The International Monetary Fund and Latin America The International Monetary Fund and Latin America THE ARGENTINE PUZZLE IN CONTEXT CLAUDIA KEDAR TEMPLE UNIVERSITY PRESS Philadelphia TEMPLE UNIVERSITY PRESS Philadelphia, Pennsylvania 19122 www.temple.edu/tempress Copyright © 2013 by Temple University All rights reserved Published 2013 Library of Congress Cataloging-in-Publication Data Kedar, Claudia, 1968– Th e International Monetary Fund and Latin America : the Argentine puzzle in context / Claudia Kedar. p. cm. Includes bibliographical references and index. ISBN 978-1-4399-0909-6 (cloth : alk. paper) ISBN 978-1-4399-0911-9 (e-book) 1. International Monetary Fund—Argentina. 2. Financial crises—Argentina—History. 3. Debts, External—Argentina. 4. Argentina—Foreign economic relations. 5. Argentina— Economic policy. I. Title. HC175.K43 2013 332.1'520982—dc23 2012017782 Th e paper used in this publication meets the requirements of the American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ANSI Z39.48-1992 Printed in the United States of America 2 4 6 8 9 7 5 3 1 For Sandy, with all my love Contents Acknowledgments ix Introduction 1 1 Multilateralism from the Margins: Latin America and the Founding of the IMF, 1942–1945 11 2 It Takes Th ree to Tango: Argentina, the Bretton Woods Institutions, and the United States, 1946–1956 32 3 Dependency in the Making: Th e First Loan Agreement and the Consolidation of the Formal Relationship with the IMF, 1957–1961 55 4 Fluctuations in the Routine of Dependency: Argentine–IMF Relations in a Decade of Political Instability, 1962–1972 88 5 All Regimes Are Legitimate: Th e IMF’s Relations with Democracies and Dictatorships, 1973–1982 119 6 Routine of Dependency or Routine of Detachment? Looking for a New Model of Relations with the IMF 151 Conclusions 184 Notes 191 References 233 Index 245 Acknowledgments his book is the result of many years of exploring and analyzing the Inter- national Monetary Fund (IMF), one of the most central and polemical T players in the current global economy. During those years, I have been fortunate to receive invaluable feedback, counsel, and support from friends and colleagues in Israel (my country of residence), Argentina (my country of origin), and the United States (the country in which the IMF is located and in which I spent some of my postdoctoral years at the University of Michigan). I owe a huge debt of gratitude to all of them. Because several parts of this book are a signifi cantly revised and expanded version of my doctoral dissertation at the Graduate School of Historical Studies, Tel-Aviv University, much of my intellectual debt is to my main supervisor, Raanan Rein, who helped me deepen my understanding of Argentina’s history. Over the years, Raanan has always been ready to give me needed guidance, not only about my research, but also about the best way to become a scholar. I am grateful to two friends and outstanding historians, Jeff rey Lesser and James N. Green. Jeff is among the fi rst people I contact every time I face an “academic” dilemma. I deeply appreciate his understanding and optimism, his willingness to answer in detail my (too) numerous questions, and his readiness to read my work. My dear friend Jim generously invested precious time in lis- tening to me and reading my manuscript from cover to cover. He always came back to me with challenging questions, criticism, and recommendations. Jim’s friendship and support has been crucial in the completion of this book. I am highly indebted to Arie Kacowicz, my mentor and friend at the Hebrew Univer- sity of Jerusalem. During the past few years, Arie has provided me with smart and realistic advice and has helped me to feel at home at the university. Most important, he encouraged me to embark on a socialization process through x Acknowledgments which I became more familiar with questions, concepts, and theories from the area of international relations. I have no doubt that the analytical framework of this book, which is based on the idea of the “routine of dependency,” refl ects the impact that process had on my way of understanding asymmetrical relations, especially those between the IMF and its Latin American member states. Many friends and colleagues have given me extremely helpful suggestions, as well as intellectual, moral, and emotional support, through many months of writing this book. Howard Stein convinced me to expand the focus of my work and manuscript from “just” IMF–Argentina relations to IMF–Latin American relations. He raised this brilliant idea as I began to teach in the World History Program at the Hebrew University, which made an idea that might have sounded crazy to me not long ago—that is, shift ing from the national to the regional level or, perhaps, from a micro- to a macro-history—suddenly seem logical and wise. I am particularly grateful to Eduardo Elena, Ruth Fine, Moshe Hirsch, Leonardo Leiderman, Patty Mullally, Ron Robin, Richard Turits, and Yfaat Weiss, who in diff erent ways and at diff erent times all supported this project. Vera S. Can- diani, Ronald H. Chilcote, Mark Healey, and Peter Smith read previous and partial versions of the manuscript. Th eir insights and suggestions had helped me shape and improve the structure and scope of the book. Orit Friedland did a wonderful job of translating and editing parts of the manuscript. I am also grateful to the members of the Centro de Estudios Económicos de la Empresa y el Desarrollo, University of Buenos Aires—particularly to Raúl García Heras. Of course, I am solely responsible for any remaining fl aws. I thank the following institutions for hosting and supporting me at diff erent stages of my research and writing: the Sverdlin Institute for Latin American History and Culture, Tel-Aviv University; the Center for Latin American and Caribbean Studies, University of Michigan; and the Leonard Davis Institute for International Relations, Department of International Relations, and Depart- ment of Romance and Latin American Studies, the Hebrew University of Jeru- salem. Th e Lady Davis Postdoctoral Fellowship I was awarded in the 2010–2011 academic years allowed me to dedicate time to the manuscript and fund one more research trip to Washington, DC. Th e Sverdlin Institute and the Faculty of the Humanities at the Hebrew University of Jerusalem generously helped fi nance the translation and editing of the manuscript. I also extend warm thanks to the staff of the IMF Archives, especially to Premela Isaac and Jean Marcouyeux, who assisted me both professionally and generously. Th anks also to the staff of the Archives and Library of the Banco Central de la República Argentina and of the Library of the Universidad Tor- cuato Di Tella in Buenos Aires. I thank the staff of the Instituto Gino Germani at the University of Buenos Aires for giving me access to their incredible and comprehensive Oral History Project. Acknowledgments xi I am grateful for the help and professionalism of the staff of Temple Univer- sity Press and especially to its director and my editor, Alex Holzman. I acknowl- edge the three anonymous readers provided by the press for their thoughtful insights and recommendations. Th ere are rumors that publishing a book can be a nightmare, but working with Temple University Press has been a pleasure. I feel that I have learned a lot about what it means to turn a raw manuscript into a book. I thank my parents, Frida and Aníbal Niemetz, and my brother Guillermo for their interest and support and for making me purchase, back in 2002, the Spanish version of Joseph Stiglitz’s Globalization and Its Discontent. Who could have imagined that Stiglitz’s book—which was sold in every bookstore and news- stand in Buenos Aires—would lead me to write a book of my own on the IMF? I am highly indebted to my in-laws, Ruthie and Paul Kedar, for their amazing intellectual curiosity and for their ongoing support and encouragement. Finally, I dedicate this book to Sandy (Alexandre) Kedar, love of my life and father of our wonderful children Michal and Yoav, the youngest experts on the IMF on earth. I have no words to express how fortunate and grateful I am to have Sandy (another IMF expert by now) by my side and with me. Sandy’s love and unconditional and permanent support have indeed made this book possible. Introduction To understand what happened in Argentina we need to look to the economic reforms that nearly all Latin America undertook in the ’80s. Countries emerging from years of poverty and dictatorship were told that democracy and the markets would bring unprecedented prosperity. And in some countries, such as Mexico, the rich few have benefi ted. More broadly, though, economic performance has been dismal, with growth little more than half of what it was in the 1950s, ’60s and ’70s. Disillusionment with “reform”—neo-liberal style—has set in. Argenti- na’s experience is being read: Th is is what happens to the A-plus student of the IMF. Th e disaster comes not from not listening to the IMF, but rather from listening [to it].1 Th e Argentine crisis of 2001 inevitably raises the question of how a country that until the 1930s was expected to join the list of the richest countries in the world ended up suff ering such economic deterioration. Although Argentina may have made its own economic mistakes over the years, we must also look at the inter- national economy in general, and at the International Monetary Fund (IMF), in particular to understand what went wrong.