It so happens that the “autopsy” carried out by the Fund’s technicians considered that the loan itself was not an error, although the majority of the directors (representatives of the shareholder countries) stated that it would have been convenient for the previous administration to carry out a restructuring of the debt with private creditors and implement a capital control. And it concluded that the Stand By program failed due to macrismo management errors, but avoided referring in a meaningful way to the responsibilities of the body under whose tutelage that plan was applied.
That is why, as he told AmbitSources from the negotiating team headed by Martín Guzmán pointed out that the audit is hardly a decisive tool to use in the ongoing negotiation. Rather, they defined it as “a necessary formal step towards the agreement”, which in turn served them for internal political debate. However, the government’s opinion on the staff evaluation, included as an annex to the report, was critical.
Reading both documents shows a ratification of the points of tension that delay the signing of the agreement: the rate of growth and fiscal adjustment, and linked to them the accumulation of reserves and the monetary issue.
For instance, the audit did not call into question the shock adjustment program implemented in 2018 and 2019. In fact, it criticized that the deficit reduction applied by Macri and the then Minister of Finance, Nicolás Dujovne, was carried out with extraordinary measures and “Low quality”, which kept the primary deficit “subject to significant risks”. In other words, that the adjustment did not have a more solid basis.
The Government’s response to the ex post evaluation stated that “the warning about the risks of a fiscal adjustment in recessive contexts is still insufficient.” An official source pointed out in this regard that the 2018 program was based on “fiscal fanaticism, which starts from denying the external restriction as a structural problem for the country,” something that was not reviewed by the agency. Furthermore, the Executive’s position asked the Fund to “consider specific realities in the future, such as the case of Argentina, where growth is a precedent for stability; never the other way around ”.
Beyond the fact that an agreement with the Fund always implies a conditioning for economic policy and that the Government’s plan is also to move towards an ordering of macroeconomic variables, this debate reflects the disagreements still in force with regard to the definition of the goals of the multi-year program. As a maximum, Guzmán proposes for next year a growth of 4% that will give continuity to the recovery of 2021 and a primary deficit of 3.3% of GDP financed by 1.8% of GDP with issuance. The numbers were overturned in the 2022 Budget project that wrecked in Congress, but the IMF he still objects to them.
In Washington, they are calling for a rapid recomposition of reserves in order to guarantee future debt repayment and a more accelerated closure of monetary financing from the Treasury, which in fact implies a less expansionary policy. Fewer imports to add more reserves and more adjustment are the rationale for the demand for lower growth.
In this sense, the economist Sergio Chouza, identified with the ruling party, stated that “there is a trade off between the speed of growth and the accumulation of reserves” and that “the discussion is until when the rope will be given to grow without complicating the external position ”, which can have a cost in terms of employment and income. And he added: “The important thing is that it is an Argentine program, not one of Washington’s technicians.”
Another aspect that clearly shows the obstacles that persist in the negotiation is the disparity of criteria between countries within the board of directors. This shows that there are still important chairs with harder positions. Guzmán acknowledged this in C5N when he pointed out that “there is a broad set of countries that agree that there was something that failed, but there are still some that say they are not so self-critical.” “There is more consensus to reach on the geopolitical stage,” he said.
On the IMF Board, the G7 countries have the upper hand; especially the United States, the only one with veto power in special majority voting. “We do not know which countries are the hardest but we can suspect that, if they are mentioned, they are some of size,” said Chouza. And he completed: “This raises the challenges of the Argentine negotiating position in the coming weeks to unite the necessary wills. Work will have to be deepened on the basis for supporting the program in macro terms and on the structural characteristics of the Argentine economy. I don’t think the deal will be down in days. There is a stretch of a few more weeks ”.