Eric Toussaint: “The IMF agreement with Argentina is perversely sophisticated”

2nd part of the interview by Martín Mosquera for the magazine Jacobinlat

15 June by Eric Toussaint , Martín Mosquera

This interview was done by Martín Mosquera for the Latin-American magazine Jacobinlat. [1]

Martín Mosquera (Jacobinlat): Concerning Argentina’s agreement with the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, there are two ideas presented by the national government that need to be examined: one is that the agreement requires no structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

reforms, which would be highly unusual; and the other is the gamble that after cleaning up the macro-economic situation, there will be growth which will limit the impact of the adjustments derived from the agreement itself, and give the economy and the social situation a push in the right direction.

In order to “sell” this loan to Argentine public opinion, the IMF has made the procedure a little more sophisticated by not beginning with demands for structural reform. It is a more perversely sophisticated form of IMF intrusion

Eric Toussaint: Well, it is obvious that the agreement must be totally rejected. It is a disastrous agreement which would once again cause huge problems in Argentina. In one way or another, in order to “sell” this loan, the IMF has made the procedure a little more sophisticated by not beginning with demands for structural reform. However, it includes a clearly defined and very limited budgetary deficit, day-to-day finance monitoring and quarterly IMF missions to check the accounts. The verdict of each mission will condition the next release of funds. Thus, the IMF will wield a powerful instrument of pressure to get reductions in spending and impose reforms not previously defined. It is a perversely sophisticated form of IMF intrusion into the choice of policies by a sovereign country, because unlike previous agreements when structural reforms were demanded at the outset, people will not know what to expect.

For the trade union bureaucrats who defend the agreement with the IMF, it would have been more difficult to make a public show of support if the demand for labour reform had been explicitly included. Now, the way that the agreement has been presented, it is easier for them to express support and later argue that they had had no idea of what was going to happen on the labour front, because it hadn’t been defined. In my view, this makes the strategy even more iniquitous and more sophisticated in its perversity. It is obvious that the terms of the agreement are in total contradiction with the version touted by the Minister of Finance, Martin Guzmán, President Alberto Fernández and those who defend it.

As for the assertion that the growth of productivity would guarantee payment of the debt, it should be pointed out that the new loan is enormous, with the 45 billion dollars that have been renegotiated with the IMF added to all previous debts. And the repayments calendar means that, even with a growing economy, it is very hard to see how the government would have enough leeway to fund any social improvements while at the same time honouring the payments. In my view, this would be very difficult.

The terms of the agreement are in total contradiction with the version touted by the Minister of Finance, Martin Guzmán, and President Alberto Fernández

Those in government and the leadership of the ruling coalition, el Frente de Todos (FdT), are perfectly aware of the nefarious situation into which they are leading Argentina. So they lie about what is going to happen. This is why part of the FdT decided to vote against it.

On 15 March 2022, I had a meeting with that section of the Frente de Todos in the Senate, before the vote on the agreement took place. They were members of the Chamber of Deputies and the Senate, with links to Cristina Fernandez Kirchner. They voted against the agreement with the IMF.

Let us recall that on the night of Thursday 10th to Friday 11th March 2022, the Chamber of Deputies validated the agreement despite the fact that a third of the MPs who had so far voted in favour of President Fernandez’s policies either voted against it or abstained. A majority was reached thanks to votes from the Right who absolutely wanted to get the agreement through as it legalizes the odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts.
that the right-wing government contracted with the IMF in 2018. In 2018, the right-wing government received 45 billion dollars from the IMF, then in 2022, President Alberto Fernandez decided to borrow another 45 billion dollars to repay it. 96 % of right-wing MPs (in the right-wing opposition) approved the IMF’s new loan, while only 62 % of the presidential camp voted in favour. The four FIT-U (Workers’ Left Front -Unity) MPs also rejected the loan.

On 17th March, 42 % of senators in the presidential camp voted against the agreement with the IMF. (Out of the 33 Frente de Todos senators, 13 voted against). Without the votes of the Right, the Senate would not have got the 2/3 majority required. 32 right-wing senators loyal to the former president Macri joined forces with 20 Senate members in the presidential camp to ensure that the IMF agreement was adopted.

When I met some of the Frente de Todos MPs who opposed the IMF agreement, they wanted to know my arguments regarding the possibility of not paying the debt claimed by the IMF and the consequences that action might have for the country. I told them that I had read the text where they explained why they had voted against the IMF loan in the Chamber of Deputies vote. I added that although I was glad that they had opposed the validation of the agreement, I did not agree with them that a debt absolutely has to be reimbursed. I said it was not enough to assert that the negotiations had resulted in a bad deal. What they should have done, right from the beginning of Alberto Fernandez’s presidency in December 2019, was push the idea that the government initiate a debt audit with citizen participation. They should have called for Argentina to declare the loan granted to the previous government by the IMF in 2018 to be odious and illegal. I explained what arguments they could have used and what the alternatives might have been. They listened attentively. Straight after this meeting, they decided to publicize our discussion. They wanted to use it to show that their opposition to the agreement was justified and that all this would lead to a negative vote on their behalf, the next day or the day after, when the agreement was submitted to the Senate for approval. And that is indeed what happened. It was in all the papers, from the right-wing press like La Nacion or Clarin to the press that supports Frente de Todos and even that of the radical left.

Martín Mosquera: What do you think might have been an alternative strategy?

Eric Toussaint: In several interviews in the media, I have explained what measures should have been taken from the outset by the new government in late 2018 and early 2019. The FdT came into government after an electoral campaign that denounced the loan granted by the IMF to the Mauricio Macri government in 2018, which brought in its wake enormous capital flight, emphasizing the illegal nature of the approval given to a loan which had not even been discussed in Parliament. Indeed, several lawsuits were brought to have the manner in which the loan had been contracted declared illegal. The electoral victory of the new government conferred upon it complete legitimacy which would have permitted it to ignore the debt contracted by Macri. They could have said, for instance, something like "There has been a change of government. The obligations contracted by the outgoing government bear the hallmarks of illegality. The debt is illegitimate and odious, and furthermore the IMF is complicit in capital flight since it did not advocate control of the flow of funds it provided. The IMF can only grant such a loan if the debt is viable; yet it is abundantly clear that what was agreed with Macri was not viable, meaning that the Fund did not adhere to its own official rules. We have consequently suspended payment of this debt and in the name of the government, we have called for an audit with citizen participation and have also brought the affair into various international fora, to the United Nations Conference on Trade and Development UNCTAD
United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.

(UNCTAD), to the G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). , to the United Nations General Assembly and other places, bringing the issue to the forefront in order to convince international public opinion and other countries.”

The preceding words are in substance what Alberto Fernandez’s government could have declared in late 2018 – early 2019. It would have created a totally different situation, making things difficult for the IMF by confronting it with a sovereign and unilateral decision and arguments founded in international law.

The International Monetary Fund’s agreement was a tool for intervention and pressure to reinforce the neoliberal model.

However, the government chose to go the way of “debts will be repaid and we will negotiate”, “we shall pay”, “we denounce Macri’s actions in the court of law but we uphold them”. This was a completely erroneous strategy. Of course, if we carry out a class analysis of the Argentine government, it is perfectly logical. Clearly the big capitalists, thanks to the IMF’s money invested in Argentina’s debt securities, did not want any suspension of payment and had every intention of maintaining the IMF as a tool for intervention and pressure to reinforce the neoliberal model. That is where the interests of Argentina’s big capitalists lie.

As I have just demonstrated, there was another possible strategy.

Moreover, another opportunity was lost over the pandemic because, regardless of whether the debt was illegitimate or not, the government could have argued “a fundamental change of circumstances”, recognized in international law, which allows payment to be suspended and the resources thus freed up to be used to fulfil the population’s basic needs; in this case, to deal with the health crisis that the Argentine people were faced with. But the government did not grasp the opportunity to suspend repayment of the debt.

Another thing that the government could have done at the end of 2021 – and here I am simply hypothesizing, as Alberto Fernandez clearly had another strategy in mind – was to say: “Our minister Guzmán did everything humanly possible to persuade the IMF to make some concessions, but the IMF really did not give an inch; and now that we have made too many concessions, we must make a U-turn and harden Argentina’s position”. They didn’t do that either.

They are thus, themselves, paving the way for a new surge from the right in the next elections and a significant increase in social unrest.

Martín Mosquera: How strong do you think the movement of opposition to the IMF agreement is?

Eric Toussaint: From a resistance point of view, I consider very positive, on the one hand, the strengthened action of the anti-debt coalition called Autoconvocatoria por la suspensión del pago e investigación de la deuda (Call for the suspension of payment and debt audit) which is a broad coalition of movements; and, on the other, the fact that the Frente de Izquierda y de los Trabajadores-Unidad (Left Workers Front-Unity) (FIT-U), who less than a year ago refused to collaborate with Autoconvocatoria, now does so systematically. Now the FIT-U takes into account the proposals of representatives of the Autoconvocatoria. FIT-U MPs like Miriam Bregman, Nicolás Del Caño and others take the struggle to Parliament by talking of debt audits and explaining what odious debt is, while demanding immediate suspension of debt repayment and putting forward new proposals. In other words, no longer content to merely denounce the situation, they open the way to actions and alternatives. And that seems to me to be a very positive development.

It is also very positive that a significant section of the Frente de Todos, especially in the social movements, are mobilizing against the IMF agreement. We saw this very clearly in the street on 24th March 2022 during the commemoration of the anniversary of the military putsch of March 1976 (more than 250,000 people demonstrated that day in Buenos Aires of whom 100,000 were connected to the Kirchnerist sector opposed to the IMF agreement).

The massive popular mobilization in Argentina is an encouraging example

Despite the significance of the FIT-U’s presence as a trade union, the main battalions of the unions continue to support the government. The challenge now is to get them involved in the struggle and to convince larger sections of the working class to join in the mobilization. Another challenge concerns young people and students, who need to get involved in the struggle. It is remarkable to note that those who are mobilized come from the lower echelons of society. They are mainly people from the piquetero movement, that is, those most affected and the poorest sector. And there are trade unions present. There are also rather feeble numbers of students. There certainly needs to be more mobilization on the resistance front. Nevertheless, to be frank, in an international context which is extremely worrying for the Left and for social movements, I would say that Argentina is an encouraging example where there may well be a build-up of forces and a positive outcome.

I am happy to have been able to take part in various big street demonstrations during the time of the IMF agreement debates. I describe this in my article “Two hectic weeks in Argentina, against the agreement with the IMF”

It is also important to note that the demonstrations have continued throughout April and May 2022.

Martín Mosquera (Jacobinlat): You must have noticed that in the local debate, the defence of the agreement has been associated with the idea that suspension or repudiation of the debt would inevitably result in chaos, because it would be impossible to access the international markets, there would be a shortage of capital, investments would stop, there would be inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. , and so on. I wanted to ask you what you thought of this argument, in connection with two other issues. Firstly, emphasis is placed on the fact that this loan is from the IMF and not from private creditors, as was the case when Rafael Correa decreed a suspension of payment in 2008-2009; or even as distinct from the first wave of “Kirchnerism” when suspension of payment of the trade debt was maintained until 2005. And secondly, in the case of a hypothetical suspension of payment, should there not be a firewall of global measures put in place to avoid undesirable effects, including such measures as foreign trade control?

Suspension of payment enables economic recovery to begin and the nation to get its sovereignty back

Eric Toussaint: Yes, of course there should. I say so in the media whenever I am asked. In an important radio programme with the pro-Kirchnerist journalist Cynthia García, I assert that the suspension of payment enables economic recovery to begin and the nation to get its sovereignty back. Let us recall that President Rodríguez Saá’s decision at the end of December 2001, under pressure from the street, to suspend payment of the debt gave rise to the economic recovery that began in 2002 and subsequently continued. And that was before the price rises of Argentina’s basic export products that began in 2003 which also had a favourable impact.

The country saw high growth rates until 2009, when the international crisis caused by the collapse of the US banking system struck, marked by the Lehman Brothers affair in September 2008. Argentina’s experience demonstrates that defaulting on payment, even without access to the finance markets, leads to neither chaos nor catastrophe. On the contrary, it enables economic recovery. Moreover, it is possible to move forward with a radical fiscal reform to increase tax revenues, taxing the big soya exporters, big capital, imposing a wealth tax on the richest 1 %, combined with a radical reduction of TVA on essential products. This will improve the population’s standard of living and reduce the inflationary effect on basic products, with price controls and control of foreign trade and capital flows. Then other anti-capitalist structural measures come into play, such as the socialization of banks, the energy sector, pharmaceutical and other industries. In other words, I see suspension of payment or repudiation of illegitimate debt as an indispensable part of a global programme of structural measures with a clear anti-capitalist dimension.

Suspension of payment or repudiation of illegitimate debt is an indispensable part of a global programme of structural measures with a clear anti-capitalist dimension

Martín Mosquera (Jacobinlat): Between the moment when the agreement was signed and today, there have been events of worldwide significance such as the war in Ukraine, creating both international and local economic problems, starting with the increase in the price of agricultural products and energy. How do these changes impact on the viability of the agreement? Quite clearly the general situation has changed.

Eric Toussaint: Yes, indeed. First and foremost, it is another argument for not ratifying the agreement and declaring suspension of payment. The claim that this could lead to Argentina being excluded from SWIFT banking transactions is without credible foundation. I have heard people say things like “they will exclude us from SWIFT transactions, like Russia”. But Russia has invaded a country, violated the United Nations Charter and declared a war. Argentina, using arguments grounded in international law, would suspend debt payment to the IMF. Please, there really is no comparison. Furthermore, the United States and Washington’s allied powers have no interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. in a conflict with Argentina, one of their allies and a member of the G20. Absolutely none. In fact, the war is somewhat destabilizing for the IMF as an institution, due to the internal contradiction of Russia being a member. There are also tensions between China and the United States that have repercussions within the IMF. All this means that it is a propitious moment for governments of the peripheral countries to gain more latitude. This is what happened in the 1930s. The crisis in the North made it easier for the experiments of Lázaro Cárdenas in Mexico (1934-1940) and Getulio Vargas in Brazil (1930-1945), and for Peronism in Argentina (1946-1955), which came later but had come about under the circumstances of the overall situation.

A propitious moment for governments of the peripheral countries to gain more latitude

The model for the Economic Commission for Latin America and the Caribbean (ECLAC), devised in the 1940s and 1950s with the vision of a different type of development model, was also part of this. It all comes about when certain governments of countries of the South begin to take advantage of a situation of international tension between the major powers to give themselves more latitude.

On the other hand, what will be the consequences of this crisis in the context of the agreement? One imagines that it will probably generate more problems for Argentina, making it more difficult to realize the objectives agreed with the IMF, and that could in turn lead to more social unrest. If the government does not take strong measures to protect the purchasing power of the lower classes, there will soon be a surge of social discontent. And if, under pressure from the IMF, it still does not to take energetic steps, the problems will only worsen. That is my forecast.

Martín Mosquera: Finally, how do you read the situation opened up by the turnaround constituted by the war in Ukraine? What impact do you think it will have on the international situation? How do you see the state of geopolitical and economic affairs across the world after the Russian invasion?

Eric Toussaint: It is a radical change. Of course, we have had wars in Europe, for example in the former Yugoslavia in the 1990s, but nothing of the magnitude of the situation created by the invasion of Ukraine. There is a fundamental change in the international state of affairs. We will see if negotiations will result in a cease-fire, withdrawal of Russian troops and Ukraine not joining NATO NATO
North Atlantic Treaty Organization
NATO ensures US military protection for the Europeans in case of aggression, but above all it gives the USA supremacy over the Western Bloc. Western European countries agreed to place their armed forces within a defence system under US command, and thus recognize the preponderance of the USA. NATO was founded in 1949 in Washington, but became less prominent after the end of the Cold War. In 2002, it had 19 members: Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the UK, the USA, to which were added Greece and Turkey in 1952, the Federal Republic of Germany in 1955 (replaced by Unified Germany in 1990), Spain in 1982, Hungary, Poland and the Czech Republic in 1999.
, but personally I have my doubts as to the feasibility of that solution – even though the withdrawal of Russian troops and Ukraine not joining NATO would of course be very positive— and I am not sure that it would be possible to reach that outcome rapidly. In any case, the already tragic effects of the war will be lasting, opening the way to further conflicts to resolve, some of them also connected to debt: Ukraine has a debt of over 15 billion dollars to the IMF and owes 3 billion dollars to Russia. Ukraine has suspended payment to Russia and denounces the debt that Putin is demanding. This is what is behind the ongoing trial in London. If there is no diplomatic solution to the war, Western imperial powers could put pressure on the British judiciary to give Ukraine the upper hand as a means of pressure against Russia, which could have significant impact in terms of jurisprudence.

In any case the demand for cancellation of Ukraine’s debt to the IMF upheld by the social movements is bound to find an echo, especially in Europe.

There is also the call for expropriation of the oligarchs. As I see it, we should not only target the Russian oligarchs but also the Ukrainian ones, to get the money repaid to the Ukrainian people through a fund under citizens’ control and not the government’s.

The way the international situation is developing is extremely worrying and it is going in the wrong direction. At the same time, the war situation opens up new possibilities and ways out which will perhaps not be so easy for the Establishment to control. Naturally we would have preferred not to have war, but the scenario does not oblige us to support the different solutions that the various powers wish to impose. From the Western position, we must oppose the policies of American imperialism and of the European Union which increase military spending while simultaneously demanding the immediate withdrawal of Russian troops and supporting Ukraine’s right to self-government.

English translation by Vicki Briault and Christine Pagnoulle (CADTM)


[1The interview was revised and augmented by Eric Toussaint in June 2022.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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