The Destabilization of Argentina: Globalization's "Success" Story

Following years of austerity measures imposed by the International Monetary Fund (IMF), in the last weeks of 2001 the people of Argentina took to the streets and brought down their neo-liberal president Fernando de la Rua. Unable to deal with the massive protests, three more interim presidents came and went in a two-week period, each one promising to solve the economic crisis gripping Argentina, but clearly unable or unwilling to do anything of real substance. A Peronist senator, Eduardo Duhalde, has now been sworn in as president, promising to abandon neo-liberal policies, including "dollarization", and to declare a moratorium on debt repayment. However, Argentinians are reported to be skeptical that he will actually fulfill most of his promises.

For many years, Argentina has been touted as one of the great "success stories" of neo-liberal globalization. In 1997, former U.S. President Bill Clinton visited Argentina as part of a Latin American tour. He praised the government of Carlos Menem for its continued support and co-operation with the U.S. in working towards a hemispheric free trade agreement. Clinton also spoke glowingly of Argentina's "economic miracle" - the transformation of a country racked by hyper-inflation and instability in the 1980s to one of the fastest growing economies in the world. Together, Menem and Clinton toasted the success of globalization and promised it would bring peace and prosperity to the world, especially the countries of Latin America, Africa and Asia.

Two years later, Clinton was a witness as the anti-globalization movement exploded in Seattle with mass demonstrations against a meeting of the World Trade Organization. Now, within five years of Clinton's praise for Argentina's "miracle", the country lies in ruins. The failure of four presidents in two weeks; the shrinking of the economy for the third consecutive year; the inability of the central and state governments to pay workers' salaries for almost a year; a soaring unemployment rate that is closing in on 20 per cent; the scarcity of currency which has wiped out the informal economy; all these have contributed to the scenes of millions of Argentinians in the streets, clanging on their pots and demanding an end to the economic policies which have devastated their lives. These policies were prescribed, in their entirety, by the International Monetary Fund. Except for slight concessions to "Argentinize" the measures, since the 1990s successive administrations have followed these prescriptions to a T.Much of the public sector has been privatized, with foreign nationals snapping up state utilities and services at bargain prices. A prime example is the water industry, which was privatized in the mid-1990s. Two French multinational water companies stepped in and took over; the consequence for Argentinians in remote areas was an increase in their water bills by as much as 400 per cent. Indeed, much of the money which flowed into Argentina in the 1990s came from either American or European multinationals. At the first signs of instability in the country, billions of dollars were quickly withdrawn - $20 billion in 2001 alone.

In order to guarantee that interest payments on Argentina's foreign debt were met, the IMF also proscribed a deficit reduction policy and massive cuts to spending on healthcare, education and social services. One year into the current recession, the IMF renegotiated a Memorandum of Understanding with Argentina. Despite the shrinkage in all sectors of the economy, the Memorandum committed the central government to further reducing their budget deficit, from $5.3 billion (U.S.) in 2000 to $4.1 billion in 2001. In order to ensure the targets were met, the Memorandum outlined a 12 to 15 per cent cut in civil servants salaries and the rationalization of pensions, which resulted in an average 13 per cent decrease in the monies paid to retired workers. These measures, according to the IMF, would head off any recession, and the document predicted economic growth of 3.7 per cent for 2001, with a concurrent decline in unemployment. The opposite, of course, has happened, with devastating consequences.

In early December, the de la Rua government imposed what it called extraordinary measures to stem the flow of hard currency from the country. It placed a near total freeze on all bank accounts. This move seemed to be the final straw for the Argentinian people. In a country where the vast majority of the population do not use either credit cards or debit cards, it was tantamount to shutting down the economy. Mass protests broke out, and the country has been in turmoil since.

On December 20, Thomas Dawson, the Director of the External Relations Department of the IMF, held a press briefing in Washington where the focus of questions from journalists was on the current crisis in Argentina. Dawson was asked repeatedly, by different journalists, what degree of responsibility the IMF bore for the situation in Argentina, including the use of violent force against protestors. Dawson refused to accept that the IMF was to blame in any way for Argentina's current difficulties. He also refused to comment on the use of force, except to pledge that the IMF would continue to work with whichever government emerges to solve the current crisis.

On December 21 alone, an estimated 30 people were killed during protests against the economic crisis. According to the military, which still has leading cadres with blood on their hands from previous dictatorships, the police and army have been exercising "considerable restraint" but have warned that if protests and looting continue, the policy of restraint will end.

In another ominous sign, the Argentine legislature announced that the presidential elections, scheduled for March of this year, will be "postponed", with the new president, Eduardo Duhalde to be sworn in until December, 2003.