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Argentina is the tango partner the IMF can’t quit

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Argentina, the land of Malbec and steak with a side order of inflation, reached a preliminary deal with the International Monetary Fund on Friday to stave off default on the lender’s biggest bailout in history. The upshot: It will take years more before the IMF gets back the many billions it lent to Argentina, seemingly a fiscal black hole of a country from which nary a dollar escapes.

The rough agreement between the IMF and the left-leaning Peronist government — which inherited the bailout from the right-leaning administration of former president Mauricio Macri — came after more than a year of intense talks. Analysts had fretted that Argentine pockets would turn up lint as massive repayments loomed, pushing negotiations toward a crunchtime. The deal came together as powerful Peronist factions threatened to walk away from repayments if generous terms couldn’t be struck — which is effectively like telling your credit card company that it had better play by your rules, or else.

“In the last two weeks, the president, the vice president and the speaker of the House in Argentina all gave speeches where they talked against paying the debt,” Gabriel Torres, a senior analyst at Moody’s Investors Service, told me. “This is something you don’t hear anywhere else in the world anymore.”

Argentine officials told the nation Friday that the IMF had given in on one key point: There will be no swift spending cuts. Some specifics of the deal remain to be worked out, but it envisions a gradual reduction in the fiscal deficit by 2024 without austerity measures, and relies in part on age-old promises to fight tax evasion and wean the country off energy subsidies. The relatively long timeline gives room for the Peronists — known for spending binges before elections — to keep the country’s creaking coffers open ahead of the pivotal 2023 presidential race. In the meantime, the IMF — of which the United States is the largest contributor — will need to hope that Argentine guarantees this time are better than the last.

The track record for Argentina adhering to its promises isn’t exactly stellar, and the deal marks a good moment to consider who’s to blame for the IMF’s long tango with a country that steps from one financial crisis to another, all while spending other people’s money.

Pundits are taking swipes at the IMF and Argentina alike. One common narrative is shared blame: that Argentina is a debt addict and the IMF its dealer.

But if Argentina is a victim, it’s from self-inflicted wounds.

In its early-20th-century heyday, Argentina, blessed with fertile plains that made it a global breadbasket, was richer than Japan and had more cars per person than France. But from the ashes of the Great Depression came not a rebirth, but a long, slow decline propelled by destructive military governments and the populism of the complex political machine launched in the 1940s by Juan and Eva “Evita” Perón.

Especially in more recent decades, Peronist governments went on spending sprees, leaving an impossibly high bill to cover for opposition candidates unlucky enough to follow their acts. The worst moment came after the IMF cut off the country’s credit in 2001, plunging the debt-laden nation into a historic sovereign default and currency devaluation that devastated the middle class and sent poverty soaring. For a “serial defaulter” — Argentina has broken its pledges to creditors nine times since independence in 1816 — it would mark its worst tangle with the IMF, but not its last.

In a candid self-assessment of the 2018 bailout, the IMF in December acknowledged the folly of the $57 billion deal. The lender conceded that it had failed to grasp just how deep-seated the financial challenges were in Argentina, a country that prints money like paper and whose people have so little faith in the peso that they stash away U.S. dollars any chance they get.

The current Argentine government and some critics agree on one thing: that the 2018 bailout should have never happened. In Forbes, Agustino Fontevecchia described that deal as being opposed by the Europeans at the IMF, but championed by the White House to help out Macri, considered a friend of President Donald Trump. By boosting Macri, it was also meant to block the political comeback of an infamous critic of Washington — former president Cristina Fernández de Kirchner.

Despite the bailout, investors never regained faith in Argentina, the peso dived, inflation soared and Macri went down in an easy defeat in 2019, paving the way for Fernández de Kirchner’s return as a vice president who looms large over President Alberto Fernández.

But the IMF’s machinations, Fontevecchia notes, “shouldn’t excuse the Argentine political class, which is the main guilty party here.”


All this comes from a place of tough love for a country I know and adore. As a journalist who covered Argentina on and off for three decades, including five years spent living there, I have long compared it to my first — and last — Alfa Romeo. Just like that Alfa, Argentina’s glossy surface is a thing of classic beauty. Buenos Aires is a Potemkin village of a capital, replete with Belle Epoque buildings, elegant wrought-iron balconies and chic cafes. But also like that Alfa, Argentina keeps breaking down because when you lift the hood, its insides just don’t work.

The IMF has long been criticized for demanding austerity of countries in crisis. But in Argentina’s case, it’s precisely the vice of overspending that’s been its greatest source of distress. Its backbreaking debt is a legacy of misspent funds and official corruption. One senior Peronist — the socialite and former environmental minister María Julia Alsogaray — was convicted in 2004 for financial crimes against the state involving hundreds of millions of dollars’ worth of transactions. Fernández de Kirchner, meanwhile, has been accused of accepting irregular payments from Aerolíneas Argentinas, the state-owned airline, and being involved in an illicit association with a friend and businessman in lucrative public works contracts — allegations she has long denied.

Voters, meanwhile, seem willing to accept corruption as a cost of being Argentine. “I know Cristina robs,” one of her supporters in a low-income suburb of Buenos Aires told me ahead of the 2019 elections. “But at least we were better off with her.”

As the Organized Crime and Corruption Reporting Project noted in 2020, when Argentina was renegotiating $65 billion in debt with foreign creditors, six times that amount was believed to be held by its citizens and companies in offshore accounts. Marcelo Bergman’s book “Tax Evasion and the Rule of Law in Latin America” compared the relatively higher tax avoidance levels in Argentina with its more fiscally responsible neighbor, Chile.

“Taxpayers in Chile conform better to tax laws in part because they perceive their own tax authorities as more effective and legitimate than Argentines perceive theirs to be,” Bergman wrote.

Argentina, meanwhile, tends to agree to terms with foreign lenders and the IMF with its fingers crossed behind its back.

“They have this idea that you pay off your debt only if everything is perfectly fine in the economy, but if you’re in crisis, you won’t,” Torres said. “What you’re telling investors is: ‘Don’t trust us.’”

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