Committee for the Abolition of Illegitimate Debt

 Spotlight on Argentina: the IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org ’s favourite prey

In 2001, Argentina defaulted on more than US$70 billion owed to private creditors. This epi-sode led to the fall of four presidents in one week, a terrible economic and social situation for several months, huge demonstrations and, finally, an agreement with the International Monetary Fund.

Argentina then considerably reduced its indebtedness to the IMF over a ten-year period (2007-2017), until the decision by the very neoliberal Mauricio Macri in 2018. In dire economic straits – with rising inequality, poverty and galloping inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. – Mauricio Macri “benefitted” from a historic IMF loan of over $44 billion. This loan was intended to enable Macri to save his man-date and be re-elected thanks to the spending permitted by this excessive loan, even if it meant plunging Argentina into decades of repayments and the imposition of the usual political condi-tionalities of the Bretton Woods institution.

Mauricio Macri was not re-elected, and his successor, Alberto Fernandez, who had promised to free the country from the policies imposed by the IMF, ultimately continued to negotiate with it. As can be seen in graphs 18 and 19, Argentina reborrowed from the International Monetary Fund ($23.4 billion in 2022 and $12.7 billion in 2023) to repay part of the $44 billion borrowed in 2018 and 2019. This $23.4 billion loan was used to make the repayments of $18.6 billion in 2022 and $21 billion in 2023 shown in Graph 19.

Graph 1: IMF loans to Argentina (in billions of current US dollars)

Graph 2: Repayments and charges paid by Argentina to the IMF (in billions of current US dollars)

The historic agreement signed by the IMF with Argentina in 2018—and the dose of austerity that went with it—has had very concrete consequences for the working classes, specifically for women. Here are just a few examples:

• Layoffs of civil servants
• Withdrawal of pensions for women who had worked at home all their lives (at the de-mand of the IMF)
• Public budget cuts
• Multiplication of soup kitchens
• Increase in the poverty rate from 27% to 40% during Mauricio Macri’s term of office.
   

Graph 3: Argentina’s debt to the IMF (in billions of current US dollars)

And there’s more to come, as Argentina still owes the IMF $40 billion (Graph 20). By deciding to save his term of office, Mauricio Macri has therefore “offered” his country at least a decade of austerity, given that Alberto Fernández’s left-wing government lacked the courage to call the repayments into question. It was this lack of courage that brought Javier Milei to power. The latter, a proponent of neoliberalism taken to the extreme, with no rules whatsoever, is quite com-fortable with the International Monetary Fund’s conditionalities. We must audit and cancel the debt, which is impoverishing the population and widening inequalities. The Argentine people should not have to pay for an agreement made for electoral reasons.

 Conclusion and alternatives

The global South is going through a debt crisis comparable to that of the 1980s, as the same trends are emerging: as in the 1970s, the countries of the South were encouraged to go into debt because capitalists in the North were looking for higher returns than in the North; the IMF and/or the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

are at the helm; neo-liberal conditionalities are being applied... As in the debt crisis of the 1980s, it was a sudden rise in interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. that helped trigger it. While the crisis affects the Global South as a whole, some countries and regions are particularly hard hit, such as Sri Lanka, sub-Saharan Africa, and Argentina.

Faced with the consequences of the global Covid-19 pandemic in 2020, Russia’s invasion of Ukraine in February 2022, and then the unilateral decision of the major Western central banks to suddenly raise interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rates in June 2022, governments in the South could have invoked the fundamental change in circumstances. This argument of international law could have enabled them to suspend payment of their debts and gain a favourable balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of power with their credi-tors to renegotiate their debts, organise audits and cancel part of their indebtedness.

They could have drawn on the very powerful social movements that have been taking place in Sri Lanka, Nigeria, Kenya and Bangladesh since 2022. In Nigeria and Kenya, the demonstrators directly targeted the International Monetary Fund, providing a golden opportunity to put an end to the domination of the Bretton Woods institutions over the countries of the South.

Mobilising fundamental change through social movements would have provided popular legiti-macy and legitimacy under international law to resist creditors and the conditionalities imposed by the International Monetary Fund and the World Bank.

This is possible. For example, the Malian government has not hesitated to arrest the directors of major foreign mining companies operating on its soil to recover unpaid taxes. We must not hesi-tate to take such measures against the powerful who plunder the countries of the South, using the money recovered to improve the living conditions of populations and not to repay illegiti-mate debts.

This resistance should take the form of a debt default, accompanied by the holding of a citizens’ audit of the debt and the cancellation of its illegitimate share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. . Debt cancellations must be accom-panied by radical social, ecological, and feminist measures. We must drastically increase budgets for education, health, ecological bifurcation, and the fight against patriarchy. By cancelling part of the public debt and taxing the richest and biggest corporations of the North that plunder the South, resources will be freed up. These tax justice measures will have to be accompanied by a new financial discipline by restoring strict controls on the movement of capital and goods, lifting banking secrecy, and banning tax havens, speculation, and usury.

Public debt could be used to finance a vast program of ecological-feminist-socialist bifurcation instead of being used to impose anti-social, extractivist, or productivist policies that promote competition between people . Public authorities can borrow to:

• a. Socialise the activities of social reproduction, notably by developing free public ser-vices (education, health, culture, etc.);
• b. Finance the complete closure of nuclear and thermal power plants;
• c. Replace fossil fuels with environmentally friendly renewable energies;
• d. Guarantee food sovereignty and finance the conversion of present-day agriculture, which is a major contributor to the ecological crisis. The aim is to steer agricultural activ-ities in a direction that is compatible with the fight against climate change and the promo-tion of biodiversity, in particular by encouraging short supply chains and producing ac-cording to an agroecological model;
• e. Radically reduce road and air transport in favour of public rail transport.
• f. Fund a vast program to develop high-quality housing that consumes much less ener-gy;
• g. Put an end to discrimination and the criminalisation of migrants, and finance a policy of welcoming migrants that respects the right of movement and settlement.