jbussey@MiamiHerald.com

Argentina canceled its nearly $10 billion debt to the International Monetary Fund on Tuesday, sparking a balloon celebration, a lawsuit by angry debtors and silence from the powerful bank.

The country paid 100 cents on the dollar as it prepaid its $9.5 billion IMF debt, less than a year after Argentina forced private bondholders to take major losses on $100 billion in defaulted Argentine bonds, the largest country default in history.

Argentine President Néstor Kirchner's payment of the IMF debt ended for now more than two decades of IMF baby sitting of Argentine economic policies. The Argentine economy soared in the early days of an IMF-backed anti-inflation plan in the 1990s and then collapsed at the end of 2001 when the propped-up Argentine peso devalued and the government declared a moratorium on its debt to more than 600,000 bondholders in Argentina and around the world.

Martín Redrado, head of Argentina's central bank, called the payment ``the most important and complex in the central bank's 70 years.''

Kirchner supporters viewed the move as one that gave the government more autonomy. In the city of La Plata, a group led by a local council member released 200 balloons that read ``Ciao IMF.''

POLICY MAKERS

In Latin America, the IMF holds huge sway over economic policies and the names of IMF officials are household words.

''They are freeing themselves from the rigid policy conditionalities of the IMF,'' said Miami economist Manuel Lasaga. ``Experience has demonstrated that the IMF has not been as effective in helping these countries.''

The IMF conditions loans on government austerity, selling off state-run businesses, deregulating economies and trade liberalization. But the austerity has often plunged economies into recession.

Lasaga said countries had tamed inflation and budget deficits under the IMF tutelage but had not been able to spur job growth or prosperity for larger numbers of citizens.

''Kirchner is sounding a new tune in terms of more direct government involvement in creating jobs and growth in these economies,'' said Lasaga.

Not all Argentines celebrated the prepayment.

In Buenos Aires, the Association for the Defense of Citizens filed a suit on Dec. 26, asking a high court to halt the prepayment of IMF debt.

''A good part of that debt was spurious to begin with,'' said Fabian Bergenfeld, the attorney who filed the suit. One of the group's main arguments was that paying in full to the IMF and only 32 cents to 40 cents on the dollar to private bondholders was illegal because debtors did not receive equal treatment.

DEBT SWAP

Bergenfeld also noted that the government was prepaying the IMF debt with an interest rate of 5 to 6 percent but has acquired new debt from Venezuela with an interest rate of 12 percent. Argentina said it paid the debt with funds from the country's foreign reserves, which dropped from $28 billion to $18 billion.

The suit also argued that the IMF funds simply fed capital flight, with much of the money in dollars leaving the country to be deposited abroad.

The IMF issued no statement on Tuesday. But when Argentina followed the lead of Brazil to announce it would prepay the IMF, the fund's managing director Rodrigo Rato said he welcomed the move and that the bank was available to help Argentina in the future.

Herald wire services contributed to this report.