New Stage in Argentina’s Relations with the IMF: The Impact of Javier Milei’s Arrival to the Casa Rosada

In the last few days, the arrival of the ultra-right-wing Javier Milei to the Casa Rosada has generated a great stir in Argentina and has inaugurated a new stage in the country’s relations with the International Monetary Fund (IMF).

Representatives of the organization have arrived in Buenos Aires with the aim of negotiating a possible rearrangement of the agreement Argentina has had with the IMF since 2018.

Background: Argentina’s Indebtedness Agreement with the IMF

In 2018, during the government of conservative Mauricio Macri, Argentina took $44 billion in debt with the IMF.

This agreement was made with the aim of stabilizing the country’s economy and facing its financial obligations. However, as time went by, the debt became unpayable for Argentina.

In 2020, already under the Peronist government of Alberto Fernandez, a new payment plan was signed with the IMF in exchange for a series of fiscal and monetary targets. Although the agreement had its last review approved in August, the IMF considered that Argentina had not reached the established goals.

Despite this, a new disbursement was authorized due to exceptional circumstances, such as an “unprecedented drought” and deviations in economic policies.

Current Negotiation and Javier Milei’s position

Negotiations between Argentina and the IMF have started with the arrival of IMF representatives in Buenos Aires. However, the meeting with government officials has been postponed until Monday.

Javier Milei, who assumed the presidency after winning the second round of elections, is confident that the negotiation will be successful due to the adjustment measures he has already started to implement. According to Milei, these measures are “tougher” than those requested by the IMF.

However, there is some uncertainty as to whether Milei will be able to carry out his orthodox, pro-market plan, as he is facing resistance in the streets as well as in Congress and the courts. In addition, the Government considers that the current agreement with the IMF is “virtually collapsed” due to the non-compliance with the established goals.

Despite this, the Government has not mentioned the possibility of discarding the current agreement and signing a new one, nor has it raised the possibility of new financing.

Impact of a Successful Agreement

If the negotiation between Argentina and the IMF is successful, this would allow the Government to strengthen the country’s balance of payments, which is currently compromised. It would also send a positive message to international investors, generating confidence in the Argentine economy.

However, some analysts point out that the orthodoxy of Milei’s economic program may generate differences with the IMF. Although the government shows commitment to implement the proposed reforms, it must also demonstrate that these policies are sustainable and have a certain degree of support in society.

The IMF takes these factors into account when establishing its support and collaboration with the country.

Obstacles and Challenges for the Milei Government

Milei’s government faces several obstacles and challenges in the implementation of its economic plan. On the one hand, his party, La Libertad Avanza, is in a minority in Congress, making it difficult to pass the proposed reforms. In addition, the mega-decree imposed by the government has been challenged in the courts as unconstitutional.

Streets also present a challenge to the Government, as citizens from different parts of the country have come out to protest against the economic measures proposed by Milei. Even the country’s main labor union has called a general strike for January 24. These political and social obstacles could generate tensions in the relationship between the Government and the IMF.

IMF’s Role in Argentina’s Economy

Throughout history, the IMF has intervened in the Argentine economy at different times and under different governments, whether democratic or dictatorial, liberal or protectionist. The relationship between the country and the organization has been marked by unpopular adjustments and deep economic and social crises.

In 2006, during the Peronist government of Néstor Kirchner, Argentina settled its debt with the IMF and distanced itself from the organization for 15 years. However, in 2018, the Macri government requested a new bailout.

Milei’s arrival to power marks a new stage in the country’s relationship with the IMF, aligning itself with the strategy of previous neoliberal governments, but from a more extreme and right-wing ideological position.

Conclusions

Javier Milei’s arrival at the Casa Rosada has inaugurated a new stage in Argentina’s relations with the IMF. The negotiation between the country and the international organization is crucial to stabilize the Argentine economy and generate confidence in international investors.

However, the implementation of the reforms proposed by Milei faces political and social obstacles, which could generate tensions in the relationship with the IMF.

Argentina’s position vis-à-vis the IMF and its geo-economic strategy are also determining factors in its treatment by the organization. Although there are challenges and uncertainties in this process, it is essential to reach an agreement that is sustainable and has the support of society.

This is the only way to advance the country’s economic recovery and lay the foundations for long-term sustainable growth.