Throughout history, the relationship between the International Monetary Fund and Latin America and the Caribbean has been turbulent, marked by numerous economic crises and debt defaults. A turning point in this relationship occurred in the early 2000s, when numerous countries from the region annulled their debt with the lender. The conclusion of the pandemic, however, marked a shift in this trend, as an increasing number of LAC nations sought loans from the IMF. This phenomenon is not occurring in isolation, as the Fund’s presence coincides with the United States’ increasing geopolitical interest in the region. Experts suggest that this could potentially condition funding in exchange for greater alignment with Washington. These are some conclusions drawn from the latest report on the IMF in Latin America and the Caribbean by the liberal think tank IDEAs (International Development Economics Associates).
Among the 83 nations indebted to the Fund, which comprises 190 IMF members, fifteen are located in Latin America and the Caribbean. The elevated count of LAC nations participating in various forms of IMF engagement is particularly notable when juxtaposed with the low point observed in early 2009. At that time, merely eight countries in the region sustained a relationship with the institution, and none were situated in South America. “The weakening of the region’s ties with the Fund had been driven by improved external conditions and the stigma left by its interventions across the Global South under the Washington Consensus policy framework,” the report explained. The region is presently the IMF’s most indebted, with approximately US$74 billion allocated to countries from Latin America and the Caribbean, representing 44% of the total US$183 billion in loans dispensed by the Fund. The region’s debt is significantly shaped by Argentina’s extraordinary agreements, which represent the largest in the Fund’s history (US$58 billion). Excluding the country’s slot from LAC’s total US$74 billion debt, the region’s IMF indebtedness experiences a significant reduction. The other nation with significant IMF debt is Ecuador, amounting to US$10 billion. Between the two, they represent 92% of the region’s exposure.
Despite the significant concentration in merely two nations, the IDEAs report highlighted that “a strikingly high proportion of LAC countries remains subject to some form of IMF conditionality.” And “It is no secret that these were not purely technical decisions; they were deeply political ones,” Martín Abeles told. “It is difficult to understand them without taking into account the well-known influence of the U.S. Treasury within the IMF’s Executive Board,” he added. In Argentina’s case, Abeles noted that the initial exceptional loan was sanctioned in 2018 under the administration of then-President Mauricio Macri, coinciding with Donald Trump’s first term in office. An additional US$20 billion package was granted to the Milei administration in 2025, during the U.S. president’s second term. For Abeles, this “original sin” is significant as it has produced what the report refers to as a “anti-catalytic effect.” He explained that “The stated objective of IMF programs is to help countries regain access to private capital markets. But when IMF exposure becomes exceptionally large, the opposite can happen.” However, since the Fund “is effectively treated as a senior creditor,” the substantial magnitude of its claims “tends to discourage other lenders,” thereby complicating a return to market financing. This is what has transpired in Argentina and, to a lesser degree, in Ecuador. The response, as Abeles articulated, “cannot simply be more austerity.” Both countries, he continued, would need to renegotiate the terms of their relationship with the Fund. This would encompass extended maturities, reduced financing costs, and repayment schedules that align with economic recovery.
Abeles, however, acknowledged that this was “unlikely under the current far-right administrations,” referencing Presidents Javier Milei and Daniel Noboa. Another crucial finding Abeles pointed out is that many Latin American countries have “internalized IMF-style policy discipline even without having active IMF programs.” And “In practice, they have adopted a highly conservative macroeconomic stance, characterized by high interest rates, fiscal restraint, and a constant effort to reassure financial markets,” he explained. Abeles cited countries with Flexible Credit Lines, such as Chile, Mexico, and Colombia, which are set to maintain these arrangements until the end of 2025. These IMF facilities are accessible solely to nations that the IMF deems to possess exceptionally “sound” policy frameworks. FCLs can actually be “more restrictive” than traditional IMF programs. This is because governments are expected to adhere “continuously to a very specific set of policy orientations” in order to remain eligible. At another point in the interview, Abeles emphasised that the “deeper challenge” in Latin America and the Caribbean has always been structural transformation. The report indicated that a significant portion of South America continues to be heavily dependent on commodity exports, whereas a large part of Central America relies on remittances from the United States, and numerous Caribbean economies are predominantly reliant on tourism. “As a result, the region remains highly exposed to swings in commodity prices, climate-related shocks, and changes in the U.S. business cycle,” the economist added.
However, he emphasised that the challenge extends beyond merely transitioning from “austerity to expansion.” What is needed, he argued, is “to move from passive adaptation to a subordinate position in the international division of labor toward a strategy of structural transformation.” This necessitates economic diversification, technological enhancement, and the fortification of domestic productive and technological capacities. One of the main points of the IDEAs report is that the geopolitical context is clearly changing, as the United States is “increasingly viewing” Latin America and the Caribbean through a strategic lens. “Washington has historically exercised considerable influence over the IMF, through its dominant position on the Fund’s Executive Board,” Abeles warned. He went on to say that the renewed emphasis on what U.S. officials call the “Western Hemisphere,” coupled with initiatives such as the Shield of the Americas and the growing strategic importance of critical minerals, energy resources, and infrastructure, “suggests that financial relationships may become more closely tied to geopolitical alignment than in the past.”
This situation is characterised by an increase in Chinese credit and investments in the region over the past decades. According to the Economic Commission for Latin America and the Caribbean, between 2005 and 2023, China granted 133 credits totalling 120 billion dollars. The average amount for each credit was US$905 million. When queried about the potential for these two financing sources to become exclusive, necessitating that countries choose one over the other, Abeles expressed scepticism. “I do not think we should automatically assume a zero-sum competition between the United States and China,” he said, adding that Chinese financial instruments in Latin America were not conceived as alternatives to the IMF, as the two have often coexisted.
