Don't Blame the IMF.(International Monetary Fund and the crisis in Argentina)(Brief Article)

Five presidents in two weeks. Can the latest, Eduardo Duhalde, save Argentina from further collapse? Duhalde launched his rescue effort last Friday by declaring a devaluation of the peso, tentatively setting up a dual exchange system that floats the peso against the dollar for domestic transactions but pegs it for foreign trade. Can it work? And can Duhalde expect any real help from the International Monetary Fund (IMF), which many blame for Argentina's mess?

Dual exchange systems have political appeal to Argentina's financiers and business people. An official international peg will provide stability for their foreign operations. But dual rates have a sorry history. On past experience, the floating domestic free-market rate will progressively undermine Argentina's international peg as traders, smugglers and ordinary citizens find ways around the government's exchange controls.

Argentina's labor laws, budget and social policies are shaped not by the IMF, but by Argentina's elected governments, which have proved unable to engineer workable reforms. The IMF's options were limited throughout the crisis. Had it continued supporting Argentina's inadequate reform efforts, it would have faced even greater recriminations when those efforts failed.

Now Duhalde can expect no immediate help from the IMF, which knows well that dual rates have a record of corruption and failure. Duhalde must devise a comprehensive program to reform labor markets, slash Argentina's wasteful social welfare ...