The International Monetary Fund and Latin America: The Argentine Puzzle in Context

Introduction

Introduction To understand what happened in Argentina we need to look to the economic reforms that nearly all Latin America undertook in the ’80s. Countries emerging from years of poverty and dictatorship were told that democracy and the markets would bring unprecedented prosperity. And in some countries, such as Mexico, the rich few have benefited. More broadly, though, economic performance has been dismal, with growth little more than half of what it was in the 1950s, ’60s and ’70s. Disillusionment with “reform”—neo-liberal style—has set in. Argentina ’s experience is being read: This is what happens to the A-plus student of the IMF. The disaster comes not from not listening to the IMF, but rather from listening [to it].1 The Argentine crisis of 2001 inevitably raises the question of how a country that until the 1930s was expected to join the list of the richest countries in the world ended up suffering such economic deterioration. Although Argentina may have made its own economic mistakes over the years, we must also look at the international economy in general, and at the International Monetary Fund (IMF), in particular to understand what went wrong. In effect, the crisis in 2001 took place as an already heavily indebted Argentina was following the IMF’s advice to the letter. But Argentina was not the only country that experienced economic stagnation or worse while implementing painful austerity measures promoted by the IMF. Other Latin American countries also suffered a considerable decline in growth in the 1990s. Indeed, the acute recession that began in 2001 triggered what experts from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) termed the “lost half decade” for Latin America, a period characterized by declining growth rates, increasing poverty, and social inequality.2 2 Introduction Although most of the problems discussed here are common to many countries in the region, this book focuses mainly on Argentina’s experience as the most comprehensive prism for understanding IMF–Latin American relations. As Joseph Stiglitz rightly indicates, no other country in the region tried harder to endear itself to the IMF; no other country was so applauded by the IMF; and no other economy experienced so traumatic a crisis as Argentina. But Argentina is a good case in point for political reasons, as well. Since the IMF’s foundation in 1944, the various forms of regime that have existed in Argentina—including dictatorships and democracies, some populist, others conservative, liberal, reformist , or developmentalist—have prevailed in all of Latin America. The history of the relations between the IMF and the shifting Argentine administrations serves to illustrate (1) how every twist and turn in Latin American politics has (or has not) affected the IMF’s modus operandi in the region; and (2) the countries’ willingness to approach or confront the IMF, to continue to interact with it almost daily, or to interrupt interactions with this influential institution. To this mix must be added an ambivalent and often tense relationship with the United States as the strongest member state in the IMF since its establishment and the only one with de facto veto power. Argentina is thus an even more illuminating case than Brazil or Mexico, whose ties to Washington have been friendlier and significantly more stable. To understand Latin America’s lost half decade at the turn of the twentyfirst century, it is not enough to look back at the “lost decade” of the 1980s. To appreciate fully not only what happened to one of the most promising economies of the region but, more important, how it happened, we must begin at the seminal historical moment in which the IMF and the World Bank were created: the Bretton Woods Conference of 1944 and the surprisingly neglected formative period of the IMF from the 1940s to the 1970s. The early and contemporary history of IMF–Latin American relations offers a window onto the formal and informal processes and patterns that were well under way in the 1980s and 1990s, when countries in the region fairly unanimously embarked on a series of neoliberal reforms promoted by the IMF and inspired by the Washington Consensus—the set of ten policies that the U.S. government, the IMF, and the World Bank believed were necessary elements of “first-stage policy reform” that developing countries should adopt to increase economic growth. To weave together the story told in this book, I conducted extensive historical research in archives on three continents, including complete series...