October 14, 2019
The economic crisis in Argentina continues to intensify, with high inflation, rising poverty, and decreasing investor confidence. The implementation of a record $57 billion IMF bailout program, rather than alleviating Argentina’s economic woes, has seen poverty and unemployment rise, and a surge in debt levels.
Argentine political sentiment was tested in August when voters went to the primary polls and delivered a decisive defeat to President Mauricio Macri and his ruling coalition. With a nearly 16-point lead, Alberto Fernández and his running mate, former president Cristina Fernández de Kirchner, are in a strong position to win the general presidential election on October 27. Their broad-based, progressive coalition is also poised to capture the legislature and key governorships, significantly reshaping Argentina’s political terrain.
In light of these developments, and Argentina’s uncertain future, on Tuesday, September 24, three economists, who have been closely following political and economic developments in Argentina, presented their analysis to congressional staffers and civil society representatives at the Longworth House Office Building in Washington, DC.
The briefing began with opening remarks by US Representative Pramila Jayapal of Washington’s Seventh District and Brian Finnegan, Global Worker Rights Coordinator at the AFL-CIO’s International Department.
Representative Jayapal, Co-Chair of the Congressional Progressive Caucus, emphasized her admiration for Argentina’s history of progressive policy reforms, high union density, and activist political culture, while expressing her concern over the dire effects that austerity policies are having on the country.
Finnegan followed up Jayapal’s remarks by highlighting the importance of Argentine partners in the labor movement for US workers, ranging from their organized and influential presence at the International Labor Organization and the G20 to the key role Argentine labor militancy played in the defeat of the Free Trade Area of the Americas in 2005.
The first panelist was Cecilia Nahón, a Ph.D. economist specializing in international affairs and development. She has more than 20 years of high-level public policy, diplomatic, and academic experience, including her role as Ambassador of Argentina to the United States; Argentina’s sherpa (top negotiator) to the G20; and in representing Argentina at the United Nations, IMF, World Bank, OECD, WTO, CELAC, and MERCOSUR.
Nahón delivered a brief overview of the political and economic situation in Argentina and summarized key elements of the current crisis, weighing in on what led to the current economic situation. She focused on the Macri administration’s neoliberal measures, which she labeled part of the “Wallstreet Consensus,” due to their similarities to the Washington Consensus of the 1990s. However, Nahón remarked, many of the important lessons of the 1990s era were not considered, especially regarding the role of debt. In her view, rather than funding real economic growth via the current debt measures, “the economy became a casino” for financial speculation, and “the engines of the real economy were turned off,” significantly aggravating the Argentine economy’s structural vulnerabilities.
Following Nahón was CEPR Co-Director Mark Weisbrot. In addition to 20 years of following the political and economic situation in Argentina, he coauthored a prescient report last December titled “Argentina’s Deal with the IMF: Will ‘Expansionary Austerity’ Work?” that analyzed procyclical elements of the IMF’s debt package and predicted many of the negative outcomes currently taking place.
Based on that report, Weisbrot examined different ways the IMF program was faulty from the outset, including its inaccurate and overly optimistic macroeconomic projections. He also addressed the great potential that Congress has to reform the IMF, citing the 1998 Meltzer Commission reforms and the 2002 congressional fight against IMF user fees on primary health care and education in low-income countries. Weisbrot argued that restructuring the way the IMF functions — especially its lopsided governance structure, which favors the US and Europe — is imperative to achieving sustainable debt outcomes and equitable development.
The last panelist was Martin Guzman, an Associate Research Scholar at Columbia Business School and Associate Professor of Economics at the University of Buenos Aires. Guzman also directs the Columbia University Initiative for Policy Dialogue’s Debt Restructuring Program and is the editor in chief of the Journal of Globalization and Development.
Guzman’s analysis focused on elements he believes helped create the current crisis, and pointed to the important role the United States will have in future developments. Elaborating on Weisbrot’s presentation, Guzman found fundamental issues with the IMF’s emphasis on a fiscal surplus and massive spending adjustments, which led to a contraction of Argentina’s economic activity. Stabilization, he argued, will only follow a macroeconomic program that centers on the recovery of economic activity to strengthen debt service capacity. In addition to this program, Guzman sees negotiations with bondholders, to reprofile the debt, and constructive renegotiation with the IMF as necessary next steps. Given that the majority of the debt has been issued under New York law, he predicted that US courts will once again play an outsized role in Argentina’s economic future.
