More IMF loans in Latin America dig up troubled memories

. May 06, 2020
More IMF loans in Latin America dig up troubled memories In October 2019, strikes broke out in Ecuador after oil subsidy cuts at the IMF's request. Photo: Jarno Verdonk/Shutterstock

Ecuador and Colombia are the latest Latin American nations to seek out the help of the International Monetary Fund (IMF), one of the world’s most important financial organizations, to borrow funds that may help drag these countries out of the economic hole into which they are falling, made deeper by the Covid-19 pandemic. But beyond the financial aid, cozying up to the IMF brings back some troubling memories for many nations in the region.

At the beginning of May, IMF director Kristalina Georgieva confirmed the approval of a USD 643 million emergency loan for Ecuador and USD 10.8 billion for Colombia,

replacing an expiring credit line signed with Bogotá. In the case of Colombia, the IMF said the renewal of the loan comes amid forecasts of the first contraction of the Colombian economy in over two decades. </p> <p>In Ecuador, despite the useful assistance to prop up the country&#8217;s health and social welfare spending, the arrival of IMF money is a reminder of the turbulent events of last year, when neoliberal President Lenín Moreno canceled fuel subsidies in order to adhere to <a href="">IMF-enforced austerity requirements</a>. In response, the country exploded in violent protest, going as far as forcing the federal government to relocate from the capital of Quito to Guayaquil. </p> <h2>IMF&#8217;s troubled history in Latin America</h2> <p>To the south, Argentina also has its hands tied thanks to IMF involvement. In 2018, the country signed a USD 57-billion loan with the Fund, the largest in the organization&#8217;s history. The IMF was also not far away back in 2001, during Argentina&#8217;s worst socio-economic frenzy on record.</p> <p>During the so-called <em>corralito </em>— when the government froze money withdrawals in an attempt to avoid a run on the country&#8217;s banks — Argentina had five different presidents in the space of 12 days. In the aftermath, the IMF&#8217;s deep pockets were waiting to help the country get back on its feet, despite having contributed to the crisis in the first place.&nbsp;</p> <p>“In Latin America, we have a long history with the IMF, one of agreements and disagreements,&#8221; said Miguel Ponce, Argentina&#8217;s Deputy Secretary of Industry and Commerce, speaking to <strong>The Brazilian Report</strong>. &#8220;This crisis could be an opportunity for the IMF to reposition itself.&#8221;</p> <div id="buzzsprout-player-1958731"></div> <script src=";player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>The Fund&#8217;s rebranding effort</h2> <p>Indeed, even with Argentina&#8217;s problems worsening year-on-year, and IMF involvement sparking social unrest in Ecuador, the organization is making a conscious effort to get rid of its negative image in the region.</p> <p>In the “How the IMF can help” section of the <a href="">latest report,</a> the organization said that in the face of an “unprecedent [<em>sic</em>] crisis,” it will be “fully committed to help,” giving priority to health and considering inequality.</p> <p>The IMF&#8217;s <a href="">aid to Latin America</a> includes “using its USD 1-trillion balance sheet, expediting the approval of lending facilities, increasing the limits of existing facilities, and providing debt relief to the poorest and most vulnerable member countries hit by the pandemic under the revised Catastrophe Containment and Relief Trust.”</p> <p>Mr. Ponce warns that this rebranding occurs as many international institutions — such as the World Health Organization, World Bank, and the IMF — were discredited due to a decade of great economic instability worldwide. After the annual global GDP growth of 4.2 percent in 2010, the average fluctuated between 2 and 3 percent in the following years.&nbsp;</p> <p>With this upcoming crisis, national economies and finance organizations are set to struggle.</p> <p>“It seems that the Latin American situation is linked to a change of role and image that the Fund wants to have during and after this crisis. Like any multilateral body, they are aware that the global organizations themselves are questioned for not having acted <em>before </em>the crisis,” Mr. Ponce said. Whether they manage to succeed is a question for the future.

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Lucas Berti

Lucas Berti covers international affairs — specialized in Latin American politics and markets. He has been published by Opera Mundi, Revista VIP, and The Intercept Brasil, among others.

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