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The government also wasted more than $16 billion in unsuccessful attempts to keep the peso from falling and greatly increased the more problematic foreign component of the public debt. The result has been near-constant recession and high inflation, enormous interest rates, peso depreciation, financial instability and the huge run-up in public debt. The debt increase is particularly noteworthy because Mr. Macri inherited a low level of public debt.
Ironically, the IMF is well known in Argentina for promoting similarly unworkable policies during the deep depression of 1998 to 2002 comparable to America's Great Depression of the 1930s. Yes, history is repeating itself, although in this case the IMF has a stronger partnership with the government than it had 20 years ago.
The Ferna'ndez candidates will have to outline how they would get out of this mess. They can explain how Argentina exited from a much more severe economic crisis, with an unemployment rate more than twice as high and millions of previously middle-class people having fallen into poverty. They can assure creditors that there is no need for default on the public debt today, as there was then, because it was completely unpayable. But, as in 2003, the economy cannot recover under the conditions agreed upon with the IMF, and they will have to be renegotiated.
Millions of Argentines remember the last depression and the role the IMF played. Many also remember the rapid improvement in people's lives over the ensuing decade. That collective memory and consciousness may now determine the outcome of this recurring debate over the economy, and with it, the October election, and possibly much of Argentina's future.
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Background, Mark Weisbrot for The Real News Network, July 29, 2018.
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