The 2001 economic and social debacle suffered by the people of Argentina after following International Monetary Fund (IMF) directives has been amply documented; however, scant attention has thus far been given to the country’s remarkable recovery since then. In the short years following the Argentinean government’s daring decision to deal with the IMF at arm’s length, Argentina’s economy has grown at an enviable annual rate of nearly 10%, poverty has been reduced by 18 percentage points from a high of 40%, unemployment has reached a low of 11.1%, foreign investments are growing rapidly, and the value of exports continues to increase.

Argentineans are now asking themselves whether to return to the IMF fold (and if so, under what conditions), or to stay clear of the IMF, at least for the time being. In Argentina, in 2005, this is not just an academic or ideological discussion. Argentineans have suffered on their own backs the consequences of ill-advised economic decisions taken in far-away global fora, such as the IMF and the World Bank (WB), where they or, for that matter, their government, had little or no say and were certainly not in a position to make demands. The worse consequence of the fully orthodox, “Washington Consensus” policies adopted prior to the 2001 crisis was a huge surge in poverty levels, and the near extinction of a substantial, historical middle-class. Argentineans know what the initials “IMF” stand for, at least for them.

Meanwhile, however, from Washington, the IMF is sending signals to the Argentinean government that it wants to be involved in the country’s recovery.

Argentina’s Minister of Finance, Roberto Lavagna, had stated recently that reaching an agreement with the IMF in 2006 was not essential; but just a couple of weeks later, picking up on the IMF’s calls to come to the table, Mr Lavagna indicated that he would indeed welcome a “useful dialogue”, provided that the negotiations be based on the premise of a “strong Argentinean participation.” Argentina would thus insist on the right to define economic and social priorities and goals, on line with the government’s policies toward sustainable development, including creation of decent employment, poverty reduction, improved health and education, etc.

For the IMF, the benefits of an early agreement seem clear enough: it is certainly not a good public-relations strategy for the IMF to remain fully absent from Argentina’s economic success. It is a bit of a global embarrassment for the IMF not to be playing a role in the country’s impressive recovery.

Furthermore, as far as IMF relations with emerging economies are concerned, all eyes are on Argentina, particularly in the developing world. While the particular circumstances of this case are not comparable to those prevailing in other countries, the ongoing Argentina-IMF process is arguably the best show in town. Many around the developing world want to know just how flexible the IMF will be in its dealings with Argentina.

For its part, the WB has already admitted to some degree of responsibility regarding the failed policies leading to Argentina’s 2001 crisis. While the Bank is careful to point out that the inadequacies observed relate only to the implementation of the policies and not the policies themselves, the WB’s recognition of responsibility nevertheless constitutes a welcome suggestion that things have to be handled differently in the future.

Away from questions of responsibility (and there’s enough responsibility to go around, both domestic and foreign), Mario Del Carril, a prominent contributor to LA NACION, a leading Buenos Aires newspaper, put it simply in a recent column: “Argentina and the IMF need each other.” As Mr Del Carril points out, Argentina is now in a position to negotiate more firmly with the IMF, and it should not demur. Given the medium-term uncertainties of Argentina’s current economic boom, no one knows how long this favourable negotiating position will prevail. Furthermore, the immediacy of the 2001 crisis makes Argentina’s voice more deserving of consideration. Bad memories tend to fade quickly in posh Washington suites. The sooner negotiations start, the better for Argentina.

In its efforts to deal with the IMF from a basis of equality, however, Argentina can not count on the help of the US government. Mixing flattery and humour, and perhaps a dash of cynicism, US President George W Bush made that point clear at a recent press conference after meeting with Argentinean President Néstor Kirchner (prior to the opening of the Fourth Summit of the Americas in Mar del Plata, Nov 4-5, 2005.). According to Pres Bush, Pres Kirchner has a strong enough hand now to deal efficaciously with the IMF on his own.

Just hours before, however, in Washington, Pres Bush had warmly praised Argentina’s economic recovery and had told LA NACION that he would be “happy to help Argentina”. But apparently, what Pres Bush had in mind for Argentina was just the US-sponsored Free Trade Area of the Americas Agreement (FTAA) – www.ftaa-alca.org – and not supporting Argentina’s positions at the IMF.

FTAA is a dirty word to most Argentineans with 70% of the population against the FTAA. Admittedly, the reasons advanced to explain such a pronounced distaste are often not well informed or fully articulated. The prevalent adverse attitude toward the FTAA in Argentina may indeed be riding on deep ideological beliefs, but who could totally blame the Argentineans for that? After the 2001 debacle, Argentineans are hyper-sensitive to any initiative originating in the United States, especially if presented under the guise of a helping hand.

The Argentineans’ tendency to be on guard against anything emanating from Washington these days is echoed in other Latin American countries as well, from the vociferous Venezuelan President Hugo Chavez to the more low keyed reservations of President Lula de Silva in Brazil. Even in the United States, some top Democratic leaders such as Sen Harry Reid, the Senate Democratic Leader; Rep Bob Menéndez, the Democratic leader in the House Subcommittee for Latin America, and Nelson Cunningham, former special advisor to Pres Bill Clinton, have also voiced deep concerns regarding the current US Administration’s perceived disengagement with Latin America, and Argentina in particular. “The policy of this Administration toward the [Latin America] region is limited to free trade”, said Sen Reid, while Rep Menéndez complained that “the region is being ignored… this is the only region for which this Administration supported budget cuts on international or military aid over the last few years, with a proposed cut of 12% for 2006.” Sen Reid has ruled the US policy toward Latin America a “failure”, and in a letter addressed to Pres Bush at the end of October, Sen Reid reminded him that the proposed free trade agreements “are not a magic cure for poverty.”

Certainly, this was not a good time to sell FTAA to Argentina, whatever its merits, and this became rather obvious with the collapse of the Fourth Summit of the Americas, where the US placed the emphasis on the FTAA (even though the FTAA was not even on the agenda), and Argentina and Brazil placed it on economic policies that serve a social purpose, such as decent employment (the main theme on the agenda). (Venezuela was busy digging a grave for FTAA, perhaps a slightly premature task.) Many voices within Argentina blame Pres Kirchner for his allegedly poor handling (or manipulation for domestic consumption, according to some) of Argentina’s role as host of the Conference, where the purpose should have been to attempt to bridge differences rather than further divide the parties. In any case, what followed was, in the words of Laura Carlsen, director of the Americas Program at the International Relations Centre, “a diplomatic mêlée that reflects not so much divisions within Latin America, as a growing resistance to the current free trade model throughout the developing world.” (see http://americas.irc-online.org/am/2954).

Be that as it may, the US government now feels slighted by Pres Kirchner’s perceived intransigence to let FTAA negotiations move forward. It has been reported in the US that the White House is quite annoyed with Mr Kirchner and feel that the entire Conference was organized as a trap for Pres Bush. The US will no doubt proceed with the FTAA agenda on a bilateral basis, which is not the preferred approach, and it may also feel less inclined to sympathize with Argentina’s positions at the IMF. Hopefully, the United States will not go beyond its implied “hands off” position in connection with the IMF-Argentina negotiations, neither helping nor obstructing Argentina in that process. But if the White House is determined to teach Pres Kirchner a lesson and return the favour at the IMF, Mr. Lavagna’s job will suddenly become far more difficult, if not impossible*. Whether danced in Buenos Aires or Washington, it still “takes two to tango”, and sometimes three.

Argentina is a bright spot in Latin America and generally across middle-income and poor countries around the Globe. Along with Brazil and Chile, but with economic and social conditions of its own, Argentina stands out as a promising experiment where economic and social policies are seen as intimately interconnected in order to achieve a stable political environment and true sustainable development. Argentina knows that economic growth alone does not solve the underlying social problems of unemployment, poverty and the unfair distribution of progress.

Argentineans have suffered enough to know that market forces cannot be allowed to dictate economic and social policy. Their proud national identity, their courage, vitality and creativity have served them well in their recent journey through hell and recovery. They have stood up to the IMF, and the IMF would now be well advised to pay attention and listen closely to the concerns of the Argentinean government. The IMF, as well as all other international financing institutions, must realize that specific economic and social conditions prevailing in a country require specific measures and methods tailored to the specific circumstances. They should further understand that national governments, with strong civil society participation, are best positioned to say where the national economic and social priorities lie.

Setting aside differences on the FTAA and feelings of improper treatment, the United States and, under its ever present influence, the IMF would do well to keep a receptive ear toward Argentina. The country is on a threshold toward sustainable development, and sustainable development will bring national and regional political stability. Washington does not need more political instability in Latin America; it needs less.

Let us hope that the IMF does not apply a business-as-usual approach and mess up Argentina’s nascent journey toward sustainable development. That would not be good for Argentina.

It would not be good for the IMF either.

In solidarity,

Vicente García-Delgado, CIVICUS´ UN Representative

* As this column was sent for publication, news arrived on November 29 that Roberto Lavagna has been replaced as Finance Minister by Felisa Miceli, President of Banco Nación, Argentina’s largest State bank. Ms Miceli is considered to be even less orthodox than her predecessor, with a particular interest in income redistribution and poverty reduction.