The relationship between the International Monetary Fund (IMF) and Latin America and the Caribbean (LAC) has historically been a rocky affair of ups and downs, with many economic crises and debt defaults in the middle.
A turning point in this relationship came in the early aughts, when many countries from the region cancelled their debt with the lender. The end of the pandemic, however, saw that trend change course, with more and more LAC nations requesting loans from the IMF.
This phenomenon is not taking place in a vacuum, as the Fund’s presence is accompanied by the United States’ growing geopolitical interest in the region. According to experts, this could potentially condition funding in exchange for greater alignment with Washington.
These are some of the conclusions from the most recent report on the IMF in Latin America and the Caribbean by liberal think tank IDEAs (International Development Economics Associates).
The region in debt numbers
Of the 83 countries out of the 190 IMF members that are indebted to the Fund, fifteen are in Latin America and the Caribbean.
The high number of LAC countries with some form of IMF engagement becomes more striking when compared to the trough reached in early 2009. At that time, only eight countries in the region maintained a relationship with the institution, and none were located 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 currently also the IMF’s most indebted: of the US$183 billion the Fund has dispensed in loans, around US$74 billion are penciled in to countries from Latin America and the Caribbean (44% of the total).
Argentina and Ecuador as test cases
The region’s debt is heavily influenced by Argentina’s exceptional arrangements, which are 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 declines substantially.
The other country with high IMF debt is Ecuador, with US$10 billion. Between the two, they account for 92% of the region’s exposure.
Despite the heavy concentration in just two countries, the IDEAs report emphasized that “a strikingly high proportion of LAC countries remains subject to some form of IMF conditionality.”
“It is no secret that these were not purely technical decisions; they were deeply political ones,” Martín Abeles, IDEAs LAC Regional Research and Policy Director, told the Herald.
“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 pointed out the first exceptional loan was approved in 2018 under then-President Mauricio Macri in 2018, during Donald Trump’s first presidency. 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” matters because it has generated what the report calls an “anti-catalytic effect.”
“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,” he explained.
But because the Fund “is effectively treated as a senior creditor,” the sheer size of its claims “tends to discourage other lenders,” making a return to market financing more difficult. This is what has happened to Argentina and, to a lesser extent, Ecuador.
The answer, Abeles said, “cannot simply be more austerity.”
Both countries, he went on to say, would need to renegotiate the terms of their relationship with the Fund. This would include longer maturities, lower financing costs, and repayment schedules that are consistent with economic recovery.
Abeles, however, acknowledged that this was “unlikely under the current far-right administrations,” referencing Presidents Javier Milei (Argentina) and Daniel Noboa (Ecuador).
Buying in to the IMF’s ‘recipe’
Another crucial finding Abeles pointed out is that many Latin American countries have “internalized IMF-style policy discipline even without having active IMF programs.”
“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.
As examples, Abeles pointed to countries with Flexible Credit Lines (FCLs), like Chile, Mexico, and Colombia, which maintained one until the end of 2025. These IMF facilities are only available to countries that the IMF considers to have 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 emphasized that the “deeper challenge” in Latin America and the Caribbean has always been structural transformation.
The report noted that much of South America remains heavily reliant on commodity exports, while much of Central America depends on remittances from the United States, and many Caribbean economies remain overwhelmingly dependent 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.
But the challenge, he stressed, is about more than simply moving 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 requires economic diversification, technological upgrading, and stronger domestic productive and technological capabilities.
Geopolitics at the center
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 accompanied by a growth in Chinese credit and investments in the region over the past decades. According to the Economic Commission for Latin America and the Caribbean (in Spanish, CEPAL), between 2005 and 2023, China granted 133 credits totaling US$120 billion. The average amount for each credit was US$905 million.
When asked if these two financing sources could become exclusive, meaning that countries would have to opt for one or the other, Abeles remained skeptical.
“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.