Díaz-Cassou, Javier
(2012)
The causes and consequences of IMF interventions in the Southern Cone.
PhD thesis, London School of Economics and Political Science.
Abstract
The International Monetary Fund has often been accused of adopting a one-size-fits-all approach to the resolution of financial crises. However, its programs present substantial
differences in terms of their relative size and conditionality among other characteristics.
This dissertation examines the causes and consequences of this variation through the
lenses of two cases in which the contrast between the Fund´s interventions was
particularly marked: Argentina and Uruguay during the period that surrounds the
financial crash of 2001-02.
The first part of this study analyses the determinants of these multilateral interventions
through an adaptation of Robert Puntam´s two level games, exploring the way in which
national politics interacted with international priorities to produce distinct outcomes in
Argentina and Uruguay. The two experiences confirm that domestic ratification
processes impose significant constraints on the negotiation of IMF programs, potentially
conferring localized bargaining advantages to borrowing governments. Beyond a certain
point, however, an intensification of these ratification constraints can result in a
suspension of the Fund´s support, after which borrowers´ bargaining position weakens
dramatically. That this point of rupture was reached in Argentina but not in Uruguay
was due primarily to the different propensity to cooperate exhibited by political actors
in these two countries, itself the product of certain institutional conditions such as the
strength of their systems of checks and balances or a varying distribution of veto power.
In turn, the second part of this thesis applies a hypothetical counterfactual approach to
assess the consequences of the multilateral decisions adopted during the 2001-02 crisis
in the Southern Cone. Although the contrast between the suspension of the Argentine
program in December 2001 and the Uruguayan bailout of August 2002 had surprisingly
modest macroeconomic consequences, its impact on politics and institutions was
profound both in the short and in the medium-term. As a result of these findings, this
dissertation argues that a better understanding of the implications of multilateral crisis
resolution loans on the political economy of the countries concerned is still needed.
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