The deuda (“debt” in Spanish) is one of the most persistent elements in the two centuries of Argentina’s history. It has conditioned the political life and the economy of the country like no other factor, for generations.
But this should not be confused with just any debt. The word deuda normally refers to the external debt (both public and private), a debt owed to foreign creditors.
Historically, the key aspect of the deuda is that it is based on a foreign currency, the world trade currency controlled by the ruling empire. It was once the British pound. Since 1944 it has largely been the US dollar.
The United States can “print” dollars (and the Federal Reserve does so regularly), but Argentina cannot. The same is true of other countries in the Global South with large external debts denominated in foreign currencies.
There are only two ways for these nations to get dollars: exporting and borrowing.
But there are also multiple ways to reduce the need for dollars by reducing imports or increasing the value of exports. For example, instead of relying on a rent economy based on the export of cheap commodities with a low value added (the model adopted by many former colonies rich in natural resources), a country can develop its own industry and reduce its dependency on expensive imported goods, especially advanced technologies or fashionable consumer products.
If a nation excels in some sectors of the economy, it may be able to export more, improving its balance of payments.
In a more advanced stage, a country may even dare to associate with its friends and neighbors, creating a regional bloc in which they trade using their own currencies and rules, or a barter system, circumventing the US dollar.
All these common-sense policies may sound like nothing special for sovereign nations, yet they are a mirage in semi-colonial countries like Argentina.
A chronic debt crisis
As Argentine as the tango and mate, the deuda affects the everyday life of everyone: inflation, salaries, employment, public services, elections. Everything.
And yet its technical and historical intricacies make the deuda a daunting topic, perfect to keep millions in the dark and bureaucrats safe, while instigating an eternal battle of the have-nots.
The deuda doesn’t just relate to the way Argentines think about the economy. In some cases, it contributes to shaping their opinions about history, culture, media, race, and class. It almost always defines their vote as well.
Argentina has defaulted on its debt eight times. It even made history with the world’s biggest ever default ($95 billion in 2001) and largest ever loan ($57 billion in 2018) from the US-controlled International Monetary Fund, making it a privileged case study.
How could this happen? A first hint could be that a man who bears heavy responsibility for some of these negative world records, neoliberal guru and Harvard doctor in economics Domingo Cavallo – who directed Argentina’s central bank during the last dictatorship and served as economic minister in the 1990s – was lavished with years of praise, given rewards by international institutions, and heroized in the US media as a kind of semi-god.
It is no coincidence that Argentina also has the dubious distinction of boasting one of the Earth’s highest ratios of “free market” think tanks to the population.
The reality is that Argentina’s ruling class has not changed much in the last 200 years. So let’s start from the beginning.
This is a brief history of Argentina’s debt, and the neocolonial relationships that dictate it.
You never forget your first debt
In 1824, only eight years after the declaration of independence from the Spanish empire, the union of provinces that would eventually become the Argentine Republic obtained a loan of £1 million pounds (a whopping £110 billion today, according to the Bank of England) from Barings Bank, a British private bank that also had lent money to the US government.
The loan, denominated in pound sterling, was supposedly destined to fund the port of Buenos Aires and build new infrastructure. Instead, it quickly evaporated in a war with Brazil (from 1825 to 1828), which was militarily supported by the British, who helped block the port of Buenos Aires for three years – cutting off Argentina from its only source of foreign currency.
Corruption and betrayal played a key role in making the 1824 loan possible. The delegation that represented Argentina in London was made up of British and Argentine traders and financiers who offered the entire State of Buenos Aires as collateral: all its assets, lands, and rents.
Of the original £1 million loan, Argentina only received £570,000, while the enormous remaining sum was lost in commissions and other fees, mostly to pay the negotiators.
Less than 20% of the money delivered was in gold coins; the rest was in paper notes.
By 1827, Argentina was already unable to service its debt obligations and entered its first default. Two frigates belonging to Buenos Aires that were under construction in England were seized by the bank, weakening Argentina’s naval defense.
A few years later, Argentina had no deterrent that could stop the British empire from occupying the Falklands, extending its power projection to Antarctica. These islands (officially known as the Malvinas) remain colonized by the United Kingdom to this day.
Argentina subsequently defaulted twice in the 19th century, and had to emit new bonds to keep paying the growing interest.
It was only in 1904 that Argentina’s original debt was formally repaid. It had taken 80 years, more than three generations, and had cost about eight times the original value.
This simplified account of Argentina’s first experience with a neocolonial debt trap only scratches the surface of a scam that inspired the more sophisticated schemes developed in the two centuries that followed.
Today’s practice of trapping former colonies in unpayable debts is the result of well-engineered financial, diplomatic, political, and legal strategies that have been tested dozens of time in a neocolonial laboratory.
Theft, extortion, and collaborators
These neocolonial extortion schemes have three major effects. First, they facilitate the transfer of enormous amounts of hard-earned wealth from the real economy of developing nations to banks and speculative funds controlled by super rich individuals and families in the Global North – largely based in the United States, Europe, or offshore tax havens.
Secondly, by installing dictatorships, leveraging institutions like the International Monetary Fund, or getting US courts and judges to seize funds of sovereign nations, lenders obtain the power to dictate the monetary, economic, labor, and even foreign policies of indebted countries, effectively creating semi-colonies whose democratically elected governments are incapable of implementing policies demanded by their people.
Thirdly, these policies imposed from outside in turn strengthen a local parasitic capitalist class that is fundamental to perpetuate a regime of foreign control. This type of traitorous bourgeoisie, still dominant in Argentina and in all Latin America, was described by Chinese revolutionary Mao Zedong as the “comprador” class, an appendage of foreign capital that benefits from the foreign exploitation of its own country.
Argentina is a case study of this neocolonial process.
When the International Monetary Fund (IMF) was formed in 1945, Argentina initially refused to join.
The South American country’s democratically elected President Juan Domingo Perón implemented a progressive nationalist program that encouraged independence and sovereignty. He was very successful in boosting Argentine industry through two five-year plans, and briefly neutralized the effects of the deuda during his tenure.
But Perón was toppled by a bloody military coup in 1955. And Argentina promptly entered the IMF under dictator Pedro Eugenio Aramburu in 1956.
A virulent anti-communist, Aramburu’s unelected military regime also severed the ties with the Soviet bloc and moved Argentina into the neocolonial orbit of the United States during the first cold war.
1976-1983- From death to debt
Argentina is one of the world’s biggest agricultural producers. Agriculture accounts for most of the country’s exports and it is the main source of foreign currency (the other being loans).
Because of this, Argentine landlords and their ultra-conservative civic organization, the Rural Society, have been extremely powerful throughout the country’s history.
Argentina did experience formidable industrial growth in the first half of the 20th century, especially between the 1930s and 1950s.
Until then Argentina, had often ranked among the 10 richest countries in the world by total GDP. According to long-run economic development data, the GDP per capita even ranked first in the world in 1895 and 1896. But Argentina also had a relatively small population.
When Perón took power in 1946, Europe was in ashes and Argentina’s per capita income ranked seventh in the world.
In 1955, when Perón was overthrown in a US-backed military coup, Argentina ranked 16th – still a very high position considering that the reconstruction of Europe was boosted by Washington’s Marshall Plan, not to mention the fact that Washington’s policy of flooding Europe with US agricultural products had had a negative impact on Argentine exports.
That year, Argentina’s GDP per capita was the highest in Latin America – almost five times that of Brazil. Compared to colonial Britain, it was only 19% lower. And it was half of that of the United States.
Argentina’s GDP per capita never got better than it was in the year Perón was overthrown. By 2016, it had plunged to 63rd.
The statistics aside, the point is that before it got sucked into Washington’s cold war, Argentina was a significant economic power.
Although politically unstable and dominated by a backward landlord and comprador class, the South American nation’s rapid growth, large immigration flows, and incipient industrialization created the conditions that could challenge the colonial status quo.
Perón was not a Marxist, but he envisioned a third way between US capitalism and Soviet socialism, and was a clear symptom of those tensions.
The old War on (Marxist) Terror
The dominance of the United States in Latin America, a region with a population of more than 660 million today, was achieved and is maintained through a number of strategies.
One of the least understood yet perhaps most significant is the intentional sabotage of independent economic development.
With a growing industry and an industrial working class strengthened by a diverse mix of immigrants, Argentina’s economy was particularly difficult to undermine. Even more so because many of the millions who had fled from poverty, fascism, and wars and ended up in the South American country were socialists or some variety of leftist.
But one of Washington’s preferred ways to impose its control over Latin America, especially during the first cold war, was through violent force.
The 1955 coup that removed Perón was carried out with aerial bombings on the presidential palace and the center of Buenos Aires. Roughly 360 people were killed.
In the two decades that followed, Argentina descended into a spiral of military coups and intermittent right-wing dictatorships backed by the United States.
In 1970, the former dictator Aramburu (de facto president between 1955 and 1958) was assassinated in circumstances that are still unclear today, accelerating a complex process of further destabilization.
The chaos was exacerbated (or caused) by the US government’s Operation Condor, a secret plan to eradicate all Marxist elements from Latin America through the provision of anti-insurgency support, coordination between intelligence services, and training to carry out infiltrations, torture, and assassinations.
The leaders of the last Argentine dictatorship (which governed from 1976 to 1983), who were later charged and convicted with crimes against humanity, used to describe their mission as a war – more precisely as a war on “Marxist terror”.
But the limited cases of insurgent violence, which paled in comparison to the wildly disproportionate state terror and repression, were used as a pretext to persecute and exterminate all dissent and resistance against the post-1955 regimes.
Between 1973 and 1976, many of these crimes were carried out by the Triple A (Argentine Anticommunist Alliance), a death squad founded by far-right Peronist José López Rega, who had been a key ally of Perón in the 1970s and a member of Italy’s infamous Propaganda Due (P2).
But anti-Peronist and anti-communist Emilio Eduardo Massera, one of the leaders of the 1976 coup and the military regime that followed, was also a member of the P2.
P2 shows how European governments also assisted in Washington’s war on the left in Latin America.
Propaganda Due was a criminal organization based in Italy and linked to Italian intelligence, allied with the CIA and NATO. It was exposed in 1981 and dismantled in 1982 by law.
P2’s leader was Licio Gelli, an Italian fascist, intelligence operative, and financier who had lived in Argentina. The organization was considered a sort of Italian deep state with strong connections to the right-wing media and anti-communist environments.
On March 28, 1976, just four days after a right-wing coup, Gelli sent a letter to Argentine coup leader and P2 member Massera saying that he was “happy everything went according to the plans” and wishing that “a strong government” could repress “the insurrection of the Marxist movements.”
The Italian parliament published a report investigating P2 in 1984.
With a number of secretive far-right entities and plots overseen by the US and European governments at the height of the first cold war, Argentina was ready for its shock.
When Argentina’s military arrested constitutional President Isabel Perón (the politically unskilled wife of Juan Domingo Perón) in the early hours of the March 24, 1976, many believed that things could not get much worse. Inflation was at 700% and political violence was already extreme.
In fact, it was one of the bloodiest nights in the history of Argentina – probably only surpassed by the genocide targeting Indigenous nations and the slavery of the previous century.
What followed the US-backed coup was a campaign of terrorismo de estado (state terror), desaparecidos (forced disappearances), systematic rape and torture, arbitrary detentions, countless people forced into exile, burning of millions of books, dystopian surveillance, and propaganda.
Like Chile under Augusto Pinochet and other countries in South America, Argentina had entered its neoliberal experiment, an economic reset under the supervision of the United States and its Operation Condor, the local comprador oligarchy, and the Argentine branch of the Chicago Boys.
The new regime was called the “National Reorganization Process” – a name that implied it had a mission to accomplish.
The US-backed military junta, an unelected government controlled by the armed forces, acted as the main enforcer of the “reorganization”.
Dictator Jorge Rafael Videla, a rabid anti-communist, was in power during most of the “process,” and proudly defended his countless crimes until his death in prison in 2013.
But the men who oversaw most of the economic shock were Adolfo Diz and José Alfredo Martínez de Hoz.
Diz directed Argentina’s central bank (and was followed in 1981 by the US media’s golden boy Domingo Cavallo). He was a pupil of Milton Friedman in Chicago and a former IMF executive director.
Elite right-wing economist Martínez de Hoz was appointed economic minister. He was a Cambridge graduate from a wealthy family of landlords, the CEO of several large Argentine companies, and a personal friend of US billionaire oligarch David Rockefeller.
Those who followed for shorter periods of time had very similar résumés, full of degrees from elite US universities and sinecures at the IMF, World Bank, and other Washington-dominated neoliberal institutions.
“Sweet money”: Neoliberal shock therapy and de-industrialization
Martínez de Hoz used his position to favor Argentine and foreign elites, including his personal friends and the companies he had worked for.
Almost immediately after the Videla dictatorship came to power, Martínez de Hoz got a $100 million IMF loan (worth a much higher sum today).
He also implemented aggressive neoliberal shock therapy: smashing trade barriers, allowing US and European products to flood Argentina’s market, and removing subsidies (including on gasoline).
In a vicious attack on Argentine workers, Martínez de Hoz froze wages by law, while inflation remained well above 100% throughout his tenure. This caused a devastating drop in the cost of labor, and therefore in the real value of salaries, which declined some 40% by 1980.
He also successfully dismantled most of the Argentina’s still competitive industry, selectively saving his friends.
The US-backed Videla dictatorship oversaw an intense de-industrialization, marking an end to Perón’s era of state-owned company, which since 1951 had produced domestically designed cars, motorbikes, trucks, airplanes, and engines.
Decades of industrial research and development, tens of thousands of jobs, and large public investments were disintegrated in Argentina.
Claiming to be fighting inflation, in 1979, Martínez de Hoz introduced an artificial system of exchange regulation between the peso and the US dollar known as la tablita (the little table).
Leveraging large and ever increasing foreign debt, la tablita overvalued the peso, favoring imported products over domestic ones, so thousands of Argentine businesses went bankrupt.
It also allowed speculative funds to exploit a scheme known as carry trade (bicicleta financiera). Speculators could get low-interest loans abroad in US dollars and absurdly high interests on pesos in Argentina, with no capital control whatsoever, so they started moving money in and out making enormous profits.
This made foreign and domestic speculators much richer than they already were, but the gains from the trick had to be paid by the state – or more precisely Argentine workers – in US dollars.
The strong peso was a clever ingredient of the dictatorship, defining a neoliberal myth that was called “sweet money” – a sort of consumerist orgy with an unhappy ending that was portrayed in a 1982 film with the same name.
Because of la tablita, the most coveted imported goods (consumer electronics, clothes, and accessories) became cheap almost overnight. Imports rose by more than 550% between 1976 and 1980.
The overvaluation of the peso meant that many Argentines could suddenly afford to travel and go shopping abroad.
While factories were closing en masse – and while thousands of mothers were looking desperately for their children and grandchildren, who had been disappeared for opposing the junta – the military regime propagandists celebrated the new era as a positive opening to the world.
The euphoria after the victory at the 1978 football World Cup led to a feast of nationalist propaganda.
This economic deception lasted two years. La tablita was abolished in 1981, with a master stroke leading to the opposite effect: a sudden devaluation of the peso.
More Argentine businesses went bankrupt because their pesos were now worth nothing, and their debts denominated in US dollars had become unpayable.
Videla, Diz, and Martínez de Hoz resigned a month later, leaving the country in recession and the state in monetary and financial chaos.
Reorganizing the last bits
In 1982, the military junta had been weakened by five years of suicidal neoliberal economic policies. It attempted to stay afloat with a jingoistic wave of paradoxical anti-colonial propaganda.
The regime that had humiliated the nation and the people of Argentina by selling it off and betraying it in all possible ways did the unthinkable: It waged a war with Britain over the Malvinas.
The Falklands War ended in a catastrophe, but also accelerated the end of the dictatorship.
Taking advantage of the last days in power, the right-wing-controlled central bank nationalized the private debt of a selected group of companies in December 1982, including Grupo Macri, a holding founded by the father of Mauricio Macri (whose neoliberal presidency between 2015 and 2019 was a nostalgic homage to the families benefited by the dictatorship).
The nationalization of this private debt cost the state about $17 billion dollars.
The financial deregulations of the regime led to uncontrolled capital flight, destructive speculative schemes, rampant fraud, and the crash of dozens of financial companies, including banks.
The desperate need for US dollars to repay debts forced Argentina’s de facto government to keep emitting bonds at always higher interest rates.
According to data from the World Bank, the external debt of the government was $4.6 billion in 1976.
At the end of the dictatorship in 1983, it was $25.6 billion – an increase of more than five times.
This debt would double to $52 billion by the end of the 1980s, and subsequently skyrocket to $103 billion in 2004, doubling again.
And these figures do not include private foreign debt.
In the 28 years since the beginning of the US-backed state terror – between 1976 and 2004, constituting roughly a generation – the deuda had increased more than 2200%, while GDP had gone up only 49%.
The world average for GDP growth in the same period was 90%.
The increase in Argentina’s external debt was 45 times the growth of its GDP.
The country was in an economic apocalypse.
1983-2001 – From hope to default
Operation Condor turned Argentina into a broke country whose economy was heavily indebted in US dollars.
With the 1983 election of Raúl Alfonsín, the military boots left the presidential palace, but the debt contracted by the dictatorship never did.
Alfonsín could have contested the legitimacy of the debt. After all, it had been contracted by a dictatorial regime installed by the CIA, operating under US influence and favoring foreign interests over Argentina’s.
The debt was the result of a deliberate effort to undermine the economy and sovereignty of the Latin American country, so the legitimacy of the deuda was a valid matter of debate.
But Alfonsín’s government and the new, fragile democracy were too weak for such a challenge.
The first elected president in a decade was inaugurated in an atmosphere of great hope, after a war and nightmarish horrors that would soon become public, thanks to an investigation that concluded with the publication of the book Nunca más (“Never Again”), and a historic trial that ended with the conviction of the junta leaders.
But by accepting to comply with all the obligations imposed by the deuda, Alfonsín’s presidency was destined to be a failure.
The government depended on negotiations with the Washington, DC-based IMF and World Bank, the only entities that could provide the dollars Argentina needed.
Every decision of these organizations in matters related to Argentina had a strong influence over the country’s political and monetary stability, including the inflation which remained very high throughout the 1980s.
Alfonsín’s presidency ended with a hyper-inflation crisis in 1989 that got even worse in 1990, when wages and savings quickly evaporated, poverty and extreme poverty skyrocketed, riots and lootings erupted.
The shock caused a desperate demand for change, and played a key role in electing Carlos Menem, a conservative Peronist who had campaigned with vague promises to favor the poor and leveraged the fame of Perón, who remained popular among large sectors of the working class.
One of Menem’s most repeated slogans was “Follow me, I won’t deceive you!”, a trivial political message that was actually a lie, considering the betrayal that followed.
The unpayable debt, that kept growing like a snowball under Alfonsín, prepared the ground for the infamous “structural adjustment” programs that were “recommended” (that is to say, forcibly imposed) by the IMF, the World Bank and the US Treasury Department.
Neoliberal structural adjustment was presented as a simple technocratic solution, a doctor’s prescription to heal economies in formerly colonized countries that, coincidentally, all suffered from the same illness: external debt.
The therapy proposed in the so-called Washington Consensus demanded financial deregulation, no tariffs on imports, cuts to public services, and radical privatizations of public assets.
Doctors, therapies, and side effects
Medical metaphors became a classic trope of the neoliberal propaganda, and were also used by reputed economists.
Jeffrey Sachs is often associated with the infamous concept of “shock therapy.” The first patient he could experiment his theories with was Bolivia in 1985.
There, Sachs’ task was to stop a hyper-inflation crisis – which, as in Argentina, came after years of a US-backed right-wing dictatorship.
Sachs did manage to contain inflation by forcibly overvaluing Bolivia’s currency. But his treatment could only be applied by deporting labor leaders, allowing mass layoffs, impoverishing workers and Indigenous people, and undermining the country’s real economic growth.
Sachs, a Columbia University professor who would go on to rebrand himself as a progressive social democrat and supporter of Bernie Sanders, first made his name in the centuries-old tradition of colonial philanthropic megalomania.
His 2005 book “The End of Poverty”, prefaced by U2 singer Bono, used the medical metaphor to explain how to cure extreme poverty by 2025.
Despite the good will behind this and other initiatives, it is difficult to find any fundamental ideological (and especially technical) difference between Sachs and Argentina’s neoliberal idol Martínez de Hoz – even though the latter operated inside a fascist military regime that raped, tortured, and disappeared dissidents or threw leftists to their deaths out of airplanes.
Two decades after Sachs’ “therapies” were sent from Washington, DC to La Paz, Bolivia’s socialist President Evo Morales showed what an economy looks like when the state protects its people, their work, and the domestic market.
The massive growth of the Bolivian economy under Morales – an Indigenous farmer and labor organizer who did not finish high school – is only one of the many indicators that exposed the pseudo-scientific economic doctrine developed in the most prestigious US universities under the guise of clinical rigor.
Bolivia’s GDP per capita was just $1034 in 2005. Morales came to power the next year, and by the time he was overthrown in a US-backed far-right coup in 2019, Bolivia’s GDP per capita more than tripled to $3552.
Overvaluing a currency by pegging it to the US dollar, in one way or another, was the core of the shock therapies that neoliberal economists had implemented in Bolivia, Argentina, and elsewhere.
This is certainly the easiest way to contain inflation, but it also undermines the domestic market and the people of a country – the two variables that are often ignored by free-market economists and institutions.
Other solutions to inflation exist, but because these include capital controls – an idea considered blasphemy in orthodox economics – and because they help preserve and stimulate local economies instead of international finance, they are most unpleasant to US and European banks and corporations.
No corporate media pundit or reputed economist would suggest a shock therapy that negatively affects the ruling class to fix a crisis, even though it would be sensible, because that would compromise their reputation and career.
So the concept of shock in economics is always reserved as a tactic for ripping off the working class and the poor – especially in formerly colonized nations.
Menem and Cavallo: the feast
Shortly after Carlos Menem took power in 1989, he pardoned all crimes committed during the Videla dictatorship. This horrified the survivors, and made it clear that his presidency would be dominated by oligarchic and foreign interests.
Menem also removed some taxes and regulations on agricultural exports, obtaining the support of the powerful landlords and the conservative establishment. The mask was off.
Hyperinflation reached a staggering 20,000% in 1990. Combined with the debt and pressure of the IMF, the crisis provided the justification for another “shock therapy”.
In 1991, Menem chose as his economic minister Domingo Cavallo, who had directed the central bank during the dictatorship. Together, they practiced what the president had famously called a “surgery without anesthesia”.
Cavallo’s landmark policy is known as the uno a uno (“one to one”). This was the new edition of Martínez de Hoz’s disastrous la tablita in 1979 and Sachs’ shock therapy in Bolivia.
The scheme was based on the same monetary principle: stop inflation by artificially and forcibly pegging a currency to the dollar (or overvaluing it).
Argentina’s latest version of this scam was even simpler than the previous manifestations. The Menem government issued a new currency – the peso still in use today. It retired old notes and coins and issued new ones.
The law then ordered that one new Argentine peso was now worth one US dollar – hence the name one to one. The Argentine peso would thus remain pegged to the dollar.
It was a de facto dollarization, a surrendering of Argentina’s monetary sovereignty.
Everybody could freely exchange pesos and dollars, now backed by the state with its reserves. This meant that the law restricted the emission of new pesos to the amount of US dollars in Argentina’s reserves.
From the point of view of the speculative financial markets, pesos had become “sound money” again, by law.
But they had also become expensive for the state, and therefore limited in circulation.
Inflation did go down to almost zero, but Argentine workers’ purchasing power dropped too.
Cavallo was celebrated in the West as a genius, as if he had invented free dollars. Clearly, they weren’t free.
The uno a uno was not meant to come alone, and was part of a larger plan of deregulations and privatizations.
With the support of the Peronists in the Congress, Menem launched one of the biggest operations of privatizations in history, an unprecedented pillage of public resources that Perón (who had nationalized the central bank and the railways) would have likely have opposed.
In a few years, the still powerful Argentine state privatized the pension system, national railways, public banks, telephone grid, national airline, ports, postal service, water supply network, power grid, gas network, several TV and radio networks, and some healthcare services.
The naval, chemical, and aerospace industries were privatized, along with the national oil company. In all, more than 400 public companies in Argentina were privatized.
US and European corporations bought the country practically overnight.
The privatizations occurred in the context of wild corruption and mismanagement. Companies and assets were sold off or given in concession at ridiculous prices and conditions.
Some services became up to 10 times more expensive. Others collapsed.
One of the most dramatic cases was the destruction of Argentina’s railways network. In its effort to de-industrialize the country, the military dictatorship had closed hundreds of stations and thousands of miles of rails.
Menem finished the job by dismantling most of the 29,000 miles of rails – which had been the eighth-largest network in the world.
Thousands lost their jobs. Some remote villages were disconnected from the rest of the world.
Neoliberalism turned a functioning public infrastructure that had been built, operated, and used by generations of Argentine workers into landfills.
In many cities and towns, these abandoned industrial, almost post-atomic ruins have not been dismantled or converted to this day, three decades later.
Trains, rails, bridges, warehouses, and stations were reconquered by nature and left to rust, offering a depressive glimpse on the past and a warning for the future.
The euphoria over Cavallo’s apparent victory against inflation did not last. An initial boost in confidence caused by the low inflation and the strong peso gave the illusion – buttressed by a worldwide neoliberal propaganda campaign praising Argentina’s model – that the economy was not going to collapse this time.
The growth between 1991 and 1994, based on the overvalued currency, gave Menem a second mandate.
But in 1995, unemployment reached 18.8%, indicating that not everybody was enjoying the consumerist joys of the rise in imported goods – the new “sweet money” phenomenon, which was similar to the one experienced in the Videla dictatorship under Martínez de Hoz.
Because of the strong currency, Argentine exports were also hurt. National products had become too expensive, leading to a growing trade deficit.
The imbalance was compensated by the dollars obtained where? From one-off income from privatizations, and, once again, loans.
But how long could this scheme last?
De la Rúa & Cavallo: the chaos
The recession and crisis that followed Menem was brutal. The so-called structural adjustments imposed by the IMF boosted unemployment, extreme poverty, and hunger to record levels, while capital started leaving the country.
In 1999, the widespread disgust for Menem – whom many remembered as a corrupt buffoon who drove a $120,000 red Ferrari while overseeing the pillage of his country – led to the defeat of the Peronist candidate in the presidential election.
At that point, Argentina had already entered a technical recession that would last four years. Yet with the shock therapy, nothing changed.
During his short presidency, from 1999 to 2001, the liberal Fernando de la Rúa kept implementing the suicidal recommendations of the IMF, with more rounds of cuts in public services and pensions.
De la Rúa reduced salaries of public employees and fired thousands. He also made it much easier, and cheaper, for employers to fire workers in the middle of a long recession, without the obligation to pay severance packages.
In December 2000, the government obtained a $37 billion “bailout” package from the IMF under the condition of annihilating the state and the economy by reaching a zero deficit.
In January 2001, the government renegotiated parts of the debt in order to postpone it for three years, while increasing the interests. But in March, the negative results forced the economic minister to resign.
In a surreal plot twist, de la Rúa called back an old acquaintance: free market star Domingo Cavallo, the former Menem minister who started the uno a uno conversion that had crippled Argentina’s national economy probably more than anything else ever conceived.
Cavallo was appointed economic minister, again.
Once back into the operatory theater, the economic butcher started doing the only thing he and all the other ministers in the previous 25 years had always done. Further cuts were approved, while the ghost of an incoming Armageddon loomed.
2001 – Mission accomplished
The unsustainable macroeconomic situation led to a bank run in Argentina in November 2001. Many people and companies feared a meltdown of the financial system. They started withdrawing large sums from banks and exchanging their pesos to US dollars, even though Cavallo’s now infamous landmark policy, the one to one conversion, was still in place.
In a desperate attempt to save the banks and contain a situation that was clearly out of control, on December 1, 2001, Cavallo and de la Rúa ordered an almost complete freeze of all bank accounts, limiting withdrawals to $250 in cash per person per week, a measure then called the corralito (small corral).
The sudden limit in liquidity, after years of financial deregulation and in the midst of a brutal recession, drastically affected trade and broke the chain of cash payments, leading to terrible consequences for millions of informal workers who did not have bank accounts, and thus could not be paid.
Considering it time to let the boat sink, the IMF announced on December 6 that it would not send the dollars expected from the last bailout, because Argentina had not met the zero deficit goal.
The following weeks were followed by a general strike, lootings, violence, and several deaths.
So on December 19, President de la Rúa ordered a curfew, inciting an infuriated response from the people. Protesters stormed the Plaza de Mayo, the square in front of Argentina’s presidential palace, the Pink House.
The day after, de la Rúa resigned and fled from the roof on a helicopter.
Three days later, on December 23, abandoned by the IMF, Argentina officially defaulted on a $95 billion debt.
The dream of debt freedom
The 2001 default was a watershed moment for all Argentines, and became a symbol of the effects of neoliberalism and imperialism across the planet.
But this historic default on debt managed by award-winning, highly respected economists was just the surface of a decades-long, fabricated crisis that was really a neocolonial takeover.
Record levels of poverty, shocking child malnutrition, a growing infant mortality rate, devastating unemployment, and increasing outward emigration shattered the false image of the country that had once been an economic powerhouse and the destination for millions of migrants seeking a better life.
Argentina was not just broke; it had been socially, economically, and politically demolished as a sovereign country.
The state, productive fabric, currency, trade, public education, and healthcare, public transportation: nothing was left untouched by the pillage that effectively led to a reset of Argentine society.
Something similar was happening in other Latin American semi-colonies of the United States. The region found itself divided into those who recognized the fraud of neoliberalism – a word that had become in the political discourse – and those who believed that the shock therapies designed by people like Jeffrey Sachs, José Alfredo Martínez de Hoz, or Domingo Cavallo were not “true” neoliberalism.
The staunch believers in the virtues of neoliberal ideology implied that, instead of changing course, the real solution was more of the same, but in a more extreme form.
Some of these free-market pundits and academics, who still thrive in major corporate media outlets, articulated a fundamentalist “libertarian” critique, claiming the neoliberal regimes did not go far enough when they removed most tariffs on imports, that they should have eliminated all of them, effectively destroying local industries. And they insisted everything should have been privatized, not almost everything.
The extent of the privatizations is something that even the free-market fundamentalists’ most eloquent evangelist, Milton Friedman, struggled to explain in practical terms.
Friedman argued that the state should still control “some roads”, and maybe the police or the army. He confusedly claimed that he was not against public control when debating schools, but simultaneously insisted that government control was bad.
The biggest neoliberal rhetorical fallacy has always been related to the debt. Neoliberals typically associate the debt with public spending on social programs, using a straw man that implies that the debt crisis of “developing countries” is a trivial problem of excessive spending that can be solved by simply reducing it.
The neoliberals act as though poor working people, especially from oppressed Black, Indigenous, or mixed race communities, are unable to manage the money that wealthy people have supposedly given them.
This narrative is totally false. It ignores key factors, including foreign control, deliberate pillage, and de-development.
In regard to foreign control, unpayable debts were deliberately created and expanded in Argentina by dictatorships or corrupt elected governments, like Menem’s, which operated on behalf of foreign interests and oligarchs, and which were forced to apply suicidal measures demanded by the IMF, World Bank, and US Treasury Department.
As for deliberate pillage, the need for massive quantities of US dollars was in large part caused by fraudulent schemes, like Argentina’s “financial bicycle”. These were made possible thanks to the deregulation of the exchange market, overvaluation of the currency, and other policies that favored scams paid by the state.
When billionaire speculators were allowed to exchange Argentine pesos for unlimited amounts of dollars, benefiting from high interest rates in pesos, it was the state that had to borrow those dollars from US private banks or from the IMF and pay interests on them. Once exchanged, the dollars obtained by the speculators were moved out of the country, leaving the debt to the state.
And in terms of de-development, the money borrowed under Argentina’s neoliberal regimes was virtually never used for social programs that would stimulate the real economy, support domestic demand, or improve people’s lives in any way. Instead, those dollars were mostly used to pay interest, service new loans, or increase the demand of dollars for speculative purposes.
Fool me once shame on you, fool me twice…
Only days after Argentina’s 2001 debt default, interim President Eduardo Duhalde abolished Cavallo’s dollarization scheme – the one peso to one dollar fixed exchange rate. The peso lost 40% of its value overnight.
This long-due monetary devaluation, together with a timid stimulus in the form of social subsidies, gave oxygen to an exhausted population and to the economy as a whole.
The defaulted country was in ruins, and the lasting crisis led to immense suffering. But as a response to the robberies and horrors of the previous decades, new creative energies and popular movements were emerging across Latin America.
In a surprising turn of events, the barely known governor of a remote southern province became president of Argentina in 2003, with a measly 22% of the vote.
The widespread contempt for the arrogant and corrupt political class of Buenos Aires played in favor of Néstor Kirchner, a progressive Peronist who belonged to the faction that opposed fascist Peronist José López Rega in the 1970s and neoliberal Peronist Menem in the 1990s.
Not many thought that Kirchner would have changed Argentina’s political direction. But he laid solid foundations for a debt-free economy that grew almost 9% every year during his presidency – a success neoliberal detractors tried to explain simply as the luck of a “commodity export boom“.
The new president joined the progressive wave that had brought Hugo Chávez in Venezuela and Lula da Silva in Brazil, forming a key part of what would later be dubbed the “Pink Tide”.
Bye, bye IMF
As of 2003, when Kirchner became president, Argentina’s defaulted external debt was a combination of IMF loans and bonds owned by private investors of all kinds. These two types of creditors operate and affect the government in very different ways.
The IMF is a political organization ruled under a very specific economic ideology, which imposes the Washington Consensus on countries that it “helps” financially. The US has always had the main quota and veto power in the Fund.
The policies demanded by the IMF are detrimental to the real economy and undermine the borrower’s growth and domestic market, trapping it in a cycle of debt.
But the bondholders, which are mostly private companies operating in international financial markets, cannot directly enforce a policy on a government. They are private companies that profit from speculative trades, which inherently involves risks, and normally the higher the risk, the higher the gain.
The more a government is in economic trouble, the higher the interests on its bonds will usually be, in order to find speculators willing to buy them.
This game makes it very profitable to trade risky bonds – in other words, to speculate on countries that are financially desperate.
While formally separate, the IMF and the bondholders (sometimes referred to simply as “the markets”) cooperate and need each other in order to maximize their effectiveness.
The more a country is financially desperate, the more speculators will profit, and the more leverage the IMF will have in order to enforce neoliberal reforms and other political pressures.
On December 16, 2005, Kirchner announced that Argentina would repay its entire IMF debt in full, and in advance, with its foreign reserves. On January 3, 2006 the payment of $9.5 billion was confirmed by the Fund.
The central bank only held $27 billion in US dollars in its reserves, but that was still more than the record low of the previous years.
The reserves had grown thanks to the budget surplus obtained from the suspension of the payments to private bondholders, and the rapid growth of exports caused by the devaluation of the peso, which made Argentine products more competitive.
Kirchner’s decision to pay off the debt early saved the country an estimated $842 million in interest.
While far from being a long-term solution to the huge problems the Argentine people were facing, this was a game changer.
The move was anticipated by Brazil’s President Lula da Silva, who had paid the IMF in full a few months earlier.
But the announcement was received as a shocking surprise by Kirchner’s supporters and detractors alike.
It also annoyed part of the Argentine establishment, whose corruption had been mercilessly exposed: Why did none of Kirchner’s predecessors pay off the IMF debt like this before?
The repayment was a demonstration that Argentina never actually needed “aid” from the IMF. The Fund had become seen as a national enemy by popular movements, and was even publicly criticized by Kirchner in his speeches.
Debt restructuring and vultures
The debt that Argentina held with the IMF was important because of its political implications, but the government still owed much more to private creditors.
In 2003, Kirchner started a complex process of negotiations with diverse groups of creditors. These talks continued under the subsequent presidency of his wife, Cristina Fernández de Kirchner (CFK).
The robust approach of the Kirchner administrations was effective – and it angered wealthy creditors, as could be seen at the time by the frustration of their media mouthpieces like The Economist.
In 2005, Argentina abandoned the seemingly endless, unsuccessful negotiations and made a unilateral offer with discounts of up to 66.3% on the original bonds. The offer was accepted by most bondholders and ended restructuring 76% of the defaulted debt (then $81.8 billion in total).
In 2010, under CFK, Argentina completed a second bond exchange under less favorable conditions for the creditors, which led to a total of 91.3% of the defaulted debt being restructured.
The Kirchners’ strategy had proved a success. Tens of billions were saved, and Argentina was on its way to finally normalize its status vis-à-vis the international credit markets, while all economic indicators were showing strong signs of recovery.
But the remaining defaulted debt, which represented just about 8% of the total from 2001, was now owned by holdouts that had refused the offers of 2005 and 2010, and decided to turn to the US judicial system to help them litigate.
Most of these creditors were known as “vulture funds” – firms that are illegal in many countries, but not the United States. (In 2008, an ambitious bill designed to prevent investors from speculating on sovereign debts of developing countries was introduced in the US Congress, but it failed to pass.)
These particular kinds of hedge funds profit by buying defaulted debts at a much lower price than their nominal value, and then use aggressive strategies, most notably lawsuits, to extort the debtor, in an attempt to get the full value plus penalties.
Some of the world’s most infamous vulture funds had bought Argentina’s defaulted bonds after 2001. The largest slice of the cake was owned by NML Capital, the Cayman Islands subsidiary of New York-based Elliott Management Corporation, whose US founder and CEO, Paul Singer, is a billionaire vulture capitalist and top donor to the Republican Party.
Also profiting on Argentina’s debt was Cayman Islands-based billionaire Kenneth Dart, the owner of Dart Management, a pioneer in vulture practices targeting Brazil, Russia, Ecuador, Turkey, and Greece.
Part of Argentina’s remaining defaulted bonds were owned by Aurelius Capital Management, which was led by speculator Mark Brodsky, a veteran of Elliott Management Corporation who saw Singer as his mentor and has also profited from Puerto Rico’s odious debt.
Singer, Dart, Brodsky, and their super-rich colleagues belong to a generation of speculators who learned to take advantage of the 1976 Foreign Sovereign Immunities Act, a law that provides the legal basis to sue a foreign country in a US court.
Before that law, vulture funds could not engage in distressed-debt litigation against sovereign countries. But in 1992, Dart opened Pandora’s box by suing Brazil, right in the middle of its debt crisis, and getting a favorable settlement.
In the following years, after the overthrow of the Soviet Union and imposition of neoliberalism across much of the world, wealthy speculators followed Dart’s example.
“When Dart and Singer started, fewer than 10% of sovereign debt crises involved litigation. Today that figure is more like 50%”, the New York Times reported in 2019.
The fight and the traitor
Argentina’s record 2001 default was the perfect opportunity for vulture funds. Their threat was so clear that even right-wing media outlets in the country that were owned by pro-US oligarchs, like the conservative newspaper Clarín, dubbed Kenneth Dart “the number one enemy of Argentina”.
After a long legal battle between the vulture funds and the Kirchners’ governments in several US courts, New York judge Thomas Griesa ruled in 2012 that Argentina had to pay the vulture funds at full value.
That meant that Singer’s company, for example, would get a return of 15 times its initial investment.
The ruling became effective in 2014. It also blocked Argentina from paying any other creditor who had accepted the bond exchanges of 2005 and 2010 until it had paid the vultures in full.
This was technically possible because almost of all bank accounts and financial transfers involved were under US jurisdiction.
In other words, the US ruling created a paradoxical situation where Argentina was considered in default for being unable to comply with payment deadlines, even though the government had actually ordered the payments.
The only way to unblock the freeze of the transactions was for Argentina to submit to a parasitic group of billionaires and speculators who were trying to make a killing off of its odious debt.
Following the ruling, Cristina Fernández de Kirchner denounced the vulture funds on the international stage, accusing them of weaponizing US law to wage “economic and financial terrorism.”
Addressing the General Assembly of the United Nations in 2014, CFK argued that these companies “are economic terrorists who destabilize the economy of a country and create poverty, hunger, and misery, from the sin of speculation.”
Despite the extortion and the high tension with Washington and its local representatives in Argentina’s opposition, President Kirchner ended her mandate in December 2015, still refusing to pay the vulture funds.
Mauricio Macri, a right-wing multi-millionaire whose family had profited from the dictatorship, and whose fortune also came from Menem’s privatizations, won the 2015 presidential election by a small margin.
At the end of CFK’s second term, Argentina’s debt-to-GDP ratio was 52.6%. It had increased a bit in the last years, but was still easily controllable.
When Macri left power in 2019, the debt-to-GDP ratio was 90.2%, and growing.
But probably the most absurd development was that under Macri, in less than four years, Argentina once again defaulted on its debt.
Making debt great again: Mauricio Macri
On December 7, 2015, three days before the inauguration of President Macri, Argentina’s future finance minister and central bank manager Luis Caputo, a former JP Morgan trader, flew to New York and met the representatives of the vulture funds. Nothing else was more urgent.
Three months later, in February 2016, Macri’s Argentina transferred $9.3 billion to the vulture funds, while the New York judge, Griesa, unblocked the other payments to the other bondholders, the owners of the 93% of the defaulted debt who had accepted the offers made in 2005 and 2010.
Paul Singer’s NML Capital alone made $2.28 billion on an original investment of just $177 million, for a total return of 1180% – while also forcing Argentina to pay the legal fees.
Macri’s payment of the vulture funds amounted to a national humiliation for a sovereign countr. It also angered many small investors, including pensioners and workers, who lost money with the debt exchanges, while a small group of US billionaires and foreign speculators made a killing.
The reason Macri gave the operation such a priority was because he hoped to obtain access to the international credit markets as soon as possible. The new right-wing president wanted to once again to borrow money by emitting new bonds – something Argentina had been banned from doing since the default in 2001.
By paying the enormous ransom to the vulture funds, Macri’s government had the power to flood the country with borrowed US dollars.
In the early days of his administration, Macri removed several regulations in order to favor financial speculators and companies in sectors like agriculture – the most important in Argentina – as well as mining, energy, finance, and the media.
These industries, especially the media, are controlled by Argentine billionaires, who were President Macri’s main supporters.
Macri got rid of capital controls and the so-called cepo, a foreign exchange regulation introduced in 2011 under CFK that limited the amount of US dollars individuals and companies could buy with pesos, in order to prevent capital flight and inflation.
For years Argentina’s mainstream media, which is dominated by the powerful telecommunications corporation the Grupo Clarín, described the “freedom” to buy dollars almost as a human right, so CFK’s regulations were presented as a violation of liberty.
Clarín was one of the most powerful supporters of Macri, so it was extremely easy for him to remove the currency controls overnight. This meant that Argentine oligarchs could buy any amount of dollars, even billions, with pesos. And that is exactly what speculators did.
The end of capital controls and the possibility to borrow virtually without limits were an explosive mix. They paved the way for Argentina’s third neoliberal robbery, the fastest and the first based almost exclusively on financial methods.
The previous two pillages had taken place during the 1976-1983 military dictatorship and Menem’s presidency from 1989 to 1999.
In a formidable show of effectiveness, Macri and his team wrecked the relatively healthy finances of the Argentine state in less than two years.
The bonds feast and the “Macrisis”
Macri’s single-term presidency used the state as a tool to bring dollars and euros into the country through easily accessible borrowing.
Those dollars ended up in private hands, thanks to the now unregulated currency market, which meant anybody could buy or sell any amount of pesos. This inevitably caused significant inflation.
At the same time, big funds were now free to move their dollars out of the country, thanks to the absence of capital controls. The new conditions led to a rapid increase in capital flight.
Under Néstor and Cristina Kirchner, capital flight was contained and was mostly paid with the surplus in the commercial balance, given exports were higher than imports.
During the “K” years, some of the money obtained from economic growth did leave the country, but under Macri, the capital flight not only grew faster, it ended up being funded with the foreign currency borrowed by the state. Capital flight was quite literally borrowed money.
Pundits propagandized on behalf of the government and Macri’s suicidal economic policies by stirring up the desire for dollars in the population, even among those who could not afford to buy any.
Deregulation of the foreign currency exchange led to high inflation in Argentina, but the right-wing-controlled media outlets blamed the Kirchners. They brought back the old neoliberal dog whistle that Argentina was now “open to the world,” and promised that the new policies would attract foreign investors who never arrived.
Macri’s most important achievement was to allow wealthy families and speculative companies to dollarize their assets, thus moving them to more profitable markets abroad.
Wealthy speculators were also allowed to profit from the old scheme known as carry trade (bicicleta financiera), which had been used during the last dictatorship.
Their trick was to buy pesos, profit from the high interest rates in pesos, then convert them to dollars and move the dollars out of the country.
In the meantime, the state had to provide a virtually infinite amount of dollars for the speculators, and was left with the pesos.
Thanks to a reckless emission of bonds to support the uncontrolled demand of foreign currency, including an extraordinary 100-year bond and very high interest rates, Argentina was already on the brink of another default just two years since Macri took power.
The debt-to-GDP ratio passed from 56% in 2017 to 86% in 2018, a catastrophic 30% increase in one year.
In 2018, the Argentine peso was the worst-performing currency in the world – excluding Venezuela, which was suffering under illegal unilateral sanctions and relentless economic war by the United States.
The Argentine peso lost about 50% of its value to the dollar. Inflation rose by the same amount.
Macri’s central bank increased interest rates to record levels in an attempt to attract investors – or more accurately, speculators – but it was too late.
The economic figures did not lie. Argentina’s debt was already unpayable in 2018, and all macroeconomic indicators showed that a crash was imminent.
At the beginning of the year, virtually no one wanted to buy Argentine bonds anymore, meaning that a country whose debt had been under control only two years before, and had no absolutely reason to rush into deregulating its currency and financial markets, was now on the brink of yet another default.
In this uncertain context, Argentina went through two major currency crises in 2018, in June and August, forcing the central bank to waste billions of dollars to contain the extreme devaluation of the peso.
The country was bleeding dollars, and toward mid-2018, the so-called “Macrisis” was a reality.
Macri’s days in power seemed numbered.
Trump’s IMF to the rescue
On May 8, 2018 Macri announced that he had formally requested financial aid from the IMF.
For millions of Argentines it was a shock. The country had not dealt with the disgraced organization since 2005, when Néstor Kirchner had paid the debt in full and decoupled the national economic policies from Washington, after years of tense relations.
The US representative at the IMF at the time, Mauricio Claver-Carone, revealed that EU members of the Fund considered Argentina’s situation at the time “unsustainable.” They were against a loan that was clearly meant to save Macri’s face and buy him time to attempt a re-election.
But according to Claver-Carone, US President Donald Trump saw Macri as an important ally in his coup attempt against Venezuela.
At the time, the White House was preparing a regime-change operation to remove Venezuela’s democratically elected President Nicolás Maduro and replace him with Washington’s hand-picked “interim president,” Juan Guaidó.
And Macri did indeed go on to recognize Guaidó, who never received a single vote in a presidential election, as the supposed head of state in Venezuela.
Ya nos encontramos en territorio argentino, donde nos reuniremos en instantes con el Presidente @mauriciomacri en el marco de nuestra agenda para que Venezuela recupere su democracia y conquiste su libertad. pic.twitter.com/SoCTM1bPpH
— Juan Guaidó (@jguaido) March 2, 2019
So Trump forced the IMF – whose biggest contributor is the United States, and therefore mainly controlled by the US government – to provide Argentina with the biggest loan in the Fund’s history, to keep Macri and his plutocratic friends afloat.
Agreeing on a $57 billion loan with a government whose policies allowed record levels of capital flight was economically nonsensical, especially considering that article VI, section 1(a) of the IMF articles of agreement states that a “member may not use the Fund’s general resources to meet a large or sustained outflow of capital.”
But the multifaceted scam designed in the White House was carried on anyway, and an agreement was reached in September 2018.
Under Macri, Argentina was ultimately disbursed $44 billion by the IMF.
But not a single dollar sent by the Fund was ever seen by the Argentine people, or used for any project for economic development.
The money evaporated, trickling up into the pockets of domestic and foreign oligarchs, funding the massive demand of US dollars generated by speculators and by the interests of the debt.
The billions sent from Washington disappeared in just 11 months.
In August 2019, Macri’s Argentina had to postpone some scheduled payments, meaning that it was already in default – the country’s first official default for lack of funds since 2001.
The fall of Macri and the return of CFK
The effects of Macri’s short administration were dramatic. His tenure was dominated by politically motivated judicial attacks (known as lawfare) against the opposition, which involved the meddling of the US embassy, intelligence services, corrupt judges, illegal surveillance, and a torrent of media propaganda.
Under Macri, Argentina’s inflation skyrocketed, the value of wages plummeted, unemployment rose, and poverty grew above the 2001 crisis levels, reaching almost 40% when he left office.
Poverty was 30% when the multi-millionaire took power, meaning that more than 4 million people had become poor in four years. About one in 10 Argentines was in extreme poverty.
The total value of capital flight during Macri’s four years in government was estimated at $79.8 billion, while the payments of interest on the debt were $40.7 billion.
The debt-to-GDP ratio reached 90% in 2019, almost doubling from when Cristina Fernández de Kirchner left office in 2015.
Without Trump’s intervention, Argentina would have defaulted two years earlier, and the chaos would have probably forced Macri to resign.
So the IMF loan was effectively an injection of oxygen that gave the right-wing president a chance to run for an almost impossible re-election.
With the vote approaching in 2019, the opposition had to find a candidate to deal with Macri’s catastrophic legacy.
Polls showed that CFK could win again, but years of lawfare had weakened her to the point that a new presidency would have been politically unstable, especially looking at the trend in the region, where right-wing, US-aligned governments were thriving.
CFK therefore decided to run as vice president, and offered the lead to Alberto Fernández.
The new Peronist candidate had been chief of ministers under Néstor Kirchner, and had served briefly under Cristina as well.
But Fernández had left CFK’s government and became a vocal opposition figure within Peronism. In the past, he had even been a political ally of the infamous neoliberal economic minister Domingo Cavallo.
Because of his reputation as a “K” critic, the new alliance appeared counterintuitive, but it earned the Alberto-Cristina alliance more support at a moment of extreme vulnerability for every progressive candidate in Latin America.
In the August 2019 primary election, CFK’s coalition with Fernández, called the Frente de Todos (Front of Everyone), won with 48%, compared to the 32% of Macri’s right-wing alliance Juntos por el Cambio.
Macri’s August 2019 default was rarely called a default by Argentina’s right-wing-dominated media, especially because it occurred in the middle of the presidential campaign and the catastrophic primary vote.
But even US rating agencies like S&P and Fitch, as well as foreign financial media outlets like Bloomberg, which are notorious for their strong bias in favor of neoliberal governments, admitted that Argentina was in “selective default” or “quasi default”.
In order to protect Macri, the Argentine media made up a new word, reperfilamiento (reshaping), and used it instead of “default,” successfully obfuscating the president’s economic disaster behind a smokescreen of propaganda.
Denying the default was a desperate attempt to put some lipstick on the corpse of Macri’s political and economic legacy. But it did the job.
The multi-millionaire did lose re-election in the October 2019 presidential election, but the enormous propaganda apparatus operated by Clarín managed to significantly improve Macri’s poor result in the primary, boosting him up to 40% against Fernández’s 48%.
The election showed what a media monopoly and millions of dollars systematically invested in troll armies on social media can do, even in the most unfavorable conditions.
The media narrative of the “heavy legacy” (pesada herencia) that Argentina supposedly received from Néstor and Cristina Kirchner, and the often fabricated allegations and charges of corruption took a significant toll.
More than appreciation for Macri’s policies, the 2019 vote expressed the anti-Kirchner sentiment that had been cultivated through years of lawfare.
Argentina’s conservative sectors needed to undermine the positive reputation of the “K“ governments and character assassinate CFK, because she was by far the most popular leader on a national level.
The right-wing oligarchy’s ultimate goal was to make it impossible for CFK to run again (which they would go on to accomplish with a judicial coup in December 2022).
But the 2019 electoral victory of Fernández and CFK ended up being the easiest part.
Debt, pandemic, and ultra-conservative hysteria
The country Alberto Fernández received on December 10, 2019 was very different from the one Macri got four years before.
In 2019, Argentina was on fire, with an economy in recession, poorer, indebted at 90% of GDP, and even more polarized than before.
The new president had the daunting task of fixing Argentina’s devastated public finances, hit by another default on its sovereign debt, while dealing with one of the worst social and economic crises in its history.
The Frente de Todos coalition that Fernández had formed with Cristina Fernández de Kirchner was very large, including parties ranging from the center to the left.
This meant there were many differences inside the Frente de Todos, which began to emerge when they took power.
But everybody in the coalition knew that Argentina’s media monopoly Clarín and the wealthy oligarchy were not going to help extinguish the fire, because they were responsible for it.
After the fall of Macri, the mainstream media continued pushing endless conspiracies against Vice President CFK.
The right-wing press even got created and added a strange new chapter about her supposed plots to undermine Fernández, the man she chose and helped put in the Pink House months before.
Although CFK was not president, and despite years of politically motivated allegations of corruption and dozens of legal prosecutions (but no convictions at this point), she was still by far the most charismatic and popular leader in Argentina.
But just a few months after Alberto and Cristina took power, in early 2020, the crisis in Argentina reached a whole new level, when the global Covid-19 pandemic hit.
In September 2018, Macri had gutted the Ministry of Health, among others, and turned it into a sub-department, as part of his harsh austerity cuts, which were justified as administrative “simplifications”.
So on March 3, 2020, when the first case of Covid-19 was identified in Buenos Aires, the new government was still in the process of reviving the national health administration, which had been systematically defunded and nearly dismantled by Macri.
Renegotiating the debt?
In this disastrous context, President Fernández and his Economic Minister Martin Guzmán, a neo-Keynesian academic and collaborator of Joseph Stiglitz, played a complex game with the two different groups of creditors, the private bondholders and political organizations like the IMF.
Shortly after being sworn in, Fernández had said Argentina would stop until 2024 all payments on the $44 billion that the IMF had lent to Macri’s administration.
In February 2020, Vice President Kirchner publicly suggested that the debt was illegitimate.
Noting that the IMF statute forbids lending money to countries with significant capital flight, CFK pointed out that loan had not been given to fund infrastructure projects or social programs.
No fue un préstamo para hacer represas, carreteras, programas ni obras de infraestructura. El Fondo presta para dar estabilidad a los países, pero acá se prestó para que se fugara el dinero.
— Cristina Kirchner (@CFKArgentina) February 9, 2020
Following the neoliberal disasters of the 1990s, the IMF has tried to rebrand itself as a more collaborative and humanistic institution.
The Covid-19 pandemic seemed to have forced the Fund to soften its infamous obsession with austerity policies and accept the priority of economic growth over debt consolidation.
Whether this was a true change in paradigm or just a marketing campaign is not clear – although Argentines are deeply skeptical.
Part two of this article will detail the attempts by the Alberto Fernández administration to renegotiate Argentina’s debt with the IMF and private creditors.