[stop-imf] Humble Argentine pie for IMF

[Robert Weissman]

BBC NEWS
April 3, 2004


Humble Argentine pie for IMF

By Humphrey Hawksley
BBC correspondent, Argentina

The International Monetary Fund (IMF) has owned up to making mistakes in
dealing with Argentina's 2001 economic crisis, which pushed half the
population into poverty.


A new softer line on debt repayment has now been adopted at the
insistence of Washington.

Grasslands stretched unprotected and untamed for as far as the eye could
see, forming a perfect horizon under a big sky, whisped with the
faintest of white clouds.

The wind was everywhere, buffeting gulls in the air, whipping up white
water on the river, and slamming shut car doors - if you gave it the
chance - as soon as you had opened them.

>From a distance, a hillside where we were heading was shimmering
strangely, the green turning into a dirty white then back again.

As we got closer, I realised it was was actually full of sheep being
rounded up with dogs and farm hands on horseback.

And down the slope, by a fence, his thumb pushing tobacco into a pipe, was
Paul Gallard. His leathery face was etched and wind-burnt from years of
working a farm on the Patagonian steppe.

"So you made it?" he said, by way of greeting.


Argentina was coming to the end of a decade of sham

I had expected Spanish-accented English. But Paul is the son of English
settlers who came to Argentina after the First World War.

I zipped up my jacket against a fresh gust. Paul, his pipe packed,
amazingly cupped his hand, struck a match and kept enough flame to light
the tobacco.

Time bomb

Just over two years ago, Paul's farm was almost bankrupt.

Argentina was coming to the end of a decade of sham.


The country had been hailed by Western politicians and bankers as a model
of democratic and economic growth. Loans poured in unchecked.

But it was riddled with corruption and so then came the crash.

Millions were put out of work and rioters took to the streets.

A recovery is under way, but there is now deep mistrust between
Argentines and financial institutions which they had once believed in.

"We knew," said Paul. "We all knew it would happen. We who lived and
suffered it. Yes, we knew. Definitely. It is hard to believe they did not
know. Our whole economic system was going down the drain fast."

So why, if a Patagonian farmer knew, did not those highly respected
economists who deliver recipes for growth to the developing world?

Spend strategy


Argentina's new president, Nestor Kirchner, has answered the question
already. They simply were not up to the job.

He used to be governor of this area and he foresaw disaster with such
certainty that he sent money from his provincial coffers into foreign
banks for safe keeping.

And now he is challenging the orthodox economic thinking of the IMF and
other lenders head on.

Kirchner is a tall man, in his early 50s with an easy, urbane manner.

He was a left-wing activist, jailed during the military dictatorship, and
even now counts Fidel Castro among his friends.

In normal times he would be a natural opponent of the United States. But
these are not normal times.

Kirchner argues that money which should be used to repay debt is better
spent in ending poverty and getting the country back on its feet again.
And so far - because of a fascinating twist of international politics - he
is winning.

Mistakes

In Washington, I asked the same question that I had asked Paul, but this
time to Anne Krueger, an academic who is now the acting managing
director of the IMF.


"Why didn't you know?" I said.

"Well I was not here," she said. "I was at Stanford University at the time."

"Sorry," I said. "Not you, but the IMF. Why did it not know?"

Then she revealed that some IMF staff had written letters about their
fears for Argentina.

"So what happened," I said.

"Nothing."

"Why not?"

"I do not know", she admitted.

And it was that oversight - for want of a better phrase - which finally
caught the attention of the White House.

Protection

Last September, Argentina came close to defaulting again because the IMF
was playing tough to get back the money it was owed.

Nestor Kirchner was playing hardball too, and the US told the IMF to back
off.

"Our point of view was that Kirchner needed time to establish his
credibility," said Richard McCormack, an economist close to the Bush
administration.

Another insider put it more concisely.

"This is so weird," he told me. "A generation ago, Kirchner and his
buddies would have been thrown into jail for being communists. Now you
have got a right-wing American government helping them stay in power.

"You see, Bush cannot afford to deal with Iraq, terror and social unrest
in Latin America. He wants to see if Kirchner can make it work, see if he
can produce a new kind of model for the developing world.

"God knows, we need to find one."


>From Our Own Correspondent was broadcast on Saturday, 3 April, 2004 at
1130 BST on BBC Radio 4. Please check the programme schedules for World
Service transmission times.


Story from BBC NEWS:
http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/3593873 .stm
Published: 2004/04/03 12:13:57 GMT

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