Macri Weighs Political Cost of Returning, Cap in Hand, to the IMF
Argentina’s request for help from the International Monetary Fund will likely impose a political cost on President Mauricio Macri.
Macri had little choice but to turn to the IMF after the currency plunged, the budget deficit expanded and borrowing costs rose. But the decision, announced via a televised address to the nation on Tuesday, brought back bad memories to many Argentines.
The country negotiated a $40 billion loan from the IMF in 2000, one year before a default on $95 billion of debt plunged the economy into a recession. At the time, many blamed the strict economic policies imposed by the IMF for the crisis.
“The IMF is simply anathema to many Argentines, who regard the Fund as synonymous with the 2001 crisis and ensuing hardship,” said Nicholas Watson, Latin America analyst at New York-based Teneo Intelligence. “Macri’s move is therefore clearly politically risky.”
For Argentines, such as Pablo Guzman, a 37-year-old street-stand magazine vendor in Buenos Aires, any involvement with the IMF is a bad sign.
“It feels like history is repeating itself,” said Guzman. “IMF loans only cause poverty.”
Guzman said he was unemployed as he came out of high school at the end of 1990s through the early 2000s. He only got a job in 2003, after former President Nestor Kirchner took office, dragging the economy out of recession and Argentina out of the shadow of the IMF.
Now, Guzman says he fears the IMF will force Macri to impose more austerity at a time when scrapping subsidies for utilities is causing widespread discontent and bills are soaring.
In a news conference on Wednesday, Cabinet Chief Marcos Pena sought to calm fears such as those of Guzman. “History does not always have to repeat itself,” he said.
It’s a tough sell though. Seventy-five percent of more than 1,000 Argentines surveyed this month in a poll by the Buenos Aires-based consultancies Berensztein and D’Alessio IROL said they’d look unfavorably on turning to the IMF.
The political damage to Macri depends on how much autonomy the government retains, said Sergio Berensztein, the political analyst who jointly carried out the poll.
In the Wings
Macri has a bit of time. His coalition doesn’t face elections until late next year and his government managed on Wednesday to muster enough support to aprove a long-awaited revision of the country’s capital markets law -- which establishes a new framework for transactions involving IPOs, mutual funds and foreign shareholders’ rights.
Still, confidence in his administration hit an all-time low in April, according to an index published by the Torcuato Di Tella University, and emboldening opposition lawmakers have started to push back.
Waiting in the wings, and perhaps the fiercest among critics of his government and the IMF, is former President Cristina Fernandez de Kirchner, now a senator with the Frente para la Victoria alliance.
Supporters of Fernandez and her late husband Kirchner still take pride in how he turned his back on the fund in 2006, clearing a debt of $9.5 billion. The economy boomed under him, but it later soured under Fernandez, whose successor Macri beat in elections in November 2015.
Fernandez slammed Christine Lagarde in 2012 when the IMF managing director warned Argentina that she would pull a red card on the government if it continued with alleged manipulation of economic statistics such as inflation.
Fernandez has remained silent for now, but her former economy minister, a lawmaker and fellow party member, Axel Kicillof took to Twitter on Wednesday to voice discontent.
“You don’t solve this running to Washington,” he said.