Argentina’s economy is hurting. The value of its currency is down more than 50 percent this year – falling 25 percent last month alone. Inflation is high, consumer prices are rising and it appears the nation is on the verge of its second recession in three years.
The reasons for Argentina’s economic woes are complex and numerous – over-reliance on exports, political instability, a poor tax structure and rampant tax evasion, a decline in the commodities market, capital flight, deindustrialization, among others.
Economists debate the degree to which each of these factors has contributed to the current situation. Many Argentinians blame international organizations like the International Monetary Fund for their country’s hardships. Most economists blame internal mismanagement and incompetence.
In any case, one thing that is certain is that it will be ordinary Argentinians who will pay the price as their leaders attempt to improve the country’s poor economic situation.
On Monday, President Mauricio Macri announced new austerity measures aimed at mitigating the currency crisis. The plans include eliminating half of government bureaucracies and raising taxes on the nation’s major exports.
The measures are part of a $50 billion IMF loan program signed in June and were announced just days before Argentina’s representatives flew to Washington to meet with IMF Director Christine Lagarde seeking expedited payments.
Macri’s announcements were met with widespread anti-austerity and anti-IMF protests across Argentina. According to experts, those demonstrating have a right to be angry.
“[Austerity programs] obviously create hardship,” Judith Teichman, a professor of political science and international development at the University of Toronto, told The Globe Post. “The losers are not the people with money … it doesn’t hit everybody equally.”
Macri and the IMF claim their restructuring program will not affect social programs that provide aid to Argentina’s most destitute. But Teichman said such assurances aren’t enough.
“The problem is … it isn’t just the extremely poor who are going to be hurt. It is the people who actually had jobs who are losing their jobs,” she said. “I doubt very much that these targeted policies are going to incorporate them. There isn’t much of a net, for instance, for the public employees who are being let go.”
Similar concerns were expressed by Vilma Ripoll, a member of Argentina’s Socialist Workers Movement.
“We already had the IMF and a crisis. We know what happened in Greece. They will fire state employees. They will reduce salaries and take away workers’ rights,” Ripoll told Al Jazeera at a demonstration in Buenos Aires.
A man gets his shoes shined as demonstrators march during a protest against the government’s economic measures in Buenos Aires, Argentina September 6, 2018. REUTERS/Marcos Brindicci pic.twitter.com/MT6JkfX2Fg
— Marcos Brindicci (@MarcosBrindicci) September 6, 2018
This is not the first time the people of Argentina have been asked to go through hardship in the name of broader economic reforms. The country has worked with the IMF on stabilization programs dating back to the 1950’s and suffered a major economic crisis in 2001 that was widely and publicly blamed on the IMF.
“[The Argentinian people] have been through hell quite frankly,” Carol Wise, a professor of international relations at the University of Southern California, told The Globe Post.
Wise said that Argentina, like many other countries, saw a huge rise in income inequality in the 1990’s and early 2000’s. Such inequality has resulted in an unequal distribution of consequences during periods of economic decline as the rich are largely able to insulate themselves from the fallout.
Argentina’s wealthy business interests are largely supportive of Macri because they believe his proposals will ultimately lead to better conditions for international investment and development, according to Teichman.
“The technocrats who are carrying out the IMF stabilization program are allied with usually very powerful business interests,” she said.
Wise and Teichman agree that although the IMF’s restructuring policies are rooted in macroeconomic theories that are widely accepted by economists, they’ve repeatedly proved ineffective in Argentina and other parts of Latin America.
The IMF’s stabilization program could ultimately make the country’s economic situation even worse because of the backlash and political unrest it’s causing, Teichman warned.
“When you have rising political unrest, nobody’s going to invest and provide jobs in that kind of environment and so capital flees,” she said.