Before the epidemic, Carla Huanka and her family were making modest but meaningful improvements to their cramped apartments in the slums of Buenos Aires.
She was working as a hair stylist. His partner was bar trending in a nightclub. Together, they were bringing home about 25,000 pesos ($ 270) a week – creating additional space for their three boys, to add a second story to their home. They were about to plaster the walls.
“Then, everything stopped,” Ms. Hunka said, 33. “We were left with nothing.”
In the midst of the lockdown, the family needed emergency handouts from the Argentine government to keep food on the table. He resigned himself to the bumpy walls. They allowed their children to manage distance education for wireless Internet service.
“We’ve spent all our savings,” Ms. Hunka said.
Global economic catastrophe Argentina, along with Kovid-19, is particularly a country that has entered a deep epidemic in crisis. its Economy A decrease of about 10 percent in 2020, marking the third straight year of the recession.
The epidemic has intensified an exodus of foreign investment, which has pushed the value of the Argentine peso down. This has raised the cost of imports such as food and fertilizer and kept the inflation rate above 40 percent. More than four people live in poverty in Argentina.
An inevitable reevaluation on national life with the International Monetary Fund later this year is an institution that Argentina is widely disgusted for doing crippling budget austerity as part of a rescue package two decades ago.
With its public finances ended by the epidemic, Argentina should schedule a new repayment on $ 45 billion in debt to the IMF. The burden is the result of the fund’s most recent bailout, and the largest in the institution’s history – a $ 57 billion package that extended loans to Argentina in 2018.
Now under new management, the fund has reduced its traditional reverence for austerity, leading to some general concerns. Nevertheless, the negotiations are sure to be complex and politically temporary.
The Argentine government led by President Alberto Fernandez is rife with discord before the midterm elections in October. The administration faced a stiff challenge from the left, along with former President – and current Vice President – Christina Fernandez de Kirchner, who calls for a more belligerent stance with the IMF.
Traders said the government had failed to come up with a strategy that could generate sustained economic growth. Freeing Argentina from stagnation and inflation is an objective that has developed the country’s leaders for decades. In a country that is less than nine times the default on its sovereign debt, skeptics destabilize national dogs by limiting investment.
Miguel Kiguel, a former Argentine finance secretary who is a Buenos Aires-based advisor, said, “There is no plan, no way forward.” “How can you get companies to invest? Still not confident.
The Fernandez administration is banking on the virtue of a more cooperative relationship with the IMF, seeking to secure an agreement with the institution that punishes the government with budget cuts and spending it to promote economic growth Gives permission.
Such expectations would never have been unrealistic. From Indonesia to Turkey to Argentina, the IMF has forced countries to reduce spending amid crises, extract fuel for economic growth, and punish those dependent on public relief.
But today’s IMF, led for the last two years by Kristalina Georgieva, has moderated the institution’s traditional obsession with financial discipline. He has urged governments to pay rent Money tax To finance the cost of epidemics – a Measures that Argentina adopted At the end of last year.
Fund analysis of Argentina’s debt picture, and its conclusion that the burden was not sustainable, laid the groundwork for compromising with international creditors last year. Investors eventually agreed to write off the value of $ 66 billion in bonds, eliminating opposition from the world’s largest asset manager, black Rock.
The Argentine government is moving forward on the assumption that it can secure a deal from the fund that would allow the country to significantly defer its debts, leaving $ 3.8 billion – $ 3.8 billion this year and 18 billion next year More than the dollar – it cuts spending without any need.
“IMF leadership clarifies that this is the framework,” Nobel Prize-winning economist Joseph E. at Columbia University in New York. Stieglitz said. The new system would reflect the “new IMF”, he said, “recognizing that austerity does not work, and recognizing their concerns about poverty.”
The IMF’s expected resilience with Argentina reflects intense confidence in President Fernandez and his Minister of Economy, Martin Guzman, who studied with Mr. Stieglitz.
On the surface, his administration represents a return to the understanding of Argentine public life under the leadership of Juan Domingo Gion since the 1940s. The muscle under his chairmanship is state authority, public negligence for the poor and contempt for budgetary views.
Peronist politicians paid bills by raiding the peso, never spending aid on struggling communities and spending in oblivion. It has often produced runaway inflation, crisis and frustration. Reformists have taken power with the mandate to restore the fiscal system by cutting public spending. It has thrown the poor into the fire, laying the ground for the next peronist ominator.
The last president, Mauricio Macri, took over as the perceived solution to this cycle of boom and bust. International investors celebrated him as the pawn of a new, technological approach to governance.
But Mr. McRee took this further in exploiting his popularity with investors. He borrowed as fast as he lent Opposed to the poor With cuts in government programs. His debt binge, combined with another recession, forced the country to do the ultimate insult – demanding a handout from the IMF.
In elections two years ago, voters disapproved of Mr. Macri and installed Mr. Fernandez – a Peronist. Some suggested that Mr. Fernandez could stake a serious situation with creditors, including the IMF, but the Fernandez administration has proved practical, winning the trust of the IMF while maintaining relief for the poor.
“We have to avoid following the pattern of the past that has caused so much damage,” Guzman said in an interview. “We want to be creative, and work on how to solve these problems.”
The most frightening problem remains inflation, a reality that gathers businesses and households, adding to the stress on the poor through high food prices.
In major economies such as the United States, central banks traditionally respond to inflation by raising interest rates. But it does affect economic growth – not a stable proposition in Argentina, where the central bank already maintains interest rates at a level of 38 percent.
Instead, Mr. Guzman pressured the unions to accept a meager wage increase, arguing that small salaries would go ahead if inflation could be controlled. It has imposed price controls on food, while urging other companies to maintain lower prices for their products.
The government has increased the tax on exports, angered cattle ranchers and farmers.
“You spend more time filling out spreadsheets for the government than you produce,” complained Martine Palazón, a farmer who grows soybeans, corn, and wheat, and also raises cattle outside Buenos Aires.
Nevertheless, the mourning of Argentine businesses and the intense stress on the poor is matched by the reality that the country’s prospects are already improving.
Argentina’s economy is expected to expand by about 7 percent this year, as soybean exports lead to growth, while high commodity prices give the country an essential source of hard currency.
Many Argentinian businesses are doubtful that the recovery could gain momentum, particularly as the central bank maintains high interest rates.
Adenflex, a company based out of Buenos Aires, designs equipment used by breweries, food processors and pharmaceutical manufacturers to manage liquids. High borrowing costs have prevented the company from improving its plants that could give additional growth, company president Miguel Harutian said.
“We essentially take a short-term approach and cannot invest in new technology,” Mr. Harutian said. “The ultimate goal of a company – or a country – cannot be simply to survive.”
Texcom is a textile manufacturer with three mills in Argentina, making clothes for international sporting goods brands. Last March, amid a government-mandated quarantine, the company ceased production. By May, Texcom reopened and went into an area of dire need: it supplied materials for protective gear, such as face masks, required by front gear medical staff.
Nevertheless, the company’s output fell by half last year compared to 2019, and it expects its production to return to only 70 percent of preandemic levels this year.
Company President Javier Chornik is now accustomed to rise and fall with his destiny as the country’s economy continues to be unstable.
“Argentina has been in a maze for years, and it can’t get out,” he said. “The country seems to be always evolving, then there is a crisis, and we lag behind. We go and come back and can never meet again. “
In a slum in the southern areas of Buenos Aires, Ms. Hunca’s partner had recently reclaimed her old job at a nightclub, but rising food and fuel prices had effectively reduced her income.
Then there was a spurt of new Kovid cases in his neighborhood. The government imposed new restrictions amid concerns of rapidly spreading variants in neighboring areas Brazil. Her partner’s employer reduced her hours, reducing her salary in half.
“I’m afraid of what might happen now,” he said. “Everyone is very worried.”