Executive Intelligence Review
This article appears in the June 28, 2002 issue of Executive Intelligence Review.

IMF Shatters Argentina
As Pieces Strike Brazil

by Cynthia R. Rush

Democratic Presidential pre-candidate Lyndon LaRouche warned Argentines as long ago as March 2001, that the Anglo-American financial oligarchy, acting through the International Monetary Fund, intended to annihilate Argentina as a nation-state; to shatter it economically, politically, and even territorially, and let the chaos resulting from their attempts to collect an unpayable debt, unleash havoc in Ibero-America and beyond. Incredible? It has happened. London and Washington will now stare at what—in their parlance—is a bona fide "failed state," destroyed by their own lunatic demands.

"Why is the crazy IMF sending these gravediggers down to Argentina?" LaRouche asked a June 13 gathering of businessmen in São Paulo, Brazil. "[They are] demanding conditions of Argentina, which are causing the disintegration of Argentina as a nation. Why are they doing that? To maintain the principle that any debt which is owed to New York bankers will be paid, if they have to sell the Argentine babies for hamburger to do it!"

A few decades ago, Argentina was one of Ibero-America's wealthiest nations, with high living standards, a skilled labor force, 99% literacy rate, and impressive scientific and technological infrastructure. Social mobility was similar to that of many European nations. Today, after 15 years of IMF dictates, reaching a particular vengefulness over the last six months, an astounding 51.4% of its population is classified as poor, according to the government's own Siempro agency. This collapse into immiseration dwarfs even that of Indonesia in the 1997-98 "Asian crisis." Since January of this year, poverty has increased at the rate of 762,000 a month, or 25,000 per day. In the first five months of this year, the cost of the basic monthly market basket increased by 35.7%. For the first quarter of this year, GDP dropped 16.3%, the biggest quarterly drop in the country's history.

"In the land of wheat and cows," it is now commonplace to see, as Agence France Presse reported on June 7, "armies of people in rags, of all ages go through the streets of the capital each night, overturning the garbage in search of leftover bits of food." Whereas people once looked only for leftover food, in recent months they have begun to eat rats, mice, frogs and toads, according to a school director in a poor neighborhood. And, 60% of those reduced to scrounging the dumps for food and recyclables to sell, are former construction, textile, and restaurant workers who lost their jobs in the last five years. The country's unemployment rate is now 25%.

Anoop Singh, IMF Hatchetman

Any sane observer is horrified at the extent of the destruction of Argentina's physical economy, and the wrenching poverty and desperation of its people. Moreover, as an angry Argentine ambassador warned State Department officials at the Organization of American States (OAS) annual meeting in early June, "with your treatment of Argentina, you are playing Russian roulette with the Southern Cone.... If you let Argentina go under, every Latin American country will ask, what's the use of being a U.S. ally?"

But apparently seeking Argentina's complete obliteration, IMF Managing Director Horst Köhler on June 11 brought in Anoop Singh, former Deputy Director of the IMF's Asia Pacific Division, to head up the Western Hemisphere Division, replacing the retiring Argentine, Claudio Loser. Why Singh? In the "Asia crisis," Singh was known for making demands that toppled governments and ripped apart national economies (see article below). Köhler praised Singh as having "demonstrated strong operational and intellectual leadership in a variety of assignments."

Unlike previous Western Hemisphere Division chiefs, the Oxford-educated Singh was deemed, by IMF Deputy Managing Director Anne Krueger, to possess sufficient brutality to deal with the very weak Argentine government of President Eduardo Duhalde. Singh's latest post had been Special Operations Director, with the authority to go over the heads of other "lenient" Fund officials and to be tougher with Argentina.

Now, that he is Western Hemisphere chief, Singh, Krueger and Köhler form what the daily Clarín called a "very rigid bloc." It is ominous, too, Clarín said, that while Singh is Indian, "he studied at Oxford and thinks and acts like an Englishman."

In every action taken in recent weeks, the IMF has shown that it's only intention is to accelerate Argentina's disintegration. With economic and social upheaval worsening daily, and against strong Congressional and provincial opposition, the Duhalde government went through torturous deal-making and political maneuvering to comply with the three demands that the Fund had established as conditionalities for the start of formal negotiations for a new agreement: changing the bankruptcy law, overturning the economic subversion law, and signing bilateral austerity agreements with each province.

Yet once the demands had been met, albeit partially, Horst Köhler announced in a June 4 interview with Reuters, that the formal negotiations which the government so desperately sought could not begin, because Buenos Aires hadn't yet produced a "credible framework" for an economic program. Nor can there be talk of specific amounts of money that might be made available, he said. "It's always a mistake to talk about numbers before talking about policy." The Fund complained that of the three conditionalities, only the changes to the bankruptcy law had been done correctly. The Congress had incorporated articles from the Criminal Code into legislation overturning the economic subversion law, such that bankers charged with financial crimes could still be prosecuted. This would not show the proper friendly attitude toward investors, the IMF said. Moreover, the austerity agreements signed by provinces are only preliminary ones, and must now be made "definitive," requiring further negotiations.

Singh then, in a harshly worded, confidential memo to the IMF's board, demanded new conditionalities, warning that "we won't move forward" until there is "greater clarity on the policies Argentina will apply." Several IMF country directors opposed Singh, worried that stonewalling aid to Argentina would exacerbate a visibly growing Brazilian and regional crisis. But he imperiously demanded the government drop its plan to gradually ease up on the bank deposit freeze, and that it allow privatized utility companies to raise their rates.

Creating a 'Failed State'

When an IMF mission finally did arrive on June 13, led by Singh's underling, Englishman John Thornton—his nickname, appropriately, is "the undertaker"—it became clear almost immediately that the Fund had no intention of a quick agreement. By June 14, there were widespread rumors in Buenos Aires that the U.S. Treasury and State Department were backing an IMF strategy to delay for as long as possible, creating such instability and uncertainty, that Duhalde would be forced to call early Presidential elections. U.S. Ambassador James Walsh was forced to issue a statement June 15, denying that the Bush Administration backed any such strategy.

The government's anxiety for an agreement is driven by the fact that it must make debt payments on July 14 and July 17, to the IMF and the Inter-American Development Bank, totalling $1.7 billion. Until now, the government has dipped into rapidly dwindling reserves to pay multilateral lending agencies, like the IMF and World Bank. But on June 14, Finance Minister Roberto Lavagna said this would no longer be done, implying that the only other option would be to default. But now Lavagna is said to be lobbying for a short-term "emergency" agreement for at least $5 billion to meet payments to the IMF and IADB. This after IMF External Affairs Director Thomas Dawson told a June 19 press conference that Argentina hasn't yet produced the "sound macroeconomic framework" the Fund requires to make a broader agreement.

Thus it's no surprise that policymakers in Washington and Buenos Aires now debating categorizing Argentina as a "failed state," requiring a supranational protectorate, 19th-Century style. In its June 9 "Zona" supplement, Clarín reports that the proposal by MIT economists Rudiger Dornbusch and Ricardo Caballero, to send in a team of foreign experts to manage Argentina's finances, as just the tip of the iceberg of a much broader debate taking place over what to do with "unruly" Argentina.

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