The economy contracted by nearly 10 percent last year, and the country faces a reckoning with the I.M.F. over $45 billion in debts.

Volunteers at a soup kitchen in the slums of Buenos Aires. The pandemic has added to strains on Argentina’s poor.Credit…Sarah Pabst for The New York Times

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By Peter S. Goodman and Daniel Politi

Before the pandemic, Carla Huanca and her family were making modest but meaningful improvements to their cramped apartment in the slums of Buenos Aires.

She was working as a hairstylist. Her partner was tending bar at a nightclub. Together, they were bringing home about 25,000 pesos ($270) a week — enough to add a second story to their home, creating extra space for their three boys. They were about to plaster the walls.

“Then, everything closed,” said Ms. Huanca, 33. “We were left with nothing.”

Amid the lockdown, the family needed emergency handouts from the Argentine government to keep food on the table. They resigned themselves to rough walls. They shelled out for wireless internet service to allow their children to manage remote learning.

“We have spent all of our savings,” Ms. Huanca said.

The global economic devastation that has accompanied Covid-19 has been especially stark in Argentina, a country that entered the pandemic deep in crisis. Its economy shrank by nearly 10 percent in 2020, marking the third straight year of recession.

The pandemic has accelerated an exodus of foreign investment, which has pushed down the value of the Argentine peso. That has increased the costs of imports like food and fertilizer, and kept the inflation rate above 40 percent. More than four in 10 Argentines are mired in poverty.

Hanging over national life is an inevitable renegotiation later this year with the International Monetary Fund, an institution that Argentines widely detest for having imposed crippling budget austerity as part of a rescue package two decades ago.

With its public finances depleted by the pandemic, Argentina must work out a new repayment schedule on $45 billion in debts to the I.M.F. That burden is the result of the fund’s most recent bailout, and the largest in the institution’s history — a $57 billion package of loans extended to Argentina in 2018.

Now under new management, the fund has lessened its traditional reverence for austerity, alleviating some of the usual anxiety. Even so, the negotiations are certain to be complex and politically tempestuous.

The Argentine government, led by President Alberto Fernández, is rife with discord ahead of midterm elections in October. The administration faces a stiff challenge from the left, with a former president — and current vice president — Cristina Fernández de Kirchner, demanding a more combative stance with the I.M.F.

Businesses vent that the government has failed to come up with a strategy that can generate sustained economic growth. Liberating Argentina from stagnation and inflation is an objective that has evaded the country’s leaders for decades. In a country that has defaulted on its sovereign debt no fewer than nine times, skepticism perpetually dogs national fortunes by limiting investment.

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