In 2001, the economy of Argentina was declared dead but it has suddenly come alive and paid off a massive $9.5 billion debt to the International Monetary Fund (IMF) almost two years ahead of schedule. The payment, which was announced on Jan. 3, represented a third of the country’s federal reserves and was aimed at once and for all breaking the financial stranglehold the IMF and its lending partners— the Paris Club, international banks and private lenders—have had for decades on that nation.
The move shocked many of those in the financial world who, four years ago, pronounced Argentina a “financial corpse.” At that time, there was political unrest, massive unemployment, a failing currency and ordinary Argen-tineans lining up outside banks to remove their assets before they evaporated in a complete currency meltdown.
At the time of the crisis in Argentina, the IMF, as it had done in neighboring countries, stepped in with offers of loans and demands for harsh measures such as cutting basic salaries from $200 a month to $160 and reducing govern-ment payments to the elderly. In return, Argentina was promised a big aid package from private lenders, the World Bank and the IMF.
However, Argentina learned, just like Brazil and other nations in the region before it, that being tied to the IMF meant being forced to follow its promotion of globalization, free trade and privatization. Those were policies which often turned out to be of no benefit to ordinary people or to the economies of the countries subjected to them.
In the 1990s for example, when Argentina had faced a similar financial crisis, the government, on the advice of the IMF, sold off the nation’s debts to foreign lenders and speculators, as well as to Fleet Bank of Boston and Citibank of New York.
That resulted in money, which would otherwise have been used for health, education and policing, being siphoned off to pay high interest rates on the dollar debts.
But, paying back loans was not the only problem Argentina faced once it was indebted to the IMF, World Bank and others. It discovered that it had little room to formulate its own national economic policies and was often a victim of the whims of those nations, organizations and institutions, which provided the loans.
It was therefore obliged to accept financial, political and social accords instituted by global bankers who had no great incentive in seeing the country emerge from bankruptcy. The reality was that the more indebted the country remained, the more interest was paid to lenders and speculators.
On Jan. 3, in announcing what some regard as an historic decision to pay off the IMF debt ahead of time, Argentina’s government revealed that it had it also succeeded in forcing private creditors to live with a 70 percent cut in a defaulted debt of $100 million.
The country’s president, Nestor Kirchner, declared that paying off the IMF would rid his nation of what had become an IMF vehicle for “meddling.” Kirchner explained that the IMF had constantly forced Argentina to accept “periodic reviews” of its financial obligations and presented it with conflicting demands, which worked against sustainable development of the economy.
By paying off the IMF and its partner lenders, Kirchner anticipated his nation would save as much as $1.1 billion a year in interest over the next three years.
Argentina’s financial moves came quickly on the heels of a decision by Brazil to get out from under the control of the Paris Club—the 19 creditor nations to which it owed $2.6 billion.
By repaying that debt the Brazilian government announced it would save $100 million. But the most sur-prising move by the Brazilians was made several weeks ago when they decided to pay-off, two years earlier than required, their entire $15.5 billion debt to the IMF. In doing so, they pointed to a reinvigorated Brazilian economy and an upturn in the economic fortunes of many of their Latin American neighbors.
For those in Washington who have closely observed the latest financial developments in the southern hemisphere there may be good reason to believe that there has been considerable consultation and coordination between Argentina, Venezuela, Brazil and other countries like Paraguay and Uruguay. It may soon become apparent that those countries, and others in the region, have for some time been secretly developing a concerted strategy to escape the control of the IMF, the World Bank, the Paris Club and other globalist groups that have benefited significantly for decades from the economic plight of Latin American nations. In so doing they may be on the road to creating a new trade bloc to rival the United States.
In the course of making his announcement about the repayment of the IMF debt it was noticeable that the Argentinean president thanked not only the president of Brazil for supporting Argentina’s decision, but also the president of Venezuela, Hugo Chavez.
Chavez has publicly opposed the IMF’s role in Latin America and argued for less U.S. influence in the region.
Richard Walker is the nom de plume of a former mainstream news pro-ducer who now writes for AFP so he can expose the kinds of subjects that he was forbidden to cover in the controlled press.