Argentina in shock as government returns to the IMF for an emergency $US30 billion loan

JUAN MABROMATA / AFP / Getty Images)Argentinian president Mauricio Macri / File
  • Argentina is seeking an emergency $US30 billion loan from the IMF to prevent a financial crisis after three successive interest rate rises last week failed to arrest the falling peso.
  • Argentines are shocked by proposals after the last loan in 2001 coincided with a major financial crisis in the country.
  • President Mauricio Macri made a televised address to the nation.
  • “This will allow us to face the new global scenario and avoid a crisis like the ones we have faced before in our history,” he said.

Argentina is seeking emergency credit from the International Monetary Fund (IMF) in an effort to prevent another financial crisis, after three consecutive interest rate rises last week failed to stop the decline of the Argentine peso against the dollar.

Argentines have been shocked by the proposals, which re-conjure images from 17 years ago when the country was plunged into a financial crisis which caused a $US100 billion debt default along with social and economic chaos.

Scarce international funding, a strong US economy and a slide of the peso and interest rates at 40% have forced President Mauricio Macri to go back to the international lender.

The President made a televised address to the nation yesterday, where he said, “This will allow us to face the new global scenario and avoid a crisis like the ones we have faced before in our history.”

The announcement is a stunning turn around in national policy from the 59-year-old President Marci who came to power in 2015 promising normality, and whose predecessors Néstor Kirchner and his wife Cristina Fernández led the country for twelve years with outward distrust for the IMF.

“When you talk about the IMF in Argentina, you are talking about a crisis,” Carlos Germano, a political analyst told the Financial Times. The word “Fund” has become a dirty word in Argentina he said, adding, ” The vast majority now believe it [the IMF] is synonymous with crisis and usury.”

Argentines are still traumatized by the crisis which coincided with austerity measures imposed by the IMF and saw a sharp fall in living standards, job losses, and political turmoil. In just two weeks five different Presidents took office, the peso lost two thirds of its value against the dollar and banks froze deposits. One in five Argentines lost their job and at the depth of the crisis seven out of ten children growing up in Argentina were considered poor.

This time around, the IMF will again expect Argentina to make certain economic changes in exchange for the $US30 billion loan.

“More than an agreement with the IMF, what is needed is an agreement between Argentinians,” Ricardo Alfonsín of the Radical party told the Guardian. “I’m worried by the IMF’s conditions. With time, the remedy could prove worse than the disease.”

From a financial stand-point, investors have been encouraged by news of the loan request, but the population is shocked and popularity for President Macri is likely to slide further.

Macri said conditions have changed since he took office in 2015. “During the first two years we have had a very favourable global context, but today that is changing, global conditions are becoming increasingly complex due to several factors: interest rates are rising, oil is rising, currencies of emerging countries have been devalued, all variables that we do not control.”

The IMF’s managing director, Christine Lagarde, said on Tuesday, “Discussions have been initiated on how we can work together to strengthen the Argentine economy and these will be pursued in short order.”

She said that Argentina is a “valued member of the International Monetary Fund”.

Despite concerns, the economic situation in Argentina is considered to be much stronger then it was in the run up to the 2001 crisis, leading to a hope that history won’t repeat itself.

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