Saturday, June 10

The pace of negotiations with the IMF slowed down

Until now, the comings and goings with the multilateral organization -logical in a negotiation- had some room for maneuver since only in March the country must face a payment to the Fund of more than 2,800 million dollars. But averaging January and with no signs yet that an agreement can be finalized in February, in the markets they began to estimate that the arrangement with the IMF could only be reached in the second quarter of the year.

The official strategy, given the lack of definitions from the United States in the sense of supporting Argentina to close an agreement, has two axes. On the one hand, the journey undertaken by the Chancellor santiago cafiero to the United States to strengthen the ties that are defined as “very good” between both nations. “The topics of conversation are several” they respond from the Foreign Ministry while “There is a lot of common work on issues such as climate change, human rights and treaties on the non-proliferation of nuclear weapons”.

But there is concern about the lack of definition of the political wing of the White House regarding the support so that Argentina can find a way to face the indebtedness with the Fund “That the Macri administration took over and that, yes, it did have the political endorsement of then President Trump”.

In the environment of Cafiero they maintain that the chancellor will seek to return with an explicit response from the highest US authorities regarding whether or not it will have the support of the IMF’s main shareholder.


The other axis is “negotiate from a position of strength” and in this sense the trip of the president is explained Alberto Fernandez to Russia and China. The Government insists that it should not be interpreted as Argentina leaning towards China or Russia. “we believe in the multilateral” they explain in the Rosada.

But these meetings that Fernández will hold in early February with the Russian leaders Vladimir Putin and chinese Xi Jinping they are part of the strategy of a “hardening” of the national position to achieve better conditions.

It should be remembered that Russia and China are the two main rivals of the United States globally. Hence, Washington sources reveal that the Fund’s highest authorities consulted the White House, resulting in the directive to negotiate more cautiously with Argentina. And it is already known that the United States has a dominant position on the IMF board, joined by Japan and Germany.


“The differences with the mission of the Fund do not go through the fiscal aspect,” they comment in Washington. The fiscal adjustment demanded by the multilateral organization is for a primary deficit of 2.5% of GDP, against 2.8% proposed by Argentina, that is, a difference of only 0.3%. The The most significant discrepancy goes through the period in which Argentina must reach a balance between expenses and income currents. The IMF shortens that path to four years and, according to the graph that Guzmán showed in the presentation to the governors, the Argentine proposal is 6 years.

The central problem, according to sources in Washington, is that Guzmán has not yet presented central aspects such as what the anti-inflationary policy will be.

In this context, the meeting that IMF technicians had last Friday with the Secretary of Commerce, Roberto Feletti, for the official to explain the pricing policy.


It is common that when negotiations with the IMF are stopped, people tend to look at the vice president Cristina Fernandez de Kirchner. However, Cristina who is on vacation in El Calafate and has taken it upon herself to clarify that she has distanced herself from the negotiations that Economy is carrying out with the IMF.

It is that after the elections, both the president and Cristina and Sergio Massa are on the same page about not agreeing with the IMF poses a complicated scenario for the recovery of the economy.


In the government they are convinced of the importance of having a new program with the IMF. They know that if this is not achieved, the consequences would be negative for the country. In this sense, the Equilibra Study Center carried out an exercise to analyze some of the consequences. For example: activity would fall by an average of 2% and inflation would accelerate to 85%, the country risk as well as the exchange rate gap would increase. That is, a depreciation of the real exchange rate with a strong recession.

Non-compliance with payments to the IMF would also imply: the closing of access to financing to most international financial organizations; payment of punitive interest to the Paris Club; and the private sector would lose export letters of credit, preferential access to international markets and Foreign Direct Investment.


The delay in negotiations with the Fund puts the Central Bank on alert. A data: net foreign assets are located at 3,500 million dollars accounting for the Special Drawing Rights which still retains the entity according to the calculations of Ecolatina. According to this consultancy, they are on their way to record lows: they are less than 100 million dollars from the lowest value recorded since the exit of Convertibility.