"It's An Embarrassment": IMF Faces Humiliation, Billions In Losses As Argentina Braces For Next Default

[camberiu]

ARTICLE

This is the classic case of "Play stupid games, win stupid prizes" for the IMF.
Once again the Ivory Tower Eurocrats took money from the poor living in rich countries and gave it to the rich living in a poor country. And then they wonder about Brexit, Trump and why the general public is skeptical of traditional institutions.

 

[Fiscal]

How much did the IMF make in interest?

 

[Rich One]

Christine Lagarde abandoned ship, Kristalina will take the Helm...?

 

[camberiu]

How much did the IMF make in interest?

Not nearly enough to cover a default just one year after the loan was issued.

 

[TheDonald]

The IMF and pretty much all western capitalist democracies, were overjoyed when the Macri administration assumed power. When Macri's pro-business agenda faltered, due to deteriorating domestic economic conditions and extreme weakness in the peso, the IMF extended help in the form of the $57B standby loan. We all know the IMF does the bidding of western capitalist democracies that fund its existence, so the standby loan was no surprise. The western capitalist democracies wanted to preserve the Macri administration, as they viewed CFK and her dishonest, socialist governance as disastrous.

The IMF loan has not been worthless to the average Argentine. To the extent it has supported Argentine asset prices and supported the peso, it has been beneficial. Yes, both of the above have collapsed, but that collapse could have been worse. The Merval could have falled 80% in dollar terms and the peso could be at 70. The IMF loan gave the Macri regime the resources to support both.

In addition, any honest analysis must include consideration of the alternatives. If the Argentine government had kept printing money, as CFK did, the peso would likely be at 70 today. Argentina was running an enormous fiscal deficit, and that has to be paid for somehow. CFK printed money to pay for it, which forced up inflation and weakened the peso. Macri borrowed to finance the fiscal deficit, while trying to reduce it, which has resulted in large debt to GDP balance.

When your spending is above your revenue, the difference has to be made up somehow.

In addition, Argentina still has about $20B in foreign exchange reserves. So it's not like the entire $57B is spent and/or "gone." A portion of it sits in the equivalent of Argentina's bank account.

Whether the standby loan has been "worth it," is a different argument and I will not enter it. But keep in mind that to the extent Argentina does not pay interest, it receives free money. To the extent Argentina restructures this loan, it gets economic benefit on the back of the IMF. To the extent, Argentina is able to renegotiate the IMF loan terms in its favor, the average Argentine will benefit. Again, whether that is "worth it," is a matter for each person to decide for themselves. But my guess is that the standby loan will not be paid in a fashion economical to the IMF - and that means Argentina will receive financial benefit - which will inure to the average Argentine.

Keep in mind the old saying, "If you owe the bank $100, it's your problem. If you owe the bank $100 million, it's the bank's problem."

 

[mmoon]

Interesting assessment above.

Nonetheless, it is indeed an embarrassment to the IMF, but what most people in the general public will remember is that it is an embarrassment to Argentina. Again.

Argentina seems to have (nearly) all the tools to get it together. Despite all the reasons I know and have experienced for why it doesn’t, particularly an accepted and expected culture of dishonesty and corruption, it remains somewhat of a mystery. I guess many are putting their lot back in with the latest cult of personality AKA CFK.

 

[toongeorges]

And the average Argentine, who has no understanding of the international debt markets, will be celebrating when Kristina comes back. Someone should write a cumbia song for the IMF to go f* itself, so people can dance on it when the default happens. Sad sad Argentina...

 

[Somewhereinba]

Too many Argentines love free shit which is why they celebrate and abuse the evil IMF when they default and refuse to pay back loans as if it is somehow a good thing. The K's are great at spending everyone elses money (pensions included) and then pointing fingers overseas at all the evil capitalists while they ride in private jets and holiday in the Caribbean.

 

[nicoenarg]

Sad reality of things is that if the "evil rich Imperialists" hadn't come to the aid of Argentina and things collapsed then they right now would be being blamed for not helping and causing the collapse. Damned if you do, damned if you don't.

No one thinks IMF did this out of the kindness of their heart but if I were in a tough spot and needed a loan for my business and someone like the IMF came to my aid, I'd be grateful, use that money responsibly to set up my business to be successful and pay it back over time.

If I couldn't pay it back, I'd go back to the negotiating table. This isn't rocket science and happens all the time in the world of business. In business or even in personal life though you screw up enough times, there aren't a lot of people who rush to loan you money. Evidently with countries it is a different matter.

 

[Bajo_cero2]

The IMF and pretty much all western capitalist democracies, were overjoyed when the Macri administration assumed power. When Macri's pro-business agenda faltered, due to deteriorating domestic economic conditions and extreme weakness in the peso, the IMF extended help in the form of the $57B standby loan. We all know the IMF does the bidding of western capitalist democracies that fund its existence, so the standby loan was no surprise. The western capitalist democracies wanted to preserve the Macri administration, as they viewed CFK and her dishonest, socialist governance as disastrous.

The IMF loan has not been worthless to the average Argentine. To the extent it has supported Argentine asset prices and supported the peso, it has been beneficial. Yes, both of the above have collapsed, but that collapse could have been worse. The Merval could have falled 80% in dollar terms and the peso could be at 70. The IMF loan gave the Macri regime the resources to support both.

In addition, any honest analysis must include consideration of the alternatives. If the Argentine government had kept printing money, as CFK did, the peso would likely be at 70 today. Argentina was running an enormous fiscal deficit, and that has to be paid for somehow. CFK printed money to pay for it, which forced up inflation and weakened the peso. Macri borrowed to finance the fiscal deficit, while trying to reduce it, which has resulted in large debt to GDP balance.

When your spending is above your revenue, the difference has to be made up somehow.

In addition, Argentina still has about $20B in foreign exchange reserves. So it's not like the entire $57B is spent and/or "gone." A portion of it sits in the equivalent of Argentina's bank account.

Whether the standby loan has been "worth it," is a different argument and I will not enter it. But keep in mind that to the extent Argentina does not pay interest, it receives free money. To the extent Argentina restructures this loan, it gets economic benefit on the back of the IMF. To the extent, Argentina is able to renegotiate the IMF loan terms in its favor, the average Argentine will benefit. Again, whether that is "worth it," is a matter for each person to decide for themselves. But my guess is that the standby loan will not be paid in a fashion economical to the IMF - and that means Argentina will receive financial benefit - which will inure to the average Argentine.

Keep in mind the old saying, "If you owe the bank $100, it's your problem. If you owe the bank $100 million, it's the bank's problem."

MM never stoped printing money and, plus, he created a debt of 57 billion usd only to the IMF that was used to support his regime.