Charles Dolph: The second time as farce? The IMF returns to Argentina

Argentina’s Mauricio Macri administration unexpectedly announced recently that it had opened negotiations with the International Monetary Fund (IMF) for a Stand-By Arrangement amid intense monetary and financial instability—with the Argentine peso losing roughly 25 percent of its value in a two-week period, the Central Bank of Argentina was forced to sell $10 billion in reserves to contain the volatility. As details began to emerge late last week about the 36-month, $50 billion agreement with the IMF, an institution widely blamed for the country’s devastating crisis and resulting sovereign debt default in 2001, Argentina faces growing financial and political uncertainty.

Pedro Biscay, who served on the Central Bank of Argentina’s board of directors from 2014 to 2017 and currently directs the Centro de Integración Financiera (CINFIN), or Center for Financial Integration, in Buenos Aires,[1] joined me to help make some sense of this situation and discuss the panorama of politics and financial capitalism, social movements, and the state, in Argentina and more broadly.


Figure 1: IMF Managing Director Christine Lagarde talks with Argentine President Mauricio Macri at the presidential residence. The Macri administration recently agreed to a $50 billion bailout package with the IMF (photograph by Casa Rosada via Wikimedia Commons, CC BY 2.5 AR).

Charles Dolph: Since Mauricio Macri assumed the presidency of Argentina in December 2015, his administration and Cambiemos (“Let’s Change”) coalition have shown a clear vocation for indebtedness. With a February 2016 agreement with vulture funds litigating the value of defaulted bonds in New York courts paving the way, the administration issued more public debt than any other “emerging market” from January 2016 to September 2017. According to the Economic Commission for Latin America and the Caribbean (ECLAC), Argentina accounted for 28 percent of all public debt issued region-wide in 2017. But turning to the IMF was not previously part of the Macri administration’s agenda. Nor was such an agreement foreseen by the IMF, as Christine Lagarde denied that the administration had sought any deal with the institution when Argentina hosted the meeting of the G20 Economy Ministers last March. So, why now? What provoked this sudden monetary and financial instability?

Pedro Biscay: Here in Argentina, an attempt was made to weave together an explanation based on the idea that we were going through an adverse international context due to the rise in the interest rate on US Treasury bonds, which for 24 April, the day that the run on the exchange rate peaked, jumped to over 3 percent. This element was combined—always according to the explanations of the specialists in the “city” [the Buenos Aires financial district]—with the fact that a tax on financial income went into effect, which the government itself had promoted a few months earlier, with the purpose of taxing income from Central Bank notes [known as LEBACs] held by foreign investors. So, the official explanation combines these two aspects, to say that we are facing a scenario of transitory financial turbulence.

But to cling to this idea is to miss the forest for the trees. The underlying problem is extremely serious and has to do with the lack of dollars, which the Argentine economy needs to finance capital outflows and interest payments on the external debt, which, as you say, this government quickly took to record levels. If you look at Argentina’s balance of payments, specifically Central Bank liabilities, you will see that at the end of 2017, there had accumulated debts on the order of $6–7 billion. To put this in perspective, this is where nonresident “carry traders” were arbitraging interest rate differentials on notes issued by the Argentine Central Bank since the beginning of the Macri government. You have a segment of investors extremely sensitive to changes in the international interest rate, to changes in Argentina’s country risk assessment, and to two other key elements, which are the current account deficit and the fiscal deficit.

So, let’s break it down in steps. That segment of investors unloaded their positions in Central Bank securities, converted the profit into dollars, and moved it to other financial markets in the first days of the run on the exchange rate. Pure, hot money. It entered, speculated, and left. That financial mass represents the heart of the investments that the Cambiemos government attracted—all short term, none of it destined for production and development. Once that segment of investors pulled out, the run on the exchange rate first mobilized local holders of Central Bank notes (I would clarify here that this means the government gradually transformed an instrument of sterilization designed to mitigate the effects of speculative financial flows into another instrument of financial speculation) and then to small savers in the country with dollar deposits, who went to the banks to withdraw part of their money in foreign currency. This last aspect did not deepen to the extent of turning the run on exchange rate into a serious withdrawal of deposits from the system. Luckily, it was contained.

CD: Can you put this in the wider context of how the administration’s policies have brought them to this point, and perhaps shed some light on why it has turned, rather desperately, to the IMF? The IMF is clearly rejected by a wide swath of Argentines who place much of the blame on it for the profound political and economic crisis that erupted in late 2001. It would seem that the administration is well aware of this and sought to avoid such a measure. Bloomberg reported that when Wall Street investors rebuffed Minister of Finance Luis Caputo on a further bond issue in March, suggesting that he instead seek a “Flexible Credit Line” with the IMF, he responded that this would not be politically viable.

PB: All this is just the external face of a very serious process of commercial, financial, and fiscal imbalance that the government generated via the indiscriminate application of financial liberalization policies. At the commercial level, this has meant opening the country to imports combined with the elimination of legally established deadlines to repatriate profits on the export commodities that generate foreign currency. This combination caused an accelerated growth of the import sector and a fall in the foreign currency generated by exports, mainly by the agricultural sector that stores part of its wealth outside the country. Thus, after a year and a half of the Macri government, the Argentine economy begins to show record trade deficits, with negative balances for the first five months of the year already above $3.5 billion.

On the financial side, there was also a wave of acute imbalances, mainly due to the deregulation of the capital account, which allowed the free entry of speculative funds into the country and the uncontrolled exit of dollars. This sum is already close to $40 billion, not counting the departures for tourism. Parallel to this, the financing needs of the country require an investment on the order of $30 billion which, if it doesn’t come from the export sector, must be sought by the minister of finance in debt markets. That was the turning point, when in a meeting with Wall Street investors they said “kaput” to Caputo, based on the worrying levels of external debt. Foreign investors said “enough” to funding capital flight from Argentina, because the risk and financial fragility begins to be worrisome. When the international market closed the faucet on dollars, it unleashed the crisis, and the government was forced to go to the IMF in search of some salvage operation.

This point was reached because the government, and in particular the Central Bank, eliminated all the exchange controls that had been designed to monitor capital flows and at the same time sponsored the flight of foreign currency under the pretense of giving greater confidence to investors. What arrived was not the promised wave of investments but the external restriction of a lack of dollars. At the same time, the liberalization of the interest rate led to a greater appreciation of the exchange rate, supported by short-term funds that speculated against nothing less than the central bank itself, leaving little room for maneuver to intervene countercyclically. Notice that, paradoxically, unlike what all other central banks do, they used the Central Bank’s balance sheet to provoke a scenario of financial vulnerability, to the point that the IMF now asks them to clean up this situation.

It’s in this context that they go to the IMF, that they renegotiate the swap of reserves with China, so criticized during our management of the Central Bank [during the previous administration of Cristina Fernández de Kirchner], as well as return to operating in currency futures, which was foreseeable despite the fact that they contrived to prosecute the use of this policy tool,[2] costing no less than $10 billion of reserves sacrificed to contain a run on the exchange rate.

CD: So, what is the nature of the agreement with the IMF, and what exactly is its purpose?

PB: This $50 billion agreement with the IMF will do nothing but deepen the austerity that the government is already imposing: reduce salaries, eliminate acquired social rights, privatize retirements, privatize the Banco de la Nación—which is the main asset of the Argentine financial system—cut funds to the provinces, reform the Organic Charter of the Central Bank, that is, a classic program of shrinking the state and reducing the fiscal deficit, combined with measures that deepen the dollarization of the system and reduce the monetary and financial sovereignty of the country. It will be necessary to see which of these measures can be applied and which ones remain pending, because Argentina’s experience is hostile to this type of agreement, and, on the other hand, the experience of countries such as Greece and Jordan reflect that these recipes do not solve any of the financial problems of dependent economies. Rather they facilitate a smooth exit for big economic players, while leaving the economies in a state of terminal recession.

CD: What are some of the potential political implications of all this? At least in electoral terms, Macri and Cambiemos appeared insulated from the backlash that their debt and austerity measures have sparked, further consolidating themselves with important victories in last year’s midterm elections. But how are Argentines reacting to the negotiations thus far? What does all this potentially mean for macrismo as a governing project?

PB: In principle, the population is showing dissatisfaction with the course that the economy has been taking since the government took office. Of course, you have sectors that support its measures, but these are a minority linked to the external sector, and to energy and finance. The rest of the population, above all small and medium enterprises and a large part of the middle class, are dissatisfied with the direction of the economy. The benchmark interest rate set at 40 percent is disrupting the payment chain in productive sectors; companies are facing bankruptcy scenarios that cause greater risks to the financial system. Workers’ salaries gradually erode, causing losses in the purchasing power of the population. The agreement with the IMF is, in this sense, a sign of failure of the government’s economic policies, because it’s not lost on anyone that they come to the Fund in search of a financial bailout, which in the memory of Argentines quickly brings to mind the crisis of 2001. The same day the government announced that it would go to the IMF, people began to wonder about the risk of a financial corralito.[3] Our people are very sensitive to the recipes of the IMF and external debt crises, which we have lived in the past. All this represents a huge political cost for the government, the impact of which is measured in the loss of a positive image of the president. The recent veto to a law that established limits to the increase in utilities prices is also part of the process of the population’s loss of confidence in the figure of the president.

The next scenario of acute conflict will be the approval of the national budget, because the variables established there will undermine the magnitude of the austerity and the conditions established by the IMF in terms of the exchange rate, investment, social spending, and public cuts. In the face of this process, the government sets up scenarios that are increasingly less credible, for example, when the finance minister comes out and says that we are going to charge less but without a loss of purchasing power, or that inflation at the end of the year will be around 20 percent when we know that it already has a floor of 27 percent for the end of the year.

All this implies a process of growing disbelief in the government, which could not solve the problem of inflation either. Since they took office, they have not been able to lower the inherited levels, which were falling sharply as a result of measures to stimulate the development of the domestic market and domestic production. The Central Bank launched an inflation-targeting plan, which was of little use in this sense, because by leaving the exchange rate free, it generated feedback processes by putting upward pressure on prices whenever the dollar appreciated against the national currency. Now the president of the Central Bank, one of the main figures responsible for the financial crisis, comes out and says that for 2018 there is no inflation target, after having modified it at the end of last year. They are not there to govern: they are filibusters.

CD: It was recently reported that the IMF asked the administration to increase taxes on agricultural exports as part of the agreement. This is rather ironic, as exactly 10 years ago the Kirchner administration and powerful landholding interests were locked in a paralyzing standoff over a proposed reform to the system of export taxes on agricultural goods, which were the key source of public revenue during Kirchnerism. That conflict altered the tone and subsequent trajectory of politics in Argentina through the end of CFK’s second term seven years later. Meanwhile, the Macri administration quickly reduced or eliminated these export taxes altogether, thereby slashing state revenues and adding to the question of how any of the debt it was issuing would ever be repaid. What do we know about this aspect of the agreement? Could the Macri administration actually pull such an about-face and raise export taxes without completely antagonizing its political base among Argentina’s powerful landholding interests? And if not through such means, what kind of further austerity measures could the administration impose on society to meet the conditionalities imposed by the IMF, especially that of reducing the fiscal deficit to 1.3 percent of the GDP for 2019?

PB: The government kept the negotiations secret, even violating constitutional rules that require that the National Congress take direct intervention in the handling of foreign debt matters. Within the Congress, there is a Bicameral Commission that works to monitor the debt and has asked the executive for information on these issues, but has not achieved positive results. Basically, the government exercises political power in the form of the presidential veto, oriented toward financial markets with which it openly dialogues and grants much of their demands. But it governs with its back to the Congress and the Argentine people. Therefore, little is known about the specifics of the negotiations. Reestablishing export taxes, setting differential exchange rates—these are possible measures that could help alleviate the core issues that I mentioned at the beginning.

Because one thing is clear, and it is that in this country, dollars are needed to pay the external debt that the government contracted for. The amount agreed to with the IMF is enough to pay the outstanding Central Bank notes; then the government needs to get the rest of the money. How will it do so? Doing this is equivalent to mortgaging the autonomy of the country and its monetary sovereignty, because a project of economic independence is unthinkable if the dollars generated by your economy are deposited offshore and do not return to the country as investments and to finance imports.

That’s why the government is at a crossroads. If it maintains the current scenario of liberalizing policies, it knows that it does not have the necessary capital to finance the rest of the mandate. If it applies measures aimed at intervening in the market, such as export taxes, it opens a scenario of conflicts with a very important sector of power, which until now was a direct ally. This type of scenario occurs as a consequence of a government that is nothing more than a business model for financial capital.

And Congress has a key role in that, because it has to demand that the agreement be debated there. What legitimacy does a democracy have that allows a president, a minister, and a central banker to compromise the fate of future generations, mortgage companies, eliminate the pension system, destroy salaries, and lead us along the same path of default, such that vulture funds come along later to buy our debt at the price of misery? What kind of democracy admits such a level of autocracy?

CD: I want to also situate these developments around the IMF and indebtedness in relation to wider questions about politics, finance, social movements, and the state in Argentina and perhaps more broadly. In their recent book, Assembly, Michael Hardt and Antonio Negri (2017: 224) quote a text of yours to the effect that social struggles need to build “a capacity of political invention able to transform the financial dynamic in the field of battle against capital.” Yet, in arguing for a transformation of the social relations institutionalized through money, they sidestep the question of the state. Making clear that they do not envision such transformation in terms of taking control of central banks, in a kind of contemporary “storming of the Winter Palace” (referring to the mass action of taking over the czar’s palace during the Bolshevik Revolution in 1917), they instead elaborate on their version of an antistatist politics of the multitude that, as John Holloway (2002) has put it, seeks to “change the world without taking power.”

However, the rise of left-of-center governments across much of Latin America in the early twenty-first century has entailed more complex relationships between states and social movements. From your own perspective of struggling within and outside the state apparatus and its financial institutions in Argentina, how do you see the relationship between these positions in terms of inventing the political capacities necessary to alter the financial dynamics of capital? What is the importance of central banks in particular?

PB: I believe there are two broad levels of analysis, intervention, and political action that make up the core of strategies of articulation of defenses and proposals against the government of finance. We are currently seeing that for global corporations, the state becomes an increasingly secondary mediation, that is, an actor that suffers a deep crisis in the dimensions of political, legal, and economic sovereignty, but that in turn attempts to establish regulations on the formation of the rate of profit on capital. The role of central banks, which are key to enacting policies aimed at mitigating the destabilizing effects inherent in the dynamics of financial capital, is inscribed on this level. Central banks have this function through the development of instruments to regulate liquidity: they generate liquidity when there is a shortage and restrict it otherwise. They intervene in the exchange rate to avoid distortions in financial stability and not much more than that. In the face of global financial capital, every day it becomes more difficult to formulate plans in which central banks promote full employment in the classical sense. This task faces great political resistance on the part of capital, as, for example, in the Brazilian process against Dilma Roussef and later Lula da Silva. But we must return to that path, the path of full employment. Global corporations, on the other hand, face ever more complex scenarios against the new financial technologies that tend to displace them in controlling market share. The case of Amazon is an example that strongly threatens the main global companies. Financial capital tends to run in hybrid forms and through areas of difficult localization. In this scenario, it is necessary to build forces of social power linked to trade unions, to social movements and the workers of the popular economy, the excluded workers who should have representation on the board of central banks, because that is where the dynamics of financial profit are defined.

It is necessary to represent from this place areas of formulation of the experiences of finance for the community, of new forms of monetary exchange, alternative systems of payment, and, above all, rules to reduce the speculative aspect of finance. In these terms, the world is seeing a process of a deepening schism of inequality and violence around financial exploitation, which recognizes neither ethical justifications nor historical antecedents. The challenge presented by the offshore world is part of that process. The challenge for the next generations is to deepen the role of social movements, their autonomy vis-à-vis the state and the corporations of financial capital. The inequality generated by finance today can only be reversed by a movement that puts an end to forms of speculation by capital.

CD: Expanding a bit on the previous question, there appears to be a flourishing of movements around a heterogeneous set of issues in Argentina. While those around gender violence and reproductive rights such as Ni Una Menos appear especially vibrant, what kinds of articulations are emerging between these and other movements, for example, over extractivism and indigenous rights, Argentina’s historically strong labor unions and human rights movement, and now perhaps mobilization against the IMF? How are the relations between the state and social movements being thought and discussed in Argentina today, and what are some of the political and intellectual inspirations for these discussions and articulations?

PB: The women’s movement marks a renewed course in the debates and experiences of political articulations between social movements and the state. There is a truly revolutionary direction there. The experience of groups such as Las Insumisas de las Finanzas and the slogans of Ni Una Menos—linked to the flags of feminism, crossed with the challenge to external indebtedness as part of a common process against patriarchy, for example—are concrete examples that indicate a little to everyone how to move forward, how to draw up new agendas in view of a collective construction of new forms of revindication, against revitalized forms of colonial subjection. Likewise, there is still a need to link the rest of the demands and alternative projects necessary for the construction of more plural societies that know how to live in full respect with the environment. Extractivism is not yet a core point in the agenda of trade union movements, and we have not been able to concretely synthesize solutions to the problems of energy and sovereignty at the same time. In the case of indigenous peoples and peasant movements, their rights to land and territory are also not guaranteed. The model of a financialized society in which we live demands that we rethink broader and more complex agendas in the face of these manifestations of economic power.

Charles Dolph is a PhD Candidate in Anthropology at the Graduate Center of the City University of New York (CUNY). With support from the Wenner-Gren Foundation and CUNY, he conducted research in Buenos Aires from 2014 to 2016 for his dissertation, which analyzes the dynamics of monetary hoarding and state formation in Argentina.


[1] CINFIN is a project for elaborating policies for financial reform within the Center for Public Policies for Socialism (Centro de Políticas Públicas para el Socialismo, CEPPAS), located in Buenos Aires.

[2] More than a dozen high-ranking officials from the former Kirchner administration, including the president, have been indicted on dubious charges of “unfaithful administration” over the Central Bank’s sale of dollar derivative contracts, known as “future dollars,” during her tenure.

[3] The corralito was a measure taken in late 2001 that contributed to wiping out much of the wealth held by Argentines in the country’s financial system by severely limiting the amount of dollars that they could withdraw from their bank accounts, which were subsequently converted into pesos and devalued from their one-to-one exchange rate with the US dollar.


Hardt, Michael, and Antonio Negri. 2017. Assembly. New York: Oxford University Press.

Holloway, John. 2002. Change the World without Taking Power: The Meaning of Revolution Today. London: Pluto Press.

Cite as: Dolph, Charles. 2018. “The second time as farce? The IMF returns to Argentina.” FocaalBlog, 20 June.