Neocolonial Agreement. The feet of the IMF: the macrista scam is honored, the future is mortgaged

The Government of the Frente de Todos reached an understanding with the Fund in a counter-clock and asymmetric negotiation. In the last section of the negotiation, the ruling party "discovered" that the IMF is the IMF: an organism of imperialist domination.

This reality of the world order is glimpsed even in certain details: the Foreign Minister, Santiago Cafiero, had to travel to the United States to pay homage and beg that they unlock the agreement. It is that the northern country has the key to the Fund with 17% of the votes in the board. And the other powers of the G7 concentrate the core of the rest of the votes.

In this context, the nonsense of one of the most important definitions made by Alberto Fernández in his brief message today shines: “this agreement does not condition us”, affirmed the president. Being in the Fund's clutches is one of the most important conditions that will affect the Argentine economy in the coming decades: the future is mortgaged.

After denouncing that the credit granted by the agency to Mauricio Macri was a political credit to facilitate his re-election, a credit that exceeded Argentina's quota, a credit that facilitated the flight of capital to tax havens of big business, a credit that did not go through Congress, the ruling party "lost its memory". Without investigating anything, without benefit of inventory, he decided to validate the scam that the Government of Cambiemos carried out on the Argentine working people.

The new agreement comes about social conditions aggravated by the pandemic and by the restrictions on which the Argentine economy operated even before an agreement with the Fund: our country was one of the countries with the least public spending to face the consequences of the Covid, not only in comparison with the economic powers, but even in relation to neighboring countries with governments located on the right.

The statements of the vice president, Cristina Fernández de Kirchner, with complaints about the fiscal adjustment are based on this reality: in 2021, according to CFK, the government spent more on payments to the IMF than on attending to the Covid emergency. A confession of parties, relief of evidence. Since Alberto Fernández took office, US$ 7,185 million have been paid to the IMF, including US$ 731 million paid today.

The agreement comes to relegate urgent social needs even more when poverty affects 40.6% of the population and is around 60% among children and young people up to 14 years of age. Neither in the president's message nor in the subsequent press conference between the chief of staff, Juan Manzur, and the Minister of Economy, Martín Guzmán, were policies indicated to put an end to this serious social reality.

Guzmán pointed out that the agreed program will take place over two and a half years: it includes an adjustment to reach a deficit of 0.9% of GDP in 2024; the increase in interest rates; and the accumulation of reserves to pay the debt. But the negotiations continue and since the Devil is in the details, new unspeakable conditions could appear. During this period of two and a half years, the Fund will provide resources (new debt) to pay the debt inherited from macrismo. Starting in 2026, the country will have to repay the new debt.

The fiscal adjustment implicit in the announcements will act directly on education, health, retirees, beneficiaries of social programs and public employees, among other social destinations of public resources, to release funds in favor of the creditors.

But the indirect way inflation will be another central weapon of the adjustment in progress. The proclaimed reduction of the exchange rate gap does not mean anything other than an increase in the official dollar that, even if it is gradual, and does not include (for now) a violent exchange rate jump, will have an impact, as everyone knows in this country, on the level of inflation . At the opposite pole, the exchange rate adjustment benefits agro-exporters in particular and, more generally, the entire capitalist class via the devaluation of local wages measured in dollars.

Finally, as stated in the Fund's statement on the agreement reached, a central aspect of the program will be the reduction of subsidies to public services. This implies an increase in gas and electricity rates that, although they are not the macro rates, will be applied to popular income that has accumulated four years of deterioration since 2018.

A little explicit objective, but always sought in the programs that the Fund applies throughout the planet, is to attack the real salary (that is, its purchasing power): contrary to what Guzmán said at the conference on the increase of the real wage, the combo of fiscal adjustment, reduction of the exchange gap and reduction of subsidies to public services, will place the real wage in a situation of fragility.

Co-government with Washington

The agreement was presented by the ruling party with the intention of hiding the serious consequences it will bring to the living conditions of working people. "We reached an agreement that does not contemplate restrictions, that postpone our development, does not limit, does not restrict, does not condition the rights of our retirees, does not force us to a labor reform and does not force us to reach a zero deficit," said President Fernández .

The Fund's agreement with the macrismo did not contemplate pension or labor reforms either. The rejection of the pension update formula was in the air (and continues to be) with the mobilization of December 2017. But that agreement still implied an attack on the income of the elderly and workers. The new pact, obviously, does not propose returning what was stolen from retirees in four years of adjustment or ending poverty pensions: only in this sense is it true that "it does not condition the rights of our retirees."

In addition, far from the affirmation of President Fernández, the lack of protection against inflation of the new pension update formula promoted by the Frente de Todos could imply new losses of the purchasing power of the elderly and other social benefits tied to that formula, such as the Universal Child Allowance (AUH), if the salary of active workers or collection deteriorates.

The capitalist regime, faced with the sure rejection of a general labor reform by the labor movement, seeks to advance by sector or by company. This is what the macrismo did with the relaxation of the oil agreement for Vaca Muerta, or as the Frente de Todos did, giving free rein to a relaxation of the automobile agreement at Toyota. There are more examples.

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But the extended facilities agreement reached by the current government includes structural reforms that may appear as a requirement of the Fund if the agreed goals are not met. It is not unreasonable that the agreement should be readjusted in a short time: the Fund sows the conditions for failure with potentially unachievable goals. This happened even with the macrismo to whom the Fund "gave everything": in October 2018, a few months after the first agreement, it had to readjust the economic program with the closure of ministries, goals of zero monetary emission and zero deficit. for 2019.

The Fund will have a formidable instrument with the quarterly reviews that Guzmán announced today: these reviews will imply an unbearable interference in all affairs of state, particularly in public accounts. This subjugation will be strengthened with an additional weapon on the temple of the Argentine economy in the hands of the constituents in Washington. It is that the government that proclaims the "never again" to the debt, has just agreed to the opposite: take on new debt to cancel the Macrista debt. Every three months, the Fund will decide whether to send fresh funds to cancel the gigantic payments committed by the macrismo.

If the Fund decides to turn off the tap in the event of an Argentine default, it would cause a crisis of a greater dimension than the one that is supposedly being exorcised. Not only that. Starting in 2026, the country will have to assume the payments of the new loan that will be added to the already impossible payments with private creditors that will increase from 2024/2025.

A brake on economic activity

Growth in 2021 made it possible to recover the fall of 2020 due to Covid, but not the one accumulated since 2018. Not only that: growth sustained the serious indices at high levels social and increased inequality in the distribution of income: that is, it is a growth that only a few kept.

However, the Argentine economy has been in a situation of virtual stagnation since 2012/2013. ECLAC speaks of a "lost decade" for Latin America. The reality of the country is immersed in this panorama. For this reason, the 2021 growth, socially unequal and also by branches of activity, does not mean any "miracle". With the IMF in command of the economy, it will be difficult for the country to emerge from this situation of lethargy.

At Manzur and Guzmán's conference, some details were given that contradict the president's definition of the absence of restrictions, particularly on growth. The announced fiscal path includes a primary deficit of 2.5% of GDP (Gross Domestic Product) for this 2022. The Minister of Economy did not blush when saying this number when in December he defended a Budget with a deficit of 3.3%.

In these terms, the Fund imposed an additional cut of 0.8% of GDP for the current year: following the GDP calculations made by the Ministry of Economy for 2022, the additional cut of 0.8% imposed by the IMF would reach around $481 billion or the equivalent of four months of minimum pension payments to four million seniors.

This cut is made based on a cut that Guzmán had already assumed before the agreement: it is a reduction of the 2022 deficit in relation to the one registered in 2021. The size of the cut between the two years was concealed by the effect of operating factors last year that will not be present in the current one: collection by solidarity contribution; increased collection of withholdings increased by international prices; and the Special Drawing Rights (DEG) that the Fund sends to all member countries.

The path of fiscal adjustment will continue in 2023 with an additional cut of 0.6% of GDP so that the deficit reaches 1.9% of Product. The same will happen in 2024 with another 1% adjustment to reach the goal of 0.9% deficit in relation to GDP. This supposedly gradual path of adjustment will establish narrow limits, not only to the development that the president spoke of (which implies much more than growth insofar as it includes -although there is a long debate on the subject- improving the productive framework), but will also be an anchor for the growth of the economy.

Minister Guzmán knows, if he is faithful to the neo-Keynesian creed of his mentor Joseph Stiglitz, that the path of reducing the fiscal deficit that has been committed takes away tools from the State to encourage growth. In fact, a few weeks ago, in the presentation of the status of the negotiations to the governors (where those of Juntos were absent) the minister defended a path of fiscal adjustment different from the one now accepted. And he emphasized that it was the main point of contention with the Fund. In other words, the government defected before the international organization as it did in 2020 in the negotiation with the wolves of Wall Street for the restructuring of debt with private creditors.

The ruling party juggles to explain that there will be no adjustment in real terms to the budget, affirming that the reduction of the deficit will be achieved thanks to growth. But it is precisely growth that is committing itself to the deficit reduction path.

Not only that. Minister Guzmán also announced that positive real interest rates will be sought. The increase in interest rates, something that the Central Bank began to practice anyway before the agreement, implies making productive and consumer credit more expensive (it will cost more to buy, for example, a refrigerator or a television on credit). In other words, it implies an additional obstacle to economic growth that the Frente de Todos claims to defend as a principle. It is no coincidence that, among so many goals, no growth targets have been made explicit so far.

The rise in the interest rate has an additional objective: to give an incentive to financial capital to finance the deficit in the transition in the local market until it is reduced. This means replacing deficit financing to the detriment of monetary issue (which in itself is not good) and in favor of private capital (which is surely worse). What is never in the debate with the Fund is to strongly affect the interests of big capitalists to “balance” the accounts with progressive taxes.

The policy of accumulating reserves in the Central Bank that Guzmán announced has several edges. The debt maturity schedule from 2024/2025 with private creditors and from 2026 with the IMF will be practically impossible to address, so another debt crisis is in the forecast for the immediate future.

Therefore, there is an urgency to accumulate reserves to pay the debt. But the accumulation of reserves to pay debt in the country of the "external restriction" (that is, the shortage of dollars to sustain growth) implies that the dollars available in these pampas will be in dispute between those that must be saved to pay the debt and those needed to sustain economic activity through the importation of capital goods (machines, technology, etc.) and intermediate goods (inputs) to supply a backward productive apparatus or final consumer goods.

In this context, the Taliban policy of the ruling party to promote mining, hydrocarbon and agricultural extractivism in order to obtain dollars in foreign trade is also understood: it is to burst the environment to pay the debt.

The eternal debt

The entire political regime (there are already pronouncements from the Cambiemite opposition in favor of the agreement), the big business community, the most powerful journalistic groups, the economists of the establishment present the need to submit to into the clutches of the Fund as the only alternative to avoid economic chaos. As a guarantee of stability. In fact, it is the opposite. They defend a bailout of capitalist businesses to the detriment of the living conditions of the working majority. This is glimpsed in the celebration that takes place in the "markets".

History is abundant with testimonies of how the Fund sank the country. The consequences for the working people are easily depicted with the chaotic end of Alfonsinism, with the 1990s policies of Menemism and the breakdown of convertibility together with the unprecedented social crisis of 2001/2002.

In recent history, the Macrista agreement, in the 19 months from June 2018 (first agreement with the Fund) to December 2019 (end of mandate), meant that the purchasing power of wages fell 13 points percentage points in the registered private sector, 10 percentage points in public employment and 19 percentage points among informal workers. The percentage of poor people went from 27.3% in the first half of 2018 to 35.5% in the second half of 2019. There is no doubt: the Fund is a machine for generating poverty.

The left proposes a way out opposed to the capitalist regime: sovereign ignorance of the debt based on worker and popular mobilization; and a program of economic and social reorganization for the benefit of the majority. It is not inexorable to repeat over and over again the history of submission and decadence to which the capitalist regime leads.