Argentina election: IMF takes Latin American nation into debt hole

Argentina has not learned to be a sovereign state in 30 years, just like Ukraine. The Argentines may kiss the Malvina Islands goodbye.

Photo: REX/Shutterstock

Argentina gets into IMF's debt pit

Ultra-liberal economist Javier Milei won the second round of the presidential election in Argentina. He received 55.8 percent of the vote. His rival, Minister of Economy, Peronist Sergio Massa, gained 44.2 percent.

The duel of economists suggests that the vast majority of Argentine voters are concerned about the state of the Argentine economy in the first place.

Left-wing governments have been replacing rightist ones for the past 30 years in Argentina, but they cannot cope with inflation. The peso is depreciating as the level of unemployment and budget deficits continues rising.

The problem is about Argentina's huge debt worth $147.8 billion in mid-2023. A third of it belongs to the Anglo-Saxon-controlled IMF. The Argentine government can not write it off by declaring a default — the country will have to repay it even on its deathbed.

All Argentine governments have borrowed from the IMF since the 1990s. The loan raised by neoliberal President Mauricio Macri in 2018 was the largest. Macri borrowed $57 billion, which is equivalent to the amount that the IMF allocated to 85 countries during the year of the coronavirus pandemic.

Currently, almost all of Argentina's foreign exchange earnings are used to pay off external debt. This nullifies domestic and cancels out foreign investment in economy. The situation has not improved after the default on government bonds in 2020. This year's inflation rate in Argentina amounted to 142 percent.

Milei offers shock therapy

Milei proposes shock therapy for Argentina:

• privatising economy,
• cutting all government spending by 15-20 percent (including social packages),
• abandoning the peso and switching to the dollar.

He warned the people of Argentina that there would be no half measures.

"The caste model of impoverishment is over. Today we embrace the model of freedom to become a world power again," he said.

Milei is a reputed economist in the West. He served at the Argentine division of one of the world's largest banks, HSBC. In 2012, he headed the economic department of Argentine think tank Fundación Acordar. He is a neoliberal to the extreme extent of a libertarian — he prefers to believe that it will be up to the market to arrange everything.

Russian Deja vu

When one listens to Milei and watches the development of the situation in Argentina, one can not help but get the feeling of deja vu.

It is obvious to the Russians that Argentina is walking the path that leads to nowhere. Boris Yeltsin and his team used to pursue the policy of shock therapy in post-Soviet Russia during the 1990s as well. They also borrowed a lot from the IMF, fell into the debt trap and thus let globalists take Russia under their control. Neoliberals took Russia to the brink of the abyss and made it a non-sovereign economy. Russia could take a breath only after it paid off the debt to the IMF.

Argentina's previous government chaired by Peronist (left-wing nationalist) Alberto Fernandez relied on China to get out of debt. China gave Buenos Aires a yuan loan and made sure that the debt to the IMF would be written off in Chinese yuans. China also concluded an ambitious $23 billion investment plan with Argentina, and Argentina submitted an application to join BRICS. That was an excellent way to sovereignise economy, but Milei cut it off when he said that he would not work with communists and BRICS.

Argentina's foreign exchange earnings are based on agricultural and livestock products. The country's exports are unstable due to drought and price fluctuations.

Dollarising economy is not a remedy either. Ecuador uses the US dollar in its official circulation, but the country still has the same problems — inflation, unemployment, budget deficit, growing debt. It will be interesting to see how Milei is going to introduce the dollar into circulation because Argentina has no foreign exchange reserves.

Ukrainian deja vu: the anti-Malvina project

Argentina's path is very reminiscent of the Ukrainian one with its lustration and libertarianism. In Ukraine, they always blame previous governments for their ineffective work. In addition, Ukraine has been falling deeper and deeper into IMF's black hole of debt.

Based on the experience of Ukraine, one may expect Argentina to deal with rampant chaos in privatisation, a new increase in inflation, unemployment, non-payments to public sector employees, loss of healthcare and education systems and a deeper plunge into a debt hole.

The West created the "anti-Russia” project in Ukraine, and is now taking Argentina to the anti-Malvinas project. The Malvinas are the national pain of the Argentines.

Javier Milei is part of the Anglo-Saxon project called "anti-Malvinas". He prefers to be cautious and evasive on this issue. However, Argentina's Foreign Minister Diana Mondino said in an interview with The Telegraph that the people of the Malvinas should "decide their own destiny” for themselves.

The islanders already voted for Great Britain in a referendum. Destiny solved.