With or without the IMF? Economic Recovery after Devaluation in Argentina and Brazil

The recent experience of the IMF in Latin America is far from promising. The failure of Argentina’s economic program in 2001 represented a hard blow to the effectiveness of the IMF’s (2003) rescue policies and diminished the institution’s support among both developing and developed countries. In many instances, Dr. Baer analyzed the relationship of Brazil and other Latin American countries with the IMF and other international institutions (Amann and Baer, 2002; 2005; Baer, 2001; Baer et al., 2002). One of his main concerns is how countries deal with the IMF’s proposed policies and what degree of freedom governments have. This paper is an attempt to evaluate how much a country needs the IMF. The recent experience of devaluation and recovery of Argentina and Brazil offers an interesting case for analysis. After devaluation in 1999, Brazil pursued an economic policy closely monitored and supported by the IMF, while Argentina, after the crisis of 2001–2002, pursued a more independent policy that, in many cases, went against the IMF’s recommendations. This chapter compares the performance of both countries and the benefits of whether or not to pursue an IMF recipe for getting out of a balance of payments crisis. As it shows, following the IMF recipe is not a guarantee for either success or failure.