Monday, December 6

Two missions to the IMF: what the Government should look for from today

On the other hand, the task will have to be completed within Kristalina Georgieva’s own body, so that the action plan to achieve fiscal balance before 2026 is not executed on the basis of an adjustment on public spending, but on the promise of an increase in the real income of the public sector.

An economic rally of talks is opened with the Fund that, if the closing of the negotiations to close the already long delayed Extended Facilities is not mediated, will lead to a default on March 20, 2022. That day the country should pay the first payment of the plan maturity of capital for about US $ 4,050 million, money that Argentina does not have and will not have.

Consequently, there is no time. Defining what will happen to the IMF will be the most important mission in economic matters that the new political landscape of the country will have to resolve from this morning. Government and opposition, since one of the Fund’s mandates is for the agreement to go through the National Congress, which must be approved by the legislative composition that emerged from yesterday’s election.

The main mission to advance the agreement exceeds the Ministry of Economy and reaches the top of Argentine diplomacy. Alberto Fernández, Martín Guzmán and the Argentine ambassador to Washington Jorge Argüello, will have to eliminate the last cartridges to convince the competent authorities of the United States, of the need to support the Argentine claim so that the Extended Facilities will apply the interests of a normal country and in tune with the IMF Charter. And not those of punishment for countries that, like Argentina, are non-compliant and that ask for money above what that document authorizes. It is not minor to achieve that goal.

There are 1,000 million dollars annually or 10,000 for the entire term of the agreement at stake; money that for the country is obviously essential to obtain as savings. And only with the support of the Joe Biden government can this possibility be realized, since a decision of this type can only be made by the board; where, as it is an alteration of the Organic Charter, a special majority is necessary. As the US holds 17% of the shares, and a majority of 85% is required; yes or yes it is necessary that Biden personally support the motion. All the technical explanations that were explained from the Ministry of Economy to the Secretary of the Treasury of Janet Yellen.

Now it only remains a political decision of the president of the United States, which depends on other issues, which sometimes (as in this case) exceed the economy. As far as is known, the European Union (EU) will follow the editorial line adopted by the Biden administration on the board. There is no definite date yet, but it is known that this board meeting will take place in December, before the start of the labor fair in the North American capital of the end of the year parties.

The truth is that achieving this interest reduction is fundamental and essential for the government. The President and the Minister of the Economy know that not achieving a reduction in rates would cause a crisis within the governing coalition; After not being able to include in the Extended Facilities an extension of the payment terms to more than 10 years, the claim that the hard Kirchnerism demanded of the Argentine negotiators at the beginning of the year when the discussions between Guzmán and the men and women of the IMF. With a reduction of the rates, the internal political support would be obtained and it would unblock the acceleration of the negotiations.

In parallel to the negotiations, more diplomatic than political, for interest rates; the technical aspects of the Extended Facilities should be defined; and that they must integrate the Letter of Intent that includes the fiscal, monetary, exchange and macro goals that the country should meet.

As far as is known, practically the objectives that Argentina would have to present annually have already been defined, without further discussion of the case. The country would have to reach a fiscal balance for the year 2025, present an increase in the BCRA’s reserves of no less than 5,000 million dollars per year, an annual trade surplus that should not fall below US $ 15,000 / 18,000 million , a monetary issue in constant reduction and a financing of public spending that depends almost 80% on the placement of debt instead of banknote printing. The problem is the criteria that Argentina raises to achieve the goals.

Guzmán made it clear to the IMF at the last meeting in Rome within the framework of the G20 summit, that the country cannot enter into new fiscal and social adjustments; and that the way must be to promote growth. And that from there, expect an improvement in real tax collection that guarantees the possibility of improving the variables. The IMF does not believe Guzmán, and demands concrete measures from him in the monetary and fiscal framework; promises that the minister did not want to endorse in Italy.

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