The IMF, Argentina and Ecuador: Have Lessons Been Learned?

Negotiations between Argentina’s government and the IMF on what comes next will be tough. The most likely scenario with the new government seems to be a more accommodative fiscal policy, combined with further falls in the peso, high inflation, prolonged recession and a large debt write-down. But the outcome of IMF programs in Argentina and Ecuador cannot be understood as a lack of learning from past mistakes. One major difficulty faced by the IMF, or whoever designs macroeconomic adjustment policies in the current Latin American context, is the difficulty involved in reading appropriately – and responsibly – a country’s political dynamics and how people will react to austerity policies.

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Source: America’s Quarterly

Categories: Macroeconomy/Finance