<img src =" https://www.ft.com/__origami/service/image/v2/images/raw/http%3A%2F%2Fcom.ft.imagepublish.upp-prod-us.s3 .amazonaws.com% 2F64e33476-ca61-11e9-af46-b09e8bfe60c0? fit = scale-down & source = next & width = 700 "data-image-type =" image "alt =" Former Argentine President and current Senator Cristina Fernandez de Kirchner (R) and her former head of state Alberto Fernandez beckon to supporters during the reopening of a sports venue under the name  The favorite to win the Argentine presidency in October, Alberto Fernández, and former president Cristina Fernández de Kirchner © AFP
Fifteen months later, the giant rescue has become a millstone around Macria's neck. Voters angry at the continuing recession delivered a staggering reprimand on August 11, handing a big victory to their Peronist rival Alberto Fernández in a primary vote. The competition is seen as a reliable barometer of the October election, and the result resulted in investor panic because it spelled disaster for Mr. Macris's chances.
After days of market turmoil in the wake of the vote, Macri's government bowed to the inevitable last week, asking creditors more time to repay Argentina's $ 101 billion foreign debt, including the IMF money, when Buenos Aires fought to avoid the country's ninth sovereign default – and the third in this century.
With the record-breaking bailout blocking off the track, questions are being asked as to why the IMF, which has monitored 21 rescue operations to Argentina, including one that ended in a historic standard, borrowed so much money to support a program that is crumbling gradually. more than a year.
"There is another black eye for the IMF in Argentina," said Benjamin Gedan, who heads the Argentina project at the Wilson Center in Washington. “They were caught up in the same euphoria as investors. . . They believed that the second-largest economy in South America included the Washington consensus. ”
After paying $ 44 billion of the rescue to Buenos Aires, the fund now faces a difficult choice: whether to stick with the program and survive another $ 5.4 billion later this month to Mr. Macris's government or cut the losses and wait to tackle the next president. The IMF said in a statement issued after officials visited Argentina last week that it considered the impact of the proposed debt measures, but would "continue to stand with Argentina during these challenging times."
The decision on the future of the rescue will be made without the person who helped win approval for the rescue: Christine Lagarde, who has resigned from the IMF's top job to lead the European Central Bank.
Ms. Lagarde is unreliable about her leadership role in lending to Argentina. "We were the only game in town," she told the Financial Times in July. "There was no one else at that time investing in the recovery process that the government had decided to engage in, and given the size of the challenge, we had to grow."
A protest in Buenos Aires against the government's talks with the International Monetary Fund © Reuters
The last 70 years of Argentina's history have been punctuated with regular economic crises, and Mr. Macri's inauguration in December 2015 was no different. His Peronist predecessor, Cristina Fernández de Kirchner, had emptied the government coffers, signing regulations to increase spending by an additional $ 27 billion in the last days of power. Inflation was close to 25 per cent, foreign exchange reserves were dangerously low and generous subsidies for tools and transport lost the budget.
The new president seemed well prepared for the challenge. The multimillionaire of an Italian immigrant who earned his fortune through lucrative government contracts, he projected a picture of cool skills, business acumen and sober realism that came as a relief to investors following Fernández's chaotic populism.
"I really believe we have finally learned from our mistakes," Macri told the Financial Times in September 2016, when asked about his financial program. "There is no other country in the world with as much upside as Argentina."
Something Mr. Macri was keen to avoid if at all possible was forced to seek help from the IMF, a perennial bugbear for Argentine leaders.
Buenos Aires's troubled history with the fund stretches back six decades. Most notorious was the economic collapse in 2001, which ended with what was then the largest debt standard in history, bankruptcy, widespread civil unrest and the president who fled the helicopter from the roof of the presidential palace.
Almost a generation later, bitterness remains. A poll last year by the Wilson Center found that 56 percent of Argentines dislike the IMF, the worst rating of any international organization surveyed. Mr. Gedan of the Center compares the organization to Superman's arch enemy: "In Argentina, the IMF is like Lex Luthor," he says. "Historically, when the IMF seeps into Argentina, it leaves behind brutal budget cuts and economic chaos in the wake."
Then Macri chose a gradual approach to fix the financial mess left to him by Fernández, hoping to avoid another cycle of IMF-imposed austerity and political crisis.
Argentina's President Mauricio Macri with his old friend Donald Trump © Getty
"Macri's political team told him he could not start his term with a large [austerity plan]," a source close to the administration said. "It would be a typical right-wing government that would end up leaving the presidential palace by helicopter when it failed."
Mr. Macri, who was also handicapped by his lack of a majority in Congress, avoided major cuts to public spending and hoped that steady growth and restoration of access to international borrowing would dig the economy out of the hole.
For a couple of years, the plan seemed to work. But the large deficits needed a constant flow of foreign money to finance them. High interest rates pushed the value of the peso, which meant that several dollars had to be borrowed to finance the deficit. When loss of market confidence triggered last year's run of the peso, Macri had to turn to the IMF.
An office for change in Buenos Aires. Argentines have withdrawn deposits in foreign currency as the economic crisis deepens © AFP
Claudio Loser, who ran the IMF division in the Western Hemisphere during Argentina's crisis in 2001, says the main problem was excessive borrowing. "They were convinced of the ability to continue to borrow significant amounts while slowly adjusting [the economy]," he says. "That was the mistake."
Kenneth Rogoff, a former chief economist at the IMF and now professor of economics at Harvard University, agrees. "Argentina made a lot of mistakes," he says. “The general principle that their program broke was that when the markets cross, the policy must transcend. They didn't – they tried a gradual policy. "
Nevertheless, despite the early mistakes, Mr. Macri secured a large IMF loan relatively quickly. He helped smooth the way was his warm personal relationship with Donald Trump, president of the country with the largest share of votes in the IMF's board.
“I've been friends with Mauricio for a long time, for many years. . . we knew each other very well, "Trump told reporters when he visited Argentina in 2018." I was actually doing business with my family. Trump referred to the purchase of a first-rate New York site for $ 95 million in 1984 from Mr. Macri's father, Franco.
"Macri caught his ear on Trump," says Hector Torres, a former senior IMF official now at the Center for International Governance Innovation, a Canadian think tank. "He made Trump believe he needed a hand, and he started [lobbying] via [US] Treasury before going to the IMF."
"Sure we talked to the Treasury," says the former senior Argentine official. "The situation was so delicate that it required a swift response, and the fund is so bureaucratic that it cannot act quickly enough."
The Fund's original bailout for Argentina, announced in June 2018, promised $ 50 billion, much more than expected. Christine Lagarde, then chief executive of the IMF, said the money would "boost market confidence."
But just two months later, the markets had lost confidence in the peso, and Argentina returned to the fund.
A major flaw in the First Agreement, says former Macri officials and economists, was the IMF's insistence that the peso float freely, leading to a new turnover to sell as markets tested the currency.
Villa 31 slum in Buenos Aires © AFP
"It was the chronicle of a death predicted," says the former Argentina senior official. “The first agreement with the fund was inflationary and therefore due to a recession. A weakening currency forces you to raise interest rates and cool down the economy. "
After last week's negotiations, Mrs. Lagarde announced last September that the IMF would stump up $ 7 billion extra, bringing rescuers in Argentina to a record $ 57 billion and allowing the money to be spent faster. She was confident that the revised plan would be "important" in restoring confidence in the market.
This time, the IMF allowed the Argentine authorities a limited number of opportunities to intervene to defend the peso. But the restrictions on when and how much it could pull in were too much for central bank governor Luis Caputo, who resigned.
“The fund took it incredibly wrong, both the first and the second time,” says another former Macri administration officer, pointing to the exchange rate decision. "It's forgivable for the fund – they have to cover their bases and that's what they do elsewhere – but not for the government. The government stormed and took what was offered. It was a huge mistake."
The IMF refused to comment on Argentina beyond the published statements, and said it is reviewing the program. The officials should understand that they believed that the rescue went the most according to plan except for the inflation element. Buenos Aires inflation targeting failed, sources close to the fund said, because it was not coordinated with a broader government strategy to keep prices under control and because the devaluation inflation effects were worse than expected. Macris's gradual approach to spending spending was a key issue. Argentina's statistics agency Indec says annual inflation was 54.3% in July.
Although the modified bailout in September calmed the markets, it did not revive the economy. As the election approached this year, interest rates in more than 70 percent hit businesses, unemployment rose and inflation remained stubbornly high.
The bleak economic picture made it a simple target for the opposition Peronists who started Argentina's presidential campaign. They painted the market-friendly Mr Macri as a candidate for a privileged few who had inflicted misery on the masses.
Hernán Lacunza, Argentina's new finance minister, has announced a debt repayment where foreign investors will be asked to voluntarily agree on delays in payments © AFP
Voting predictions before the August 11 primary that Mr. Macri ran close to his challenger Fernández proved disastrously wrong. In case, Fernández threatened the president by a 15-point margin. The day after the Buenos Aires stock market plunged by 37 percent, and the peso hit record lows as investors woke up to the likelihood that a peronist would return to power.
The panic further undermined Mr. Macri by reviving the instability he had promised to banish. It helped trigger last week's debt "re-profiling" of the announcement by new Finance Minister Hernán Lacunza, where foreign investors will be asked to voluntarily agree to the repayment delays. The Standard & Poor's brand pulled a "selective standard" last Thursday, a rating it drew hours later.
"An Argentine government debt is now more likely than not," Capital Economics said before the announcement. It predicted that bondholders would probably lose about half their money in a restructuring.
Fernández, the likely next president, has sent contradictory signals about his intentions to the rescue, saying he will repay the IMF loan but also critically criticize the fund. "Those who have generated this crisis, the government and the IMF are responsible for ending and reversing the social catastrophe that an ever-growing part of the Argentine community is suffering," he said in a statement.
Argentine President Fernando de la Rúa flees from the presidential palace in Buenos Aires by helicopter in 2001 © AFP
Daniel Marx, a former finance secretary, saw a political motive in the comments. "[Fernández] sets the stage for the next negotiation."
Investors and business people would like to see Fernández and Mr Macri work together to calm markets, stabilize the economy and minimize uncertainty during the painful long transition to the next president inaugurated in December. But there has been little evidence that one of the two presidential candidates is prepared to do so.
Ironically, experts agree that if Mr Macri had sought the IMF's assistance from the beginning, he would have been better off.
"Had Macri gone to the IMF in the beginning, it probably would have worked," says Victor Bulmer-Thomas, a fellow at Chatham House in London. The problem is that history is so terrible that governments postpone going to the IMF until it's almost too late. As a result, the Fund is facing an impossible situation. Then they prescribe the usual remedies and they do not work. "
Additional Reporting by James Police in Washington