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Author: Kendrick Foster
Date: Fall 2019
From: Harvard International Review(Vol. 40, Issue 4)
Publisher: Harvard International Relations Council, Inc.
Document Type: Article
Length: 2,317 words
Lexile Measure: 1420L

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Argentina's name may mean "made of silver," but oftentimes its economy does not seem as strong as the name might suggest. With yearly inflation reaching almost 60 percent and the country mired in debt, policymakers are grasping for a solution without much success. Meanwhile, many Argentines follow the US-peso exchange rate religiously, yet seem to have little control over its fluctuations. Foreign investors anxiously watching October's general elections flee from the peso every time the leftist candidate surges in the polls, while the currency grows stronger when President Mauricio Macri's government gains support.

At this point, Argentina's economy is intertwined with non-state actors, beyond just foreign investors, and the quandary the country's leadership faces is this: how to balance their competing, often diametrically opposed interests. On one hand, international financial institutions such as the World Bank, the International Monetary Fund, and the Organization for Economic Cooperation and Development exert a significant amount of free-market pressure over Argentina's economic policy, yet Argentina's powerful trade unions also put pressure on the government from below to enact more socialist policies. Balancing these two interests will certainly be a tricky challenge, yet whatever happens will ultimately depend on the election results. Above all, Argentina's economic status reminds the world that, despite the proliferation of non-state actors, state actors still maintain key levels in enacting policies over their countries.

Pressures from Above: International Financial Institutions

Politics complicates Argentina's long and complicated financial history. The fall of a military government in the 1980s left Argentina with massive amounts of debt; subsequently, the government pegged the Argentine peso to the US dollar, which ended up reducing Argentine exports and plunging the country into a deep recession. In 2001, the country defaulted on its debts.

After the default, a commodity boom brought the Argentine economy back to its feet, but the administrations of Nestor and Cristina Fernandez de Kirchner engaged in some dubious economic management, printing money to pay for large budget deficits and instituting controls on American dollars leaving the country. Again, Argentina defaulted on its debts, forcing the International Monetary Fund to lend Argentina US$57 billion in order to save its faltering economy.

That bailout initiated major international involvement in Argentine economic policy. As part of the bailout, the IMF set numerous conditions on Argentina's economic policy. Similar to the Spanish and Greek austerity packages in the Eurozone crisis, Argentina has raised taxes, reduced tax exemptions, scaled back capital expenditures, and frozen public hiring in order to transform its previous budget deficit into a surplus at the behest of the IMF. The organization also recently met with the two leading opposition candidates in October's elections, discussing their economic plans behind closed doors (and likely trying to convince them to continue following the IMF's policy recommendations).

Understandably, many in Argentina have not received these changes well, reminded of past times times when Spain made all of Argentina's economic decisions. To many, the IMF is a bogeyman in Argentine circles. "The International Monetary Fund is the Eye of...

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Gale Document Number: GALE|A616448604