Koehler's Tough Visit to Buenos Aires

IMF managing director received strong criticism even from new Argentine President Nestor Kirchner. Koehler had to admit the IMF has to learn from its past mistakes

There were no red carpets for the head of the IMF during his visit to Argentina this week. Instead of the usual courtesies, Horst Koehler was received by a long list of demands and complaints lodged by different groups ranging from NGOs to the President.  

Koehler's visit was intended to ease strained relations between Argentina and the International Monetary Fund since country's financial crisis in December 2001. Only a couple of months prior to the crisis, Argentina was considered by the IMF as a star pupil of free-market policies. However, this South American country quickly collapsed and defaulted on $102 billion in debt, the largest in history, pushing Russia into second place with its $31 billion in default of August 1998.

However, many local and international figures (Nobel Prize winner in economics Stephen Stipglitz, among them) alerted the IMF of Argentina's impending crisis, by supporting draconian financial measures to reduce the government’s deficit. Unquestionably, the IMF's austerity measures contributed to a recession that has lasted for four years and everybody in Buenos Aires took the opportunity to remind it to Mr. Koehler of this. 

The first group to vent their displeasure came during a meeting with social leaders. Social, human rights and religious leaders made clear to Mr. Koehler that Argentine civil society is not ready to pay for the default at the expense of the ordinary citizen. The Catholic Church, as well as the Muslim and the Jewish communities criticized the IMF for lending money without doing the follow up of how borrowed funds were spent. Suddenly, Koehler admitted critics and said that the IMF had to learn from its past errors, something preciously unheard from the international organization.

Despite critics, those who attended to the meeting saw with satisfaction the dialogue started by the IMF and civic leaders. This is the first time in which a high ranking official from the IMF showed an interest in engaging non-market social players.  

However, the main event of the visit came Monday night when Koehler attended a protocol dinner at Kirchner's residence. There, the IMF managing Director found a direct speaking Argentine President who made clear his position. "I am not going to betray my convictions", told Kirchner to Koehler, according to the local newspaper Pagina/12. "I am not going to sign deals that I cannot comply with", he also said.

After stating the official position to renegotiate debt restructuring, Kirchner expressed his opinion about the to IMF’s policies during the 1990s. "You have a big responsibility on what happened to Argentina", said Kirchner. Adding, "You exhibited (former President Carlos) Menem in the world as a model to follow, backing the same programs that led Argentina into an enormous economic concentration, worst-ever social exclusion and, at last, the institutional breakdown of the country".

It is not necessary to comment on Kirchner's words. In fact, the IMF's current authorities are internally auditing Fund's actions on Argentina since 1990, an unprecedented measure for this international lending organization.