Friday, March 29

From the deficit to the dollar: what we need to know before agreeing with the IMF


If there is a news, it is that the payment that must be made tomorrow for US $ 731 million has been taken hostage. It seems that the Government is willing to trigger this disbursement if, as a maximum, it manages to get the IMF to come as close as possible to Guzmán’s proposal or, in any case, if the Government manages to advance enough to open a new phase of the negotiation with some guarantees in the credit. That is confirmation of payment depends on a subtle perception: if the entire government considers that the negotiation instance has borne some fruit (although an agreement has not yet been reached) then the payment would be authorized with the commitment to continue the conversation and respect what was agreed up to that point. It is clear that not only the Casa Rosada and the Palacio de Hacienda must corroborate this assessment of real progress -many times subjective- based on the aversion to negotiating rupture. It is known that President Fernández has been in favor in recent hours of shielding the negotiation and clearing the stage of any pessimistic statement, unlike the vice president who, from Honduras, charged hard against the multilateral credit organizations. Therein would lie Guzmán’s effort to buy some time, letting it be known since last night that there was an approach “in fiscal matters”, one of the points of conflict with the IMF.

At least two government sources participating in the talks with the IMF indicated yesterday that they had achieved “advancements”, which referred to the possibility that Argentina maintains the chance to preserve its autonomy to define what kind of fiscal policy it should apply at least in the next two years, that is, 2022 and 2023. It would then be an Extended Facilities agreement without the commitment to structural reforms in the short term. At the same time, it would imply a certain flexibility in the terms that had been negotiated until now regarding the moment in which the organism would begin to demand a balance in the public accounts.

Argentina’s position so far was a zero deficit in 2027, while the IMF asked to do so in 2024. Although there are no details in this regard, everything indicates that Argentina would have managed to postpone, at least in part, said commitment that year. From this perspective, local politics and the Frente de Todos in particular, have something to hold on to, since this mechanism serves to kick the maturities forward and transfer the discussion to a possible next government term. If you think about it, the most expensive thing for Argentina at this time is time due to the delicate macro situation and reserves. With time, the Government can see the possibility of refinancing the payments or even making disbursements with the surplus of the current account. But if the expectation is for exports to grow, then time is of the essence.

The other part of the equation, which until now is silent, is that of the exchange rate and inflation. If the IMF asks for a devaluation, that is, to unify the exchange rates, then the inflationary shock could undermine stability, an argument often used by exegetes of dollarization. A base 50% inflation fueled by a commitment to unify the exchange rate in a short period of time can inhibit any favorable tax agreement due to the enormous social deterioration in purchasing power and living conditions. One wonders if it is meritorious to close an agreement that would not guarantee to clear up uncertainty and accumulate social tensions that will then depend on a superlative macroeconomic performance of the key sectors and exporters and on a forceful redistribution of wealth via tax progressiveness and subsidy policies so as not to shipwreck. .



www.ambito.com