For years, Argentina’s once prosperous economy had been faltering. Then, in December, 2001, the International Monetary Fund cut off its aid to the country. In late December and early January, the country had six presidents in two weeks. In February, citizens nationwide protested and rioted in the streets.
While there are a number of reasons for this economic — and now social — crisis, some of them reaching far back into Argentina’s political and economic past, Boston University international relations professor Adil Najam believes that international financial institutions are partially to blame for Argentina’s decline.
Najam described the collapse of the country’s banking system and the unavailability of credit that was needed to finance production as primary elements in a sinking cycle that led to default on foreign debt.
“Argentina started a lot of bold economic policies and a lot of risks,” he said. “The bigger the risk, the harder the fall. When risks work, all is well — but when they don’t, you’ve abandoned the safety net.”
The risks worked for some time. In the 1990s, Argentina had the highest gross domestic product in Latin America and, according to Najam, was the ‘darling of international eyes.'”
He compared the situation in Argentina to the situation with Enron, saying that the public wasn’t given many indicators of decline or of how bad things would get.
“The IMF does this all the time; it gives countries a clean bill of health like the Arthur Andersen accountants made the public think Enron was doing well,” he said. “The international community was glowing, just like Wall Street was about Enron. If you want to learn, the place to look is in the international financial architecture. The world should reexamine its financial institutions.”
The largest problem with the IMF, Najam said, is that it is widely regarded as a financial institution that performs for financial success and not a development institution that performs for developmental success.
“Normal banks pride themselves when they can say that no one owes them money — the World Bank should not. The money that’s poured in, it should lead to development. If money is given to build a dam, people should ask, ‘Did it do what it was supposed to?’ not ‘Did it pay back?’ You have to start with a development basis.”
Argentina, in an effort to stabilize its currency, is currently trying to float its peso against the dollar for the first time since 1991. Jorje Remes Lenicov, the Argentinean economy minister, is negotiating with the United States government and the IMF to obtain aid and work out fiscal reforms.
– Deirdre Fulton, DFP Staff
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