Deal with the IMF: An opportunity to remedy inflation-driven instability?

Enrique Blasco Garma
Consejero Académico en Libertad y Progreso

INFOBAEThe absence of stable agreements, rules and measures creates uncertainty, a central fault in Argentina. In these circumstances, agreeing to renew obligations with the IMF could provide certainty and confidence.

It seems that most commentators, legislators and officials have read neither the National Constitution nor Adam Smith in “The Wealth of Nations.” Wealth is the consequence of specialized competence in developing the individual skills of the population. Knowledge. Competition is supported by a framework of stable rules which should be the same for all. The opposite of the repeated prescription of granting privileges to individuals and legislators, which always harm the excluded. Every privilege, advantage, granted results in a large number of people being excluded. Competition, fairness, efficiency, price stability, mean that people know the rules, which are stable and equal for all. Public-private coordination is possible with transparent institutions. In advanced nations, prices are agreed upon in different private transactions. Officials lack the knowledge to impose prices on every single deal. The State is necessary to ensure fair action for effective activities by agreeing on stable rules, equal for all, liberties, justice and competition advance.

The absence of stable rules and measures results in a lack of information, ignorance, which are the food of poverty. Indeed, the knowledge that advanced to the most prosperous countries is applied in unequal intensity in the world. That explains the income gaps of the countries.


Argentines must decide at a speed determined by inflation, without certain guidelines. Each one makes its own estimates, as uncertain as the lack of agreements and international reserves that support the value. No one is sure about business opportunities, availability of jobs or what you can do, for how long. Inflation exacerbates instability, cutting contracts. Prices, public rates and norms, constantly vary. What confidence can governments deserve when they cheat their people, handing out bills that depreciate over time? How can we propose long-term policies when inflation makes rules and projects uncertain? All the contractors are depressed before the depreciation of the currency. Inflation messes us up and impoverishes us.

Let’s start at the beginning. The Constitution determines the expenses of the State are financed with taxes and credits sanctioned by Congress (art. 4). Thus, the monetary issue is not the result of financing government expenditures. To order economic activity the first step is to eliminate the fiscal deficit or, at least, contain it in the amount of genuine financing available. Second, we need to agree on a monetary rule for the peso or, failing that, replace it with the dollar. The two steps would facilitate a quick agreement with the IMF, which does not require canceling all the debt if not renewing it over time. Thus, the agreement would not have to be contractual. On the contrary, greater certainty would favor the expansion of activities and income. The absence of stable rules and measures denounces lack of information and ignorance, which are the food of poverty

A conflicting idea of ​​the IMF persists, an entity with charitable purposes, of which Argentina has been a member since 1956, that’s also a member of the UN. With incentives to facilitate credits, it works through audits and teachings. It main objective is to look for coherence in financial dealings. However, regarding economic policy in developing countries, disagreements and ignorance are enormous. Therefore, these countries are currently its exclusive beneficiaries. The developed countries overcame those conflicts and have better markets.

Unpredictable monetary expansion, without stable emission standards, scares off demand and makes the peso lose value. When asked if the dollar is expensive (in relation to the prices of cheap goods in dollars) an answer would be: with what inflation, monetary issue, rules? Worse, governments add obstructions to activity in the form of taxes, foreign exchange traps and complex, everchanging, changing rules for the production and acquisition of goods and services. Asset prices in dollars measure expectations.

The combo of zero fiscal deficit and stable monetary rule would have such an impact that, if sustainable over time, the value of the free dollar could fall to $ 100, the current official parity. Especially if labor contracts and foreign transactions were freed from arbitrary obstacles.

In 2019, the primary fiscal deficit was 0.4% of GDP. It is not impossible to return to those numbers. There were few times were the foreign outlook seemed as favorable to Argentina as it is now, with low-interest rates (10-year US Treasury bond yields less than 1.6% per year) and the price of soybean prices (above 450 dollars per ton) and other exports high.

In all aspects of life, violations are harmful. In economics, violations of individual rights to life and property cause impoverishment. Instead, obstacle releases enrich people and their belongings. International experience confirms this: societies that are freer are more prosperous, provide better opportunities and income. Freedom from shackles means equal and stable rules for all. Justice, Efficiency and competition are different expressions of the same thing.

Inflation is a non-legislated tax on the holdings of pesos and nominal assets. Like all forced imposition, it is violence to individuals and private properties. Against that, and recognizing the knowledge is not exclusive to some, the nations that advanced divide the powers of the State into strong branches to encourage acceptable private decisions. The Argentine decadence results from opposing individual wills in favor of that of government officials. Businesses face surprise irruptions and unexpected issues are always present. Bureaucrats continually alter private contracts. Capital insecurity.

In contrast, advanced nations take an interest in the feelings of their population and periodically survey them. They measure how satisfied people are and assess whether individual rights are protected. According to the Standard Eurobarometer survey, from June-July 2021, optimism and confidence regarding the future of the EU is at its highest since 2009. Two-thirds of Europeans trust the EU will make the right decisions in the future against the pandemic.

Nations with homogeneous norms harbor fewer conflicts and their public spending is more satisfactory. They open up to trade and reduce obstacles to a minimum. That is why they achieve the highest income per inhabitant. If all nations suffered the same obstacles, they would have the same GDP/ h. In truth, the agreement with the IMF opens up an opportunity.