Default the IMF or default the people: The Argentine Dilemma

Thousands of people took to the streets of the nation’s capital in Bueno Aires calling for the government to cut ties with the IMF.


On 28 January 2022, the Argentine government announced a nearly $45 billion deal with the International Monetary Fund. In response, thousands of people took to the streets of the nation’s capital in Bueno Aires answering a call by leftist civil society organizations. The protesters have called for the government to cut ties with the IMF.

The deal was a restructuring of a deal made in 2018 when Argentina went into extreme levels of inflation, leading to a heavy devaluation of the Argentine Peso. The economic crisis was sparked by a combination of drought and the return of many businesses from Argentina to the United States. This resulted in a huge loss of tax revenue and a drop in demand for the Peso. The Argentinan government then sought a loan from the IMF of nearly $50 billion and agreed to cut public spending, which later expanded to $57 billion, making it the largest loan by the IMF in history. The government managed to curb inflation slightly, but with the COVID Pandemic, the country fell into dire straights once again.

Debt trap after debt trap

Over the past 50 years, Argentina has spiralled into international debt traps. Nearly a hundred years ago, Argentina had a very large GDP. Many thought that it would dominate the Southern Americas the way the US dominated the northern Americas. The economy was extremely unequal and underdeveloped, but it was culturally and economically very influential.

Argentina has been a democracy since 1983 with elections happening regularly. However, the government was still very beholden to foreign markets. By 1985, then President Raul Alfonsin, instituted austerity measures, leading to an economic collapse in the late 1980s. The resulting collapse led to a huge public deficit and popular upheaval. The Country began borrowing from the IMF.

Rise of the Piqueteros

The labour movement was known as the Piqueteros. Piquetero is Spanish, meaning picketer, referring to their protests outside of their place of work. As jobs were cut, the Piqueteros became a national movement to protect poor working-class people. Over time, the Piqueteros became more organized in their actions. They began to make decisions by the assembly, developing support systems across working groups, and helping build worker cooperatives. They also worked with local crime mafias, leading to disrepute with the middle class, and making them targets of attack by right-wing politicians.

The Argentine Great Depression

In the late 1990s, many of Argentina’s trading partners (Latin American countries in similar situations) were getting economically weaker. Argentina then fell into depression, sometimes called the Argentine Great Depression. The economy shrank by nearly a quarter with nearly half the country living below the poverty line.

By 2001, the devaluation of the Peso snowballed, as people were getting rid of the currency however they could. The loss of value caused social unrest. Many people in Argentina blamed American and European banks. Confrontations with the police by the people were followed by the state declaring emergency at the end of 2001. The government then floated the Peso, leading many poor people to lose their savings. Many businesses left the country.

In this situation, Piqueteros started to take direct control over local factories. They would face resistance from the police, but some factory cooperatives ran. Many workers began organizing assemblies to help take care of the situation created by the crisis, creating solidarity among the poor and the working class.

The following year, the resurgent demands for Argentine goods (mostly from China) and the resolution of the South American economic crisis in other countries eased the Depression in Argentina. The government defaulted on the IMF loan and introduced a dual currency system to control devaluation. The years of hyperinflation also made Argentine goods competitive on the market, leading to the return of capital to the country. The crisis, though very present, began to ebb. Starting in 2005, Argentina began paying back its debt to the IMF on schedule using bonds, completing payments by 2006, despite the 2004 energy crisis. The payment was seen by many Argentinians as an end to the ignominious indebtedness.

Piquetero leaders began working with local governments to provide welfare schemes, losing their radical edge. Politicians began to coopt leaders in the Piquetero movement, making them lose support from traditional left groups. In some localities, they were associated with local crime, making them targets of attacks from right-wing politicians and the middle class. Eventually, the Piquetero movement fragmented.

Debt crisis: Another time around

In 2015, with rising food prices, the Argentine economy went into another crisis. The government responded with more deregulation. They floated the exchange value of the peso, reduced subsidies, and opened up capital markets. Foreign investment grew, but trouble came around the corner. In 2018, inflation began to creep in again, and the state ran out of foreign currency reserves, leading to the devaluation of the peso, repeating the follies that led to the crisis of the late 1990s. The government then applied to the IMF for its infamous $50 billion debt.

In 2020, Argentina instituted one of the strictest COVID lockdowns, leading to a 10% shrinkage of the economy amidst extreme inflation. The economic crisis led to hardships for many Argentinians who took to the streets this year. Protests continue.

Protests against IMF

Experts have argued that the popular political solutions to the Argentine crisis are too expensive, and would require higher levels of indebtedness for the country. Politicians have called for national unity in times of crisis. Protesters have demanded that the government step in and work for the people against foreign capital. Without the movements of the 1990s active anymore, the country continues to stay in gridlock. Protesters on the ground march across the country expressing anger and frustration with the current system, calling for the prosecution of its politicians and to forget its debt to there IMF. Inflation rates have reached 70% in Argentina, and have wiped out the savings of the people. They say that there is a need to pay pensions, for the education of the people, and the elimination of poverty in the country.

Read more about over coverage of crises created by IMF here. 


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