on the neoliberal policies that led to the country’s economic collapse in 2001-2002. 

During the crisis Argentina defaulted on portions of its $140 billion international debt. Kirchner has now thrown the G-7 nations, the leading capitalist countries, into a quandary with his declaration that the private investors who bought about $50 billion in government bonds in Argentina in the 1990s will receive only 25 percent of the face value of their bonds. Kirchner argues the bondholders gambled on Argentina during the heady days of the corrupt, neoliberal government of Carlos Menem, when some bonds paid upwards of 30 percent annual returns. Caring little about what these exorbitant rates meant for the Argentine people, the Kirchner government argues the bondholders should now reap the results of their speculative adventures that helped fuel the boom and bust of the Argentine economy. 

During 2002 and 2003 the IMF, the World Bank, and other international financial institutions lent new funds to Argentina in hopes of keeping the country from opting out of the international financial system. There were even signs that some of the lending institutions were backing off from their history of demanding dramatic cutbacks in basic social programs and balancing the budget on the backs of the poor. In early 2003, the Inter- American Development Bank lent $1.5 billion to help shore up the country’s social programs, including the special government payments of about $50 a month to the heads of household who were unemployed. Due in large part to the government’s decision to insist that the domestic economy came first and that social spending needed to be increased, the country’s economy in 2003 grew at 7.5 percent after having contracted by over a quarter in 2001 and 2002. 

However, recently, the finance ministers of the G-7 nations, who met in Monterrey, Mexico in January, insisted the government must “be more flexible” in its debt renegotiations with the private bondholders. Beholden to the financial and political dictates of the G-7 countries, the IMF and the World Bank are both pressuring the government to change its approach. The IMF called Economics Minister Roberto Lavagna to Washington to renegotiate the release of a loan for $8 billion, while the World Bank held up a loan for $5 billion that was scheduled for release on February 11. 

The government, however, is giving few signs of budging and has hinted it may even suspend debt repayments to the IMF and the World Bank. On February 4, Lavagna released a report pointing out that these institutions continued to drain the country of financial resources even during the midst of a severe economic crisis. In 2002 and 2003, they lent $9.3 billion to the country while collecting $16.6 billion in old debt. In other words, due to the repayment demands of institutions like the IMF and the World Bank the country suffered a net loss of over $7 billion. 

The fact that Nestor Kirchner, a little known politician from the sparsely populated province of Santa Cruz, would take on the dominant international institutions is due in large part to the fact that the Argentine people have rebelled against prior governments and openly mobilized in the streets against the payment of the foreign debt to the IMF and its kindred institutions. A popular slogan in 2002 was “Que se vayan todos,” meaning the entire political class and its international financial backers should be tossed out. International private banks like the Bank of Boston and Citibank were denounced in particular for their role in precipitating the country’s crisis. 

The Piqueteros were the leaders of this popular revolt. Comprised of the underclass that is suffering the brunt of the country’s 20 percent unemployment rate, they poured into the streets blocking traffic to demand jobs, government assistance for their families, and land to grow their own foodstuffs. The political beliefs of the entire country were shaken by the crisis. Popular assemblies, cooperatives, alternative currencies, worker- seized and -run factories, along with a host of local self-help institutions have taken root in the country as the people strive to overcome their economic desti- tution. 

The French foreign minister, Dominique de Villepin met with the Popular Assembly of San Anselmo in the province of Buenos Aires, announcing a special contribution to the Assembly’s free popular dining center as well as to its educational and cultural programs. A leader of the assembly told De Villepin: “We organized the assembly because we need to resist the efforts to privatize even the political spaces...” It was not specifically mentioned at the Assembly, but one of De Villepin’s reasons for making this gesture was to try to protect French investments like the Argentine water company that was privatized during the Menem government. 

The Piqueteros of Argentina are especially militant, often denouncing government programs as “reformist” at best and for not going far enough to take on foreign interests and the economic groups that still dominate the country. In early February, several groups of Piqueteros seized the labor ministry, denouncing the government decision to eliminate the $50 a month payments to about 250,000 families. This occurred on the eve of Lavagne’s visit to Washington where he was to negotiate with the IMF on the dispersal of the new loan. The government says there were irregularities in many of these payments, but the Piqueteros are demanding a public review of the cases of those who were dropped from the roles. 

“For the time being Kirchner maintains his high level of support,” says Manrique Salvarrey, a political journalist who also works as a staff assistant in the Argentine Congress. “But if he cedes too much to the IMF and does not carry out fundamental economic changes, the country could witness further political eruptions from groups like the Piqueteros.”

Roger Burbach is the author of The Pinochet Affair (2003) and is co-author, with Jim Tarbell, of Imperial Overstretch: George W. Bush and the Hubris of  Empire ( Zed Books). 
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