In a national televised broadcast on April 11, Argentine President Javier Milei announced to the people of Argentina that a series of restrictions on the purchase of dollars would be lifted. “A few hours ago, the Secretary of Economy and the Central Bank of the Argentine Republic finished breaking the last link in the chain that kept our national economy tied to the floor for 15 years. From this moment on, we have eliminated the foreign exchange trap [cepo] from the Argentine economy forever,” said the libertarian president, surrounded by his secretaries.
The announcement sent a shockwave across Argentine society, a country whose recent history has been dictated by the dollar and the International Monetary Fund.
What was the foreign exchange “trap”, known as cepo?
The cepo was a restriction implemented in 2011 by Cristina Fernández’s government to prevent the uncontrolled outflow of foreign currency and the dollar’s increase in the exchange rate (ie devaluation of the national currency the peso), which usually causes an immediate price increase. Former right-wing president Mauricio Macri tried to eliminate the cepo in 2015 but had to reinstate it due to several financial problems in the country.
The truth is that the cepo was the measure found by the authorities to protect the Central Bank’s reserves, despite the fact that the measure caused the opening of parallel markets to the official ones where people make purchases in dollars. For its part, Milei’s government has affirmed that the measure will allow greater foreign investment, a proposal that several experts question because the “massive foreign investment” that the libertarian government has promised has yet to arrive.
Record agreement with the IMF: More debt and deepening of neoliberalism
Before assuming the presidency, economist Milei insulted and expressed his distrust for the international organization: “The IMF is a perverse institution. It is a creation of White, a Russian spy, and Keynes… It should not exist.” Today, faced with the need to sustain his neoliberal project, Milei seems to have reconsidered his views.
The Argentine President announced that the International Monetary Fund and the World Bank would lend a record amount of money to Argentina: USD 20 billion would be disbursed by the financial institutions. The initial disbursement would be USD 12 billion. Thus, Argentina accumulates a record debt of more than USD 40 billion with the IMF.
Milei emphasized that the loan is not given to regulate macroeconomic imbalances, but to “reward” the political management of the Argentine economy carried out by his government, namely its controversial policies such as:
- reduction of the state
- liberalization of the economy
- privatization of public companies
- reduction of inflation (although this is disputed by several experts)
Embracing the institutions he once condemned, Milei is using record levels of foreign debt to underwrite a sweeping neoliberal transformation of the Argentine economy.
What did Milei offer the IMF?
Contrary to Milei’s statements, the IMF itself said: “(The loan) supports the next phase of Argentina’s domestic stabilization and a reform agenda aimed at consolidating macroeconomic stability, strengthening external sustainability and removing the brakes on strong and more sustainable growth, while managing a more challenging global environment.”
The IMF granted the loan following a commitment to deepen neoliberal measures with the Argentine government: reform of the retirement system by 2026 and a labor reform that contemplates radical changes in the ways of hiring employees, that is, a more aggressive program of labor flexibilization. According to the IMF’s wishes, it is expected that it will be possible to “negotiate” wages and “simplify” the links between companies and workers.
In this regard, the political analysis page Spanish Revolution states that the IMF disbursement is not intended to lower inflation, reduce poverty, or improve public services but to “artificially prop up the dollar, pay off old debt and buy time for a government that is bleeding in the polls. Inflation rises, salaries fall and the adjustment is again paid by the people… It is not aid; it is financial occupation. It is not a bailout; it is a colonial mortgage.”
For her part, the former president of Argentina, Cristina Fernández, replied to Milei: “Because it’s clear your plan – if you even had one – failed. And look, I told you that the problem was not the pesos [Argentina’s national currency]… that the problem was the dollars that you don’t have and that you had to borrow from the Fund.” In this sense, Fernández assumes that the agreement serves only to have a reserve of dollars that will not promote the economy’s growth.
In addition, the former president said, “HARD TIMES for those who work, for those who produce, for those who have no way to defend themselves from the adjustment and speculation. HARD TIMES that will not end until 2027 when you, [Milei], will no longer be President, and this country can return to a national and rational, fair and, above all, humane course.”
Original article published in Peoples Dispatch.
