Before the pandemic, Carla Huanca and her family were making modest but meaningful improvements to their cramped apartment in the slums of Buenos Aires.
She was working as a hairstylist. Her partner was tending bar at a nightclub. Together, they were bringing home about 25,000 pesos ($270) a week — enough to add a second story to their home, creating extra space for their three boys. They were about to plaster the walls.
“Then, everything closed,” said Ms. Huanca, 33. “We were left with nothing.”
Amid the lockdown, the family needed emergency handouts from the Argentine government to keep food on the table. They resigned themselves to rough walls. They shelled out for wireless internet service to allow their children to manage remote learning.
“We have spent all of our savings,” Ms. Huanca said.
The global economic devastation that has accompanied Covid-19 has been especially stark in Argentina, a country that entered the pandemic deep in crisis. Its economy shrank by nearly 10 percent in 2020, marking the third straight year of recession.
wealth taxes to finance the costs of the pandemic — a measure that Argentina adopted late last year.
The fund’s analysis of Argentina’s debt picture, and its conclusion that the burden was not sustainable, set the groundwork for a settlement with international creditors last year. Investors ultimately agreed to write down the value of some $66 billion in bonds, overcoming the opposition of the world’s largest asset manager, BlackRock.
The Argentine government is proceeding on the assumption that it can secure a deal from the fund that will allow the country to significantly postpone its debts, providing relief from looming payments — $3.8 billion this year, and more than $18 billion next year — without strict requirements that it cut spending.
“The I.M.F. leadership has made clear that this is the framework,” said Joseph E. Stiglitz, a Nobel laureate economist at Columbia University in New York. The new arrangement will reflect “the new I.M.F.,” he added, “recognizing that austerity doesn’t work, and recognizing their concerns about poverty.”
antagonized the poor with cuts to government programs. His debt binge combined with another recession forced the country to submit to the ultimate humiliation — asking the I.M.F. for a hand.
In elections two years ago, voters rejected Mr. Macri and installed Mr. Fernandez — a Peronist. Some suggested that Mr. Fernandez might stake out an acrimonious position with creditors, including the I.M.F. But the Fernandez administration has proved pragmatic, winning the confidence of the I.M.F., while maintaining relief for the poor.
“We have to avoid following the patterns of the past that did so much damage,” the economy minister, Mr. Guzmán, said in an interview. “We want to be constructive, and resolve these problems in a way that works.”
The most pernicious problem remains inflation, a reality that assails businesses and households, adding to the strain on the poor through higher food prices.
In major economies like the United States, central banks conventionally respond to inflation by lifting interest rates. But that snuffs out economic growth — not a tenable proposition in Argentina, where the central bank already maintains interest rates at the stultifying level of 38 percent.