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OVERVIEW OF RELATIONS BETWEEN ARGENTINA AND THE WORLD BANK GROUP

By Maria Soledad Arroyo
*


Guyana Journal March 2013


INTRODUCTION

The World Bank is one of institutions created at the Bretton Woods Conference in 1944. Since inception it has expanded from a single institution to a closely associated group of five development institutions and that is why it is known as the World Bank Group (WBG). It is an organization that initially was to be within the jurisdiction of the United Nations (UN). However it has since spun off doing its “own thing.” It was created with the purpose of providing financial and technical assistance to the developing countries in order to reduce poverty and support development.

Argentina formally entered the WBG in September 1956 under the provisional government of the “Liberating Revolution” that overthrew President Juan Domingo Peron in late 1955. Nevertheless, Argentina's first credit was facilitated five years later in 1961. From that year until the beginning of the 1980s, the relations between Argentina and the WBG were not really close. It was not until the last government (1983-1989) of the conservative Radical Party (Partido Radical) that relations deepened and consolidated. Indeed, fifteen (15) out of the forty credits granted (2.959.5 out of 5117.8 million dollars) were awarded between 1986 and 1988.

WBG CHANGES POLICIES

Argentina's credit plan got delayed during the internal restructuring and new management of the WBG that took place in 1987. As a result, during the second half of 1987 nothing was negotiated or approved. What is more, the economic policy conditionality changed and disbursements were subjected to complex and protracted negotiations. Moreover, in April 1988, it was announced by the WBG that it would play a greater role in the financial negotiations of the indebted countries. Consequently, loans linked to economic reforms significantly increased. WBG's new policy was designed to attract parallel financing from commercial banks covering them with a cross-default clause with the WBG as guarantor. In 1988, the WBG continued to support the government of Argentina with the financing scheme agreed in March 1987. Argentina complied with all the commitments including the Bank's conditionality and the gradual opening of the economy. In October 1988, it received a new loan package worth 1,250 million dollars.

In 2009, the WBG granted Argentina 1,290 million dollars. Then in 2010, when the share of votes of emerging countries increased, the WBG made available more financial resources to its members, and consequently, Argentina applied for additional credits.

CURRENT PROBLEM

Currently, there is one problem with three dimensions affecting relations between the WBG and Argentina: information reliability, an overspill of an issue between IMF and Government of Argentina (GOA), and the nationalization of the YPF Spanish oil company.

Each year, member countries of the IMF in accordance with Article IV must submit accurate information regarding their economy. The IMF alleges that GOA did not only fail to do this but also failed to provide credible statistical information regarding inflation rates. Due to this, the Fund applied a motion of censure to the country. The GOA is denied access to financial resources from that institution. IMF threatens expulsion.

The GOA privatized YPF in the 1990s and the Spanish oil company REPSOL became the new owners of the largest oil company in that country. In 2012, the GOA sent a proposed legislation to the Argentinian Congress to nationalize. However, only 51% of the total shares were expropriated.

By the end of 2011, the United States began voting against new credits to Argentina on the boards of international agencies. The Spanish government joined the U.S. strategy in retaliation for the nationalization of YPF and even warned that the intention was to persuade other developed countries to do the same. In addition to this, Germany voted against Argentina at the IADB. Angela Merkel, the Germany's Chancellor, demanded that the GOA hasten nine (9) billion dollars payments to the Paris Club. Great Britain hitched its wagon to Spain, Germany and USA on this issue. Andrew Rosindell British MP said: “This House notes that, despite repeated attacks toward Great Britain and the right of the Falkland Islanders to remain British, Argentina receives substantial loans from the World Bank” where the UK is a contributor.

The WBG decided to postpone the implementation of the new country partnership strategy with Argentina. Presently, the GOA is denied new funds and can only benefit from existing commitments until 2015. The WBG's decision is linked to the IMF, to the unpaid debt with the Paris Club, the problem of statistics, the holdouts and the failure to comply with ICSID's (International Centre for Settlement of Investment Disputes) resolutions. In addition to this, the inabilities to buy dollars make many local companies to be indebted with the International Finance Corporation (IFC), the WBG arm that provides financing to the private sector. The current GOA does not accept any kind of conditioning, especially the ones coming from the IMF and the WBG. The GOA considers the IMF and WBG discredited international institutions that continue to impose old unworkable and crisis ridden policies. Such policies the GOA claims worsen rather than improve its economy and society.



*
Maria Soledad Arroyo is an economics student at CEMA University (Universidad del Centro de Estudios Macroenonomicos de Argentina). She is the research assistant to Professor Paul Nehru Tennassee, Director of International Affairs – NAPFE. Washington, DC. March 2013



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