[stop-imf] NYT: Consequences for the United States in Argentina's Collapse

[Robert Weissman]

December 25, 2001
Consequences for the United States in Argentina's Collapse
By LARRY ROHTER
BUENOS AIRES, Dec. 24 — Argentina's declaration of a moratorium on repayment
of its foreign debt marks the end of a failed economic experiment that has
cost this country dearly. But it is also a blow to the United States and the
International Monetary Fund, which had invested much of their
credibility and
prestige here, yet proved unwilling to help when things began falling apart.

"I think this is going to end up being a very costly experience for the
United States," Walter Molano, chief of research for BCP Securities, a
brokerage firm based in Connecticut that focuses on Latin America, said
today. "It was very clearly the Department of the Treasury that pushed
Argentina over the edge and allowed it to collapse, so I think the issue of
accountability has to come up."

A decade ago, Argentina decided to tie its peso to the dollar at a value of
one to one, a decision that at first dramatically reduced inflation and
imposed fiscal discipline, but eventually led to the current crisis. The
first Bush administration had strongly urged that step on Argentina, and the
United States tried to sell the same system to other doubtful Latin American
countries.

There is plenty of blame to go around. But from the start, the second Bush
administration found it convenient to overlook the United States's earlier
role as advocate and cheerleader of that policy and to distance itself as
much as possible from Argentina's growing problems. The bluntest
statement of
official indifference came from Treasury Secretary Paul H. O'Neill this
summer and helped accelerate the loss of capital and confidence here.

"They've been off and on in trouble for 70 years or more," Mr. O'Neill said
dismissively in an interview with the British magazine The Economist. "They
don't have any export industry to speak of at all. And they like it that way.
Nobody forced them to be what they are."

What was missing from Mr. O'Neill's analysis, however, was any mention
of the
high tariffs the United States imposes on Argentine exports or of the
aversion to easing those barriers to help Argentina regain its footing. Nor
was the Bush administration particularly helpful in "creating some kind of
framework for how the international system could respond, rather than saying,
`It's all up to you,' " said Peter Hakim, president of Inter-American
Dialogue, a Washington-based conference of hemisphere leaders.

As a result, "the Argentines were operating in a vacuum, without a clear
sense of what the United States was thinking and what it was prepared to do
to be helpful," Mr. Hakim said. "The real blame is passivity: the U.S. did
not want to engage, and so it stayed on the sidelines."

Taking its cue from the Bush administration, the International Monetary Fund
kept "raising the bar" on Argentina, in Mr. Molano's words — requiring
increasingly harsh austerity measures — in return for the disbursement of
money already promised. That was followed by the fund's public
declaration on
Dec. 18 of its lack of confidence in the Argentine authorities, which helped
hasten the government's fall.

"It's clear that the mix of fiscal policy, debt and the exchange rate regime
is not sustainable," said Kenneth Rogoff, the fund's chief economist. He also
maintained that "everyone recognizes that to a large extent the problem lies
in Argentina," a statement that did not ring true to other governments
in the
region.

"The fund is partly to blame for this because the fund did not sound the
alarm in time and then took a very hard line when things were incredibly
difficult," said Pedro Pablo Kuczynski, the finance minister of Peru, which
has itself been in in talks with the organization recently.

But the abandonment of Argentina represents more than just an economic policy
failure. It also has a strategic effect, because it confirms to the rest of
Latin America what many leaders have always maintained: that the United
States is a fickle and undependable ally.

Over the past decade, Argentina has aligned itself more closely with the
United States on foreign policy questions than any other country in the
region. It was the only Latin American country to participate actively
in the
Persian Gulf war, and in recognition of that and numerous other
demonstrations of support, the Clinton administration formally designated
Argentina a "non-NATO ally."

Even with its economy disintegrating, Argentina has not wavered from a
commitment to send up to 600 troops as part of the peacekeeping force in
Afghanistan and to open a field hospital in Pakistan. That effort, which will
cost Argentina up to $20 million, has been criticized here as an expenditure
that would be better directed at creating jobs for the millions of unemployed.

Six months ago, Turkey's situation was very similar to Argentina's. But while
Argentina has been left to fend for itself, Turkey has been showered with
financial and political support, which most people here regard as proof the
United States regards Turkey as vital to American geopolitical goals in
a way
that Argentina, despite its demonstrated support of the United States, is
not.Now, other Latin American countries are likely to draw the conclusion
that there is no payoff for being America's friend, at a time when the United
States hopes to draw its neighbors into a Free Trade Area of the Americas.

"On the whole, I think this bodes very badly for building a long-term
economic community in the hemisphere," Mr. Hakim said. "If this is what
community means, it doesn't really mean much."



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