The arrival of the right-wing extremist Javier Milei at the Casa Rosada marks a new stage in Argentina's relations with the International Monetary Fund (IMF). Representatives of the organization have arrived in Buenos Aires to negotiate a possible restructuring of the agreement that Argentina has had with the fund since 2018, when the conservative Mauricio Macri incurred debts of 44,000 million dollars, and the payment plan signed in 2020 with the Peronist Alberto Fernandez. The funding body will begin meeting with technical teams this Friday and the meeting with government officials scheduled for today has been postponed to Monday. Milei is confident the negotiations will be successful because the spending cuts he has already begun are, in his own assessment, “tougher” than what he is demanding from the IMF. The fund doubts that the far-right will be able to carry out this orthodox and pro-market plan, which is facing resistance on the streets and clashes with Congress and the courts.
Argentina has to pay off the 44 billion debt it took over from Macri, which soon became unaffordable for the country. The Fernández government that succeeded Macri agreed to a new payment plan in exchange for a series of fiscal and monetary targets. The latest revision of the current program was approved in August. The fund considered that Argentina had not met the targets, but approved a new disbursement, believing that the non-compliance was due to an “unprecedented drought and policy deviations”. A new review is now due, which was due to take place in December and was postponed due to Milei coming to power.
The current government believes the 2020 agreement is a “virtual failure” as the country has “failed” to meet the targets. However, formally this is not the case and the representatives of the Fund will meet with the Chief of Staff Nicolás Posse, the Minister of Economy Luis Caputo, the authorities of the Central Bank and the technical teams in order to “redirect” the negotiations, according to the presidential spokesman , Manuel Adorni. The government did not mention the possibility of leaving the current agreement, which ends in September, to sign a new one, and ruled out raising new financing. Various analysts consulted by EL PAÍS believe that these options are “not very viable,” although there is no certainty. The agenda for the meeting was “not set in advance,” assured Adorni.
Monday's meeting, scheduled for this Friday, will be the first meeting of officials of this government with representatives of the fund in Buenos Aires, after meeting in Washington in December. Kristalina Georgieva, head of the International Monetary Fund, said at the time that the organization was “very interested” in supporting Argentina. Georgieva had had a video conference call with Milei days earlier. “The fund has been cooperative,” the president said in a message on the social network X, describing the conversation as “excellent.” For this reason, and because of the depth of adjustment Milei has already begun – devaluing the currency by 50% and announcing the elimination of transport and energy subsidies, among other measures – the government is confident it will achieve this IMF support.
A successful agreement will allow the government to strengthen the currently vulnerable balance of payments and send a message to international investors. But some analysts point out that the orthodoxy of Milei's economic program, based partly on measures imposed by decree or not yet approved by Congress, could lead to differences with the IMF.
“The government shows commitment to implementing the reforms it proposes,” says Pablo Nemiña, political economy researcher at the National Council for Scientific and Technical Research (Conicet), the University of San Martín and the Latin American Faculty of Social Sciences (Flacso). ). But that's not all, he adds: “It also has to be proven that the policy is sustainable, that is, that it can be implemented because it has a certain level of support.” In economics, he explains, we talk about property, i.e. “property or “control” that a country has over the agreement.
Milei has a problem. Although the far-right won the second round with 56% of the vote and popular support is still broad, his party, La Libertad Avanza, is in the minority in Congress. The bill he has presented with more than 600 measures to reform Argentina's political, economic and social system must overcome legislative hurdles. The mega-decree that he has implemented with more than 300 reforms and which is being challenged in court as “unconstitutional” must also do the same – a court has already suspended part of this decree this Wednesday. The roads pose another challenge: citizens from different parts of the country oppose the measures almost daily, and the country's main trade union federation, the General Confederation of Trade Unions, has already called for a general strike on January 24th.
Protests against Javier Milei's measures to deregulate the country's economy.NurPhoto (Getty Images)
Nemiña believes that the support of the measures will be crucial in shaping the connection between both parties. “Renovations are possible at any time. But society must be involved and the government must be willing to let its ideas be adapted. If you think society is wrong, you have to convince them. There is an extraordinary instrument for this called politics,” he emphasizes.
“The IMF is more political and knows that it has to conduct negotiations that make it possible to advance these reforms and in some way contain the sectors affected,” says Francisco Cantamutto, doctor of social sciences specializing in economics and researcher at Conicet. Cantamutto explains: “If the Fund accepts an ideological position like that of the Milei government, there is a risk that the program will collapse very quickly if society cannot tolerate it.” If, on the other hand, it aims for a smaller but more socially viable program, it would fall short of the demands of the government itself. “We are facing a relatively new situation that the IMF needs to study carefully.”
Further stages will follow this approach. While the parties negotiate, Argentina's payment plan with the Fund follows the predetermined path. After the IMF paused disbursements following the ruling party's defeat in November elections, the Milei government agreed to a new $960 million bridge loan with the Development Bank of Latin America (CAF) to cover December maturities. The country will have to pay almost $7.3 billion this year. The first maturity is this Monday, January 9th, and the second one a week later, on the 16th, for a total of 1,900 million.
Harmony with the fund
The IMF has intervened in the Argentine economy during periods of democratic governments and dictatorships with liberal or protectionist governments. President Juan Domingo Perón refused to be included in the organization's list of members when it was founded in 1944 because he considered it “a suspected new offspring of imperialism.” But ten years later, General Pedro Aramburu first gained fame after seizing power in a coup in 1955. Thus began the country's history of encounters and disagreements with the IMF, an acronym that Argentines associate with unpopular and profound social crises such as the Corralito crisis of 2001 and the default on a $144 billion foreign debt.
In 2006, he and Peronist President Néstor Kirchner settled debts to the fund and ushered in an era of distancing. The organization closed its office in Buenos Aires and Argentina was exempt from regular inspection of its technicians. For 15 years the country did not ask for help. Until 2018, shortly before the end of his term in office, Macri asked for another rescue package.
The more orthodox and market-friendly phase inaugurated by Milei “is in line with the strategy of neoliberal governments that have previously crossed Argentina, but from a more extreme ideological position and moved to the right,” says Cantamutto. The economist points out two peculiarities. One is the “position of serious political weakness” that Milei occupies in parliament, and the other is “a different international scenario.” “Today we are not faced with the unipolar world of the 1990s. “The global hegemony of the United States is threatened by the rise of the BRICS by China,” he says.
New geoeconomic strategy
Argentina has just officially declared that it will not participate in the BRICS, the economic alliance of Brazil, Russia, India, China and South Africa that Argentina joined in August. The decision is consistent with Milei's vision, which defends his government's closeness to the United States, Israel and the “free world” in general, far from the countries he considers “communist.” China is on this banned list, but so is Brazil. “This affects the relationship with the Monetary Fund, which is so strongly influenced by the United States,” says Noemí Brenta, doctor of economics at the University of Buenos Aires and author of the book “History of Foreign Debt from the Dictatorship to Today.” “I expect the government to use this external repositioning as leverage to obtain more favorable treatment from the fund,” he adds.
However, Brenta sees it as “difficult” for the fund to grant Argentina additional resources to the agreement concluded in September 2024. “The agreement with the fund is already 84% paid out.” We cannot expect much more than this $7 billion [que restan]. And that will serve to pay for the fund itself,” he estimates. He then continues: “What other funding options does the government have? No significant amounts. Relations with China have already cooled and China has denied activating the new tranche of the swap [intercambio de divisas], so we can't rely on it. The amounts that other organizations – CAF, World Bank, IDB – can lend us are minimal for the external financing needs.” Argentina's external debt amounts to almost 300,000 million dollars.