Before the pandemic, Carla Huanca and her family were making
modest but meaningful improvements to their cramped apartment in the slums of
Buenos Aires, Argentina.
اضافة اعلان
She was working as a hairstylist. Her partner worked too.
Together, they were bringing home about 25,000 pesos (about $270) a week —
enough to add a second story to their home, creating extra space for their
three boys. They were about to plaster the walls.
“Then, everything closed,” said Huanca, 33. “We were left with
nothing.”
Amid the lockdown, the family needed emergency handouts from the
Argentine government to keep food on the table. They resigned themselves to
rough walls. They shelled out for wireless internet service to allow their
children to manage remote learning.
“We have spent all of our savings,” Huanca said.
The global economic devastation that has accompanied
COVID-19 has been especially stark in Argentina, a country that entered the pandemic
deep in crisis. Its economy shrank by nearly 10 percent in 2020, marking the
third straight year of recession.
The pandemic has accelerated an exodus of foreign investment,
which has pushed down the value of the Argentine peso. That has increased the
costs of imports such as food and fertilizer, and kept the inflation rate above
40 percent. More than 40 percent of Argentines are mired in poverty.
Hanging over national life is an inevitable renegotiation later
this year with
the International Monetary Fund (IMF), an institution that Argentines
widely detest for having imposed crippling budget austerity as part of a rescue
package two decades ago.
With its public finances depleted by the pandemic, Argentina
must work out a new repayment schedule on $45 billion in debts to the IMF. That burden is the result of the fund’s most recent
bailout and the largest in the institution’s history — a $57 billion package of
loans extended to Argentina in 2018.
Now under new management, the fund has lessened its traditional
reverence for austerity, alleviating some of the usual anxiety. Even so, the
negotiations are certain to be complex and politically tempestuous.
The Argentine government, led by
President Alberto Fernández, is
rife with discord before midterm elections in October. The administration faces
a stiff challenge from the left, with
Cristina Fernández de Kirchner — a former
president and current vice president — demanding a more combative stance with
the IMF.
Businesses vent that the government has failed to come up with a
strategy that can generate sustained economic growth. Liberating Argentina from
stagnation and inflation is an objective that has evaded the country’s leaders
for decades. In a country that has defaulted on its sovereign debt no fewer
than nine times, skepticism perpetually dogs national fortunes by limiting
investment.
“There is no plan, there is no path forward,” said
MiguelKiguel, a former Argentine finance secretary who runs Econviews, a Buenos
Aires-based consultant. “How can you get companies to invest? There is still no
trust.”
The Fernández administration is banking on the merits of a more
cooperative relationship with the IMF, seeking to secure a deal with the
institution that spares the government punishing budget cuts and allows it to
spend to promote economic growth.
Such hopes would have once been unrealistic. From Indonesia to
Turkey to Argentina, the IMF has forced countries to slash spending in the
midst of crises, removing fuel for economic growth, and punishing those
dependent on public relief.
But today’s IMF, led for the past two years by
Kristalina Georgieva, has moderated the institution’s traditional obsession with fiscal
discipline. She has urged governments to levy wealth taxes to finance the costs
of the pandemic — a measure that Argentina adopted late last year.
The fund’s analysis of Argentina’s debt picture, and its
conclusion that the burden was not sustainable, set the groundwork for a
settlement with international creditors last year. Investors ultimately agreed
to write down the value of about $66 billion in bonds, overcoming the
opposition of the world’s largest asset manager, BlackRock.
The Argentine government is proceeding on the assumption that it
can secure a deal from the fund that will allow the country to significantly
postpone its debts, providing relief from looming payments — $3.8 billion this
year and more than $18 billion next year — without strict requirements that it
cut spending.
“The IMF leadership has made clear that this is the framework,”
said
Joseph Stiglitz, a Nobel laureate economist at Columbia University in New
York. The new arrangement will reflect “the new IMF,” he said, “recognizing
that austerity doesn’t work, and recognizing their concerns about poverty.”
The IMF’s expected flexibility with Argentina reflects its
deepening confidence in Fernández and his economy minister,
Martin Guzmán, who
studied with Stiglitz.
On the surface, their administration represents a return to the
thinking that has animated Argentina’s public life since the 1940s under the
leadership of
Juan Domingo Perón. His presidency featured muscular state
authority, public largesse for the poor and contempt for budgetary
considerations.
Peronist politicians ever after have showered aid on struggling
communities and spent into oblivion, paying the bills by printing pesos. That
has frequently produced runaway inflation, crisis and desperation. Reformists
have intermittently taken power with mandates to restore fiscal order by
cutting public spending. That has enraged the poor, laying the ground for the
next Peronist upsurge.
The previous president,
Mauricio Macri, took office as the
supposed solution to this cycle of booms and busts. International investors
celebrated him as the vanguard of a new, technocratic approach to governance.
But Macri overdid it in exploiting his popularity with
investors. He borrowed exuberantly, even as he antagonized the poor with cuts
to government programs. His debt binge combined with another recession forced
the country to submit to the ultimate humiliation — asking the IMF for a hand.
In elections two years ago, voters rejected Macri and installed
Fernández, a Peronist. Some suggested that Fernández might stake out an
acrimonious position with creditors, including the IMF. But the Fernández
administration has proved pragmatic, winning the confidence of the IMF, while
maintaining relief for the poor.
“We have to avoid following the patterns of the past that did so
much damage,” Guzmán said in an interview. “We want to be constructive and
resolve these problems in a way that works.”
The most pernicious problem remains inflation, a reality that
assails businesses and households, adding to the strain on the poor through
higher food prices.
In the slum in the southern reaches of Buenos Aires, Huanca’s
partner had recently reclaimed his old job at the nightclub, but rising prices
for food and fuel had effectively diminished their income.
Then came a surge of new COVID cases in their neighborhood. The
government imposed new restrictions amid worries of variants spreading rapidly
in neighboring Brazil. Her partner’s employer reduced his hours, cutting his
pay in half.
“I’m scared about what could happen now,” she said. “Everyone is
very worried.”
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