Without access to credit, the only way to run a budget deficit is to print money. It is false to assert that having access to reasonably priced credit would have no effect on inflation.
Corruption is one major problem with foreign loans to Latin American nations.
In theory, money that is borrowed gets put to use for programs that generate revenue. That revenue may result in taxes or may support the treasury directly in some cases, but either way the notion is that the loan generates a return that pays the debt service (or bridges the borrower over to a future cashflow that can pay the debt service of the new loan).
That return can't be generated if the money is not put to good use. As a result, loans that come due are often either refunded further out, or forgiven/restructured with certain concessions. By "concessions" I mean the country makes domestic and foreign policy changes that benefit the lender in some way.
Argentina tapped IMF funds during Macri's presidency despite the 2014 default. I see the 2020 default as a negotiation tactic. It's a little unreasonable to assert that a country that owes hundreds of billions of dollars lacks access to credit -- and if indeed we describe them as lacking access to credit, it's only because they have over-accessed credit in the recent past.
Lending a country more money under such circumstances often compromises their ability to support self-beneficial foreign policy, and kicks the debt can further down the road. It trades a big problem today for a bigger problem tomorrow.
I don't personally think Argentina should have access to credit. I was politically active while down there, never at the federal level but I think most of my mates agreed that renegotiation of Argentina's debt under the premise that it was not legitimate was a good thing, and also that the federal government to stop relying on international credit was also a good thing.
What I'm saying is that the effect of not giving access to credit to a government that is already massively indebted internationally has a similar macro effect to economic sanctions. It's basically reducing the profit you can make from international trade.
By no means did I mean to imply that Argentina is credit worthy. Only that inflation is tied in with other financial problems, including the inability to access international credit.
But when you can’t get access to international capital, can’t effectively tax, and are unable to cut spending, you’re left with an inability to address that issue.
> can’t effectively tax, and are unable to cut spending
By cutting out the leechers, enforcing taxation properly, and some austerity measures short term, this can be rescued. there would be pain of course - esp. if leechers are large in number and powerful.
The political leadership who does this will not be thanked, and is basically political suicide as the people would not enjoy these measures. This is why nobody does it - thankless job at best, and derided or punished at worst!
