Argentina and the IMF: worse than you may think

31 March, 2022

Protest by the agro-export sector against the increase in withholding taxes approved to finance the state at the same time as the deployment of the agreement between Argentina and the IMF was being finalized.
Protest by the agro-export sector against the increase in withholding taxes approved to finance the state at the same time as the deployment of the agreement between Argentina and the IMF was being finalized.

The implementation of the agreement between Argentina and the IMF, which is now being defined, is getting closer and closer to becoming a real rescue plan for national capital… on account of draconian measures that will reduce the purchasing power of wages by no less than 30%. All this in a country where, already nowadays, almost a third of the workers cannot buy the basic basket of goods with the income provided by their work.

Table of Contents

The agreement between Argentina and the IMF

Alberto Fernández and Kristalina Georgieva meet by videoconference this week
Alberto Fernández and Kristalina Georgieva, representing Argentina and the IMF, meet via videoconference.

The agreement approved by the IMF for the repayment of Argentina’s debt is an income-sucking scheme and a textbook reduction in the overall costs of exploiting labor power.

The goals and the means

1 The Argentine government commits itself to achieve a fiscal surplus (collecting more than it spends) from 2025 onwards while keeping the economy (=accumulation) at an accelerated growth rate between 3.5 and 4.5% per annum…

All this without resorting to public spending or borrowing: Central Bank financing to the state will be drastically reduced this year and will be at zero before 2024.

2 A recessive monetary policy: interest rates above inflation to ensure that capital has an incentive to stay in the country instead of seeking investment abroad (as befits the absence of productive export sectors beyond the primary sector, a classic feature of semi-colonial countries).

The direct impact on workers

1 The usual IMF plan to spend less, collect more is nothing other than a brutal reduction in the general costs of exploiting the labor force. But even the costs that the ruling class continues to mutualize in the state are restructured.

Lest anyone think of any ” social cushion ” that would make the blow less hard, the opposite is true: the percentage of public spending devoted to structural investments that reduce the operating costs of enterprises (roads, gas pipelines, electricity grids, etc.) will be doubled? at the expense of social programs.

2 The state will sharply cut gas, electricity and water subsidies. For half of Argentina’s working class, this means a 200% increase in their basic bills. For the rest there will be an average increase of 45% in electricity and gas bills. Even for the beneficiaries of the social tariff, the increase will be 22%.

But the idea is not only to spend less, but to collect more. So, as one of the goals is to increase tax collection, the idea of the IMF and the government’s economic team is to update the land registry and impose a new tax on housing which, like housing itself, will have a greater impact on labor income than on the income of the “wealthy” classes.

That which is not openly acknowledged but is inevitable: Labor and pension reform

Picketers camped out on 9 de Julio in Buenos Aires this week. In the background the Ministry of Social Development with the image of Evita Perón
Picketers camped out on 9 de Julio in Buenos Aires this week. In the background the Ministry of Social Development with the image of Evita Perón.

Officially the agreement with the IMF does not include any demands for labor or social security reform. However, spending on pensions and social plans today represents 66.6% of the state budget, making public spending reduction targets unattainable without both.

And the impact can only be massive and concentrated on workers because a large part of the income received by lower-income workers and practically all pensioners is channeled through the state. 28 million active workers, retired or disabled, received some kind of pension, assistance or transfer from the state last year.

It appears that the studies commissioned by the parties agree on a number of points on the reforms to be undertaken. The most significant: reduction of the cost of dismissal coupled with a version of the Austrian backpack so that its payment does not damage the companies’ treasury, a general reduction of working hours with an equal reduction of salaries and new restrictions to shore up the trade union monopoly to call strikes and negotiate agreements.

Secondly: introduction of the “dynamic working day” and reconsideration of workers’ rest periods to adapt them to the needs of companies; increased fines for informal work and new -cheaper- employment contracts for SMEs.

Imposition or agreement?

As usual, the Kirchnerist left and Trotskostalinism are playing at disassociating themselves from the agreement by presenting it as a foreign imposition on national capital. The basis of this division is the traditional one:

The industrial bourgeoisie and petty bourgeoisie fear, with good reason, that the agreement with the IMF will reduce the state support to the industrial enterprises, artificially maintained with public purchases and protection against imports. […] This opposition of interests is what reproduces -not always mechanically- the divisions that cross the governmental front and the opposition. Also the “unexpected” alliances between pro-government and opposition groups that serve to push through budgets and key laws.

Argentina, the IMF and the workers, 18/1/2022

However, with the agreement on the table, things change and a broader game takes place. The truth is that the agreement with the IMF is a real wishlist of the Argentine corporate and financial bourgeoisie. The program national capital has been proposing for years.

And it will obviously entail costs and “sacrifices” for the small industrial and commercial bourgeoisie, traditionally subsidized and protected. But the latter, in addition to cheaper labor contracts with “flexible schedules” and punctual tenders, will be provided with tools to further squeeze down wages and maintain or increase productivity in terms of profit.

Thus, as its consequences unfold, the agreement with the IMF is getting closer and closer to becoming an overall plan for the entire Argentine bourgeoisie, be it small or big, oriented to the domestic or foreign market. This does not detract from the fact that this internal negotiation will take place in a rather heated and contentious manner and that there may be moments of tension.

But so far, when these tensions threatened to question not only the unity of the ruling class, but also the Peronist coalition in the government, President Fernández only needed to increase the verbal tension with the Macrista right wing to avert the danger. Something to which Kirchnerism and its left wing always aim at, as we saw this week with the debates on the tax amnesty law prepared by its parliamentary benches.

Where lies the Argentine bourgeoisie’s problem?

Assembly line in Argentina
Assembly line in Argentina

As the bourgeoisie as a whole “begins to see itself” in the agreement, it becomes clear that its problem is not a non-existent dilemma between international insertion and national independence. Its main challenge is that its political apparatus is too worn out to withstand an “adjustment” such as the one implied by the agreement without risking a generalized opposition.

This risk is multiplied by its incapacity to face an inflation that is now not only fed by the situation of Argentine capital in the global market but also by the consequences of the war in Ukraine and the reorganization of the international division of labor.

In fact, the very bases of the agreement do not quite add up. As the Fernández government itself recognizes, the possibility of sustaining itself on internal financing depends on inflation. And it has already anticipated that it will not meet the target agreed with the IMF this year.

To stay on the ground marked by the agreement, as if a national solution to inflation were possible by imposing an “Income Pact”, would only mean multiplying and advancing the offensive against the living conditions of the workers. All in a framework in which the conflict with the Bolivian state gas company and the international situation may well combine to produce basic energy shortages.

And here is where the economic contradictions become political problems for the ruling class. Alberto Fernández himself seems increasingly overcome by the “devils” of inflation and politically ill-armed to devote the remaining two years of his presidency to impose a draconian adjustment.

The typical move would be to call elections and face the adjustment with the “legitimacy” of a newly elected government, clearly aligned with the IMF agreement and blessed by the electoral ritual. But all possible alternative coalitions to the Alberto-Cristina alliance seem to break down. And “holding out” two more years without the shock plan that goes hand in hand with the agreement is unfeasible for a national capital that needs the “adjustment” more than the IMF.

In fact, the main challenge of the government today is that it does not even have the capacity to finance itself urgently by raising the yields on agricultural exports without raising against it the big agro-exporting bourgeoisie which, to top it off, is increasingly afraid of running out of enough gasoil and ethanol to reap the harvest.

The weakness of the government and the nervousness of the most authoritarian sectors of capital -those linked to agricultural and mining exports- is what is breathing air to the rise of a far right whose original stronghold was, however, urban and from the capital city.

In the absence of an independent class movement there is no doubt that this movement will continue to grow and offer itself more and more openly as a repressive force against the workers. Milei’s presentation of the “anti-picketing movement”, a group dedicated to digital monitoring and reporting of roadblocks and those who take part in their activities, may seem folkloric and irrelevant, but it marks a leap forward in the anti-worker belligerence of the Buenos Aires petty bourgeoisie.

The outlook for the workers

Workers' demonstration in Rawson, Chubut.
Workers’ demonstration in Rawson, Chubut.

The Indec announced yesterday the poverty rate. It fell slightly at the end of 2021, but inflation did its work afterwards and the suction of income towards capital will make it exceed 40% again. The simultaneous publication of working poverty rates – workers whose wages do not cover the basic basket – completed the picture: from 17.6% in 2010 we have gone to 28.2%, the current figure, an absolute record. And among the most precarious workers, those who suffer the “unstable underemployment” of the changas, this severe working poverty affected 58.2%.

In other words, the starting point is that nearly a third of workers cannot meet their basic needs with their wages.

Now let us add the blow of inflation doubled by the reduction of real wages due to anti-inflationary policies. And to that the abrupt reduction of social security coverage, the brutal rise in energy and water rates and the effect of taxes. Let us add that the cheapening of dismissal tends to concentrate wages around the minimum and that pensions, already eroded by inflation, are going to be cut directly.

The situation is serious. All the more so because Argentina is moving from the periphery to the center of the map of imperialist conflicts. And above all, because the workers have not found a way out of the permanent sabotage of their struggles by the left and the unions. It is still an open situation, but it is urgent to organize.

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