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Imf policies promoted poverty in argentina Original Source Link: (May no longer be active)
http://www.myrtlebeachonline.com/mld/myrtlebeachonline/news/world/13417254.htmhttp://www.myrtlebeachonline.com/mld/myrtlebeachonline/news/world/13417254.htm
Posted on Thu, Dec. 15, 2005
Argentina will use reserves to pay off IMF debt by year's end
BY COLIN MCMAHON
Chicago Tribune
BUENOS AIRES, Argentina - Argentina will pay off its debt to the International Monetary Fund by year's end, President Nestor Kirchner announced Thursday, saying the country is better off taking a financial hit now than submitting to more IMF prescriptions for economic policy.
Argentina will raid its foreign currency reserves of $9.8 billion to settle the debt, a risky maneuver for a country that relies on reserves to help control the value of its peso currency. But the move will save the government about $1 billion in interest costs over the next two years, Kirchner said. And the symbolism of the decision will reap for Kirchner significant political dividends.
"They want to convince us that the difficulties are so great that it's better not to change anything; they want to make us believe that doing nothing new is the only realistic option," Kirchner said in a speech to scores of government officials, legislators, diplomats and business leaders invited to the Pink House for the announcement. "We know that we are recovering our hope and that we must take over the tools to build our autonomy."
The speech was more than a declaration of independence from the IMF. It was also a denunciation. He accused the IMF of being "the promoter of and the vehicle for policies that caused poverty and pain among the Argentine people."
Kirchner and the IMF have been battling since 2003 over just about every aspect of the fund's relationship with Argentina.
Unwilling to abide by several conditions the IMF insisted on to release new loans or refinance the old ones, Kirchner instead kept making most of Argentina's payments even as the country struggled to climb out of a crisis that had thrown millions into poverty.
In the process, Kirchner became something of a hero among many Latin Americans. And the IMF's reputation sank further in the region. Earlier this week, to cheers of his fellow Brazilians, President Luiz Inacio Lula da Silva said Brazil would also settle up early with the IMF.
Like most of his countrymen, Kirchner blames the IMF's lending policies and fiscal advice for exacerbating Argentina's financial collapse in 2001-02. He said Thursday that 30 years of IMF activity in Argentina has contributed only to indigence. And he bristled at the IMF's "demands and more demands."
The IMF has urged Argentina to run a greater fiscal surplus, in part as a way to free up money to pay off the nation's creditors. It wants Argentina to take a tougher line on inflation, with one proposal to allow the peso to strengthen against the dollar. And the fund has leaned on Kirchner to allow foreign-owned utility companies to raise the rates that the government froze amid the crisis.
Kirchner and his economic team deem all this meddling. And they insist that their evolving approach of government intervention mixed with fiscal conservatism addresses Argentina's needs far better than the orthodox neoliberal approach urged by the fund.
Argentina has enjoyed a tremendous economic rebound under Kirchner. Growth is on track to exceed 9 percent for 2005, according to figures released Thursday. But the IMF argues that inflation will end up costing the poor if not tamped down and that eventually the growth spurt will subside unless Kirchner finds ways to bring in more investment.
At the same time, Argentina remains saddled with a giant debt load. The nearly $10 billion owed to the IMF is only a fraction of what Argentina still owes to private creditors.
© 2005 KRT Wire and wire service sources. All Rights Reserved.
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