Argentina and Bolivia Are Done With the 'Looting' IMF

Bolivia has returned “irregular” credit to the institution, and Argentina has launched a criminal investigation into a massive 2018 loan.
March 5, 2021, 6:54pm
Luis Arce
Bolivian President Luis Arce has been a vocal critic of IMF loans taken out by his predecessor. Photo: Jorge Bernal via AFP/Getty.

Left-leaning governments in Argentina and Bolivia are hitting out at controversial loans their right-wing predecessors took out with the International Monetary Fund. The motions signal a desire for independence from the Washington-based fund, which observers say has a history of making deals with the region’s dictatorships.

The IMF is wildly unpopular with many in Latin America, who view it as a vehicle for U.S interests that imposes harsh economic reforms on governments and tortuous austerity on their people.

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Argentina’s President Alberto Fernández announced on March 1 that he would launch a criminal investigation into a record-breaking $57 billion IMF credit line taken out in 2018 by his right-wing predecessor, Mauricio Macri, a market-friendly businessman hailing from the country’s aristocracy.

The announcement came just two weeks after neighboring Bolivia’s central bank announced that it had paid back an IMF loan, saying it was returning “irregular credit” to “defend the economic sovereignty of the country.” 

“Getting the country into debt like that, allowing the resources that came in to just fund the most shocking capital flight that our history has seen [...] that can’t be viewed as anything other than fraudulent administration and embezzlement of public funds like we’ve never seen before,” Fernández said in a speech this week.

Argentina’s Central Bank has announced that it will send all documentation related to the IMF deal to the anti-corruption authorities so they can perform a close audit and determine whether the deal was harmful to the public interest. 

Macri’s economists have told local media that the move is a smokescreen to distract the public from a vaccination scandal. Health minister Ginés Gonzáles García resigned in February after it emerged that some high-profile individuals had been able to use their connections to cut in line for COVID-19 vaccines.

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In Argentina, many associate the IMF with coups and a loss of sovereignty. “It means a systematic policy of looting and domination,” said Beverly Keene, an economist and activist with human rights collective Diálogo 2000. 

Martín Burgos, coordinator of the economics department at the Floreal Gorini Cultural Centre for Cooperation, pointed out that the IMF made deals with Argentina’s dictatorships following coups in 1955 and 1976. It was also blamed for pushing harmful policies that deepened a cataclysmic financial crisis in 2001-2002. 

“The history of Argentina is a long, sad one,” Burgos said. “The Left likes, to a degree correctly, to mention that depending on the IMF - well, the IMF has a certain dependency on Washington.”

In the case of Bolivia, the emergency financing was requested by the interim government of conservative president Jeanine Áñez in April 2020 to fund pandemic relief. Supporters of the deal say the loan offered favorable terms in an emergency. 

But the loan was pushed through last year without the consent of Bolivia’s assembly, and questions remain about whether a caretaker government had the right to turn to the IMF in the first place.

Leftist economist Luis Arce of the Movement Towards Socialism (MAS) party was elected president in October. Arce, who gained popularity as finance minister under indigenous president Evo Morales, quickly distanced himself from Áñez’s approach.

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“The economic damage is clear and Mrs. Áñez is responsible,” current senate president Andrónico Rodríguez told local media during a speech announcing legal action against Áñez over the loan.

On February 17, the Central Bank of Bolivia announced that it had repaid $351.5 million to the IMF: the “irregular credit” of $346.7 million, plus $4.7 million in interest. “This loan, as well as being irregular and onerous because of its financial conditions, generated additional, multi-million-dollar economic costs to the Bolivian state,” the bank wrote in an announcement. 

Áñez tweeted: “Bolivia, as a member of the IMF, has access to a kind of soft, advantageous credit. It asked for it to tackle the pandemic. Today, MAS is returning it for ideological reasons. That money was enough to vaccinate all Bolivians quickly.”

Her government turned to the IMF and other international financing organizations in April 2020. Mitsuhiro Furusawa, IMF Deputy Managing Director, said in a statement at the time that the fund’s assistance would “help to support urgently required medical spending and relief measures, while addressing the country’s balance of payments needs.”

But to many onlookers, the loan sounded alarm bells. Áñez had assumed the presidency after Morales was ousted in what many viewed as a coup in November 2019. As interim leader, her only mandate was to call elections, which she was not expected to win. 

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“There was a really big political debate about what to do,” said Bolivian economist and lecturer, Gonzalo Chávez Álvarez. “The argument was, ok, you have three months [to call elections], you shouldn’t make big changes but the economy has to keep functioning.”

Bolivia’s national assembly, which was controlled by MAS, rejected the deal because its planning, economic policy, and finance committee said that the government hadn’t provided enough information about how the money would be spent or paid off. The executive branch disputed this claim. Ultimately, Áñez’s government approved the loan by passing a supreme decree.

Skepticism about what international funds would really be spent on was compounded in a May 2020 overpricing scandal, when it emerged that the government had used cash from the Inter-American Development Bank to buy ventilators for a cool $27,683 each. Health Minister Marcelo Navajas was fired and an investigation was launched.

Like Argentina, Bolivia has had bad experiences with the IMF, according to political analyst Diego Von Vacano. “Especially in the mid-eighties, one of the major problems was that state companies were cut back, public expenditures on things like mining were cut back as a result of IMF loans, and this created a lot of unemployment, especially in rural areas,” he said. 

However, Chávez Álvarez said that the deal was made under a system of quick, short-term financing that didn’t come with onerous policy impositions. He added that the interest on the loan was relatively low, making it cheaper than some of the debt assumed by Morales.

Unlike Bolivia, Argentina doesn’t have the cash to pay the fund off and send the IMF packing. The Fernández government has been in a drawn-out renegotiation process since it came to power. “It was 10 percent of its GDP and it was supposed to be paid within four years. That was going to be impossible,” Burgos said.

Keene’s view is that if the debt is believed to have involved fraud, the government shouldn’t be paying it back at all. 

Ultimately, the countries’ hostile gestures are as much about anti-imperialism and the political significance of the IMF as they are about economics. Von Vacano said; “It’s a very powerful symbolic move by Arce to underscore sovereignty and continued left-leaning independence.”