The relationship between the International Monetary Fund (IMF) and Argentina, is an eternal loop; an endless succession of tug-of-war. But he was never better than with Mauricio Macri. When the markets realized that the Government could not comply with the payment schedule assumed from 2016, the Fund came to the rescue of the Casa Rosada. With the backing of the united States, in June 2018, the agency gave the country a credit line of 50,000 million dollars, to which three months later came another 7,000. The second agreement ahead of the delivery of the money to 2019, the year in which Macri had to seek re-election. The rescue was not enough to prevent defeat for a ruling and left everything in the hands of the peronist Alberto Fernandez. Until then, roughly speaking, the story told for 18 months that seem to 18 years.
Much less depth in the story from the opposite perspective. The bet of the Fund in Argentina was great: in a few words, the largest rescue of its history. And the legacy, highly complex: with a renegotiation at the sight, Christine Lagarde, today at the ECB, has left a difficult ballot to his successor in the office of 19th street Washington, Kristalina Georgieva. The half-dozen sources consulted by THE COUNTRY agree on one central idea: Argentina will score the mandate of Georgieva.
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“More than a hot potato, is a potato, peeling of how hot that is,” shoot Claudio Loser, an economist who knows the internals of the IMF: was for eight years its head for the region. The numbers are there: Argentina owes the Fund 14 times his quota, four of every 10 dollars for the rescue plans are now in Buenos Aires and, according to the figures of the Loser, the last year, the program number 21 in six decades. And, as goes the popular saying, if you have a weight problem you have; if you have 5,000 of them, the mess is for the bank.
“Lagarde was played a lot, the Fund has lost and you can't get away so easily. He had to think that there was a lot of programs open and that I could play a higher amount, giving more margin to the argentine authorities in the past. Those were your big mistakes”, slide Loser on the phone. And adds another factor to the cocktail: the pressure of Donald Trump as part of his approach to countries opposed to the axis bolivarian. “Georgieva receives the inheritance more difficult in the history of the Fund, without counting with the Dominique Strauss-Kahn and Rodrigo Rato, both by personal issues”, he concludes.
the size of The rescue was “so exaggerated that many of us disoriented” says Arturo Porzecanski, a professor of the American University. “Argentina has problems legendary. The IMF should not have made a bet so big. 20,000 million have already been an act of faith, but 50,000 million and to extend them after... it Was crazy. A great bet with a Government that was not more than 18 months of political life, and that was not going to tighten the screws,” he continues.
Gabriel Oddone, of the consulting firm CPA Ferrere, sees “a situation of very difficult digestion,” with repercussions on the future of the IMF. “The technicians were not able to stop a bailout of a magnitude immeasurable,” he adds. This “error” says Oddone, will have implications not only for the Fund and Argentina, but for all of Latin America: “We have spent the whole of the trust. What will happen with Bolivia, Uruguay or Paraguay, candidates receive a program of the IMF?”. To that list we must add Ecuador, immersed in a rescue, although the Background discards consequences of the saga of argentina in this case.
The counterpoint puts Pablo Nemiña, researcher, and author of History of the relations between Argentina and the International Monetary Fund . “The IMF is resilient and accustomed to failure. It failed in Argentina, but it has mechanisms to process it, such as the replacement and relocation of their staff. Already moved to Cardarelli, in charge of the negotiations, and have to see what happens with Alejandro Werner [current director of the Western Hemisphere]”, spear.
Nemiña prefers to focus on the economic consequences of the bailout for the country southern: “a complete disaster”. The plan, he points out, “was a failure because their plans were the usual: an adjustment of the current account deficit in the midst of a recession, with the consequent collapse of the activity and the depreciation of the exchange rate”. To this we must add that the Government of Macri was “more orthodox” than the IMF itself. “As it does not put control of capital, the few dollars that had escaped in the hands of private investors. The only novelty were the networks of social restraint, which prevented a social explosion”.
When the primary of August 11, revealed that Macri would not be re-elected, Buenos Aires did jump into the air the austerity agreement with the Fund, and, in an attempt to save his luck in the parliamentary elections, limited the purchase of foreign currency, froze the price of the public rates and fuel prices and announced aid extra to the poorest of the poor. Paid to the euphemism, announced the “re-profiling” of the schedule of payments to the noteholders and private negotiations with the Fund in order to postpone the cancellation of interests. Then, the risk rating agencies have already considered the argentine bonds in the area of insolvency and country risk that sailed over 2,000 points.
The IMF, which had delivered up to that point 44.000 million dollars, froze the disbursements pending with the argument that the measures were out of the original libretto. But it soon became apparent that the problem was another: the technical Background considered a waste of time to negotiate with the outgoing Executive and wanted to wait for the peronist Alberto Fernandez, who is the final responsible of solve the debt problem. Before the anxiety of the markets, the IMF warned that any negotiation with Argentina should expect the details of the plan of Fernandez.
“The new Government is starting to take over their functions. The important thing is to listen to the argentine authorities about their priorities and their plans,” said the 12 of December a spokesman for the agency. Meanwhile, Fernández warned Georgieva, the crisis legacy left no room for “more fiscal adjustments”.
beyond the always neutral public discourse, and with Buenos Aires by issuing confusing signals about the negotiation, the concern in the agency with headquarters in Washington has grown in the last few weeks: do not know the intentions of Fernández and what they see, of time, them generates a lot of doubts. Want more concreteness. A plan, in short. “The Fund wants to negotiate, but you have to convince you that there is an economic plan reasonable,” says Benjamin Gedan, an analyst at the Wilson Center. “Although the new minister of Economy has said he does not want additional loans, you will need to delay the payment of the existing debt”.
Fernandez has achieved the endorsement of the Congress to a law of “economic emergency” that freezes pensions, raises taxes on agricultural exports (the main source of foreign exchange), and imposes a penalty of 30% on the purchase of dollars. The Government did not use the word fit, a term damn to anyone who wants to keep her popularity, but investors read once that more taxes and less resources to pensions were evidence of willingness to pay. “The measures showed that the intention is to care for the dollar and be fiscally cautious”, summarizes Nemiña. “Bondholders expect that the remove that may be proposed by the Government is lower than what you expected. The key is now to see the reaction of the Fund: if you give a guarantor or informal if you say that before negotiating with private creditors, Argentina has that sign with him,” he continues.
The near horizon is a wasteland in terms of maturities of capital with the Fund —in 2020 there will be no (although yes with private), but the schedule of returns is accelerated in 2021 and 2022— which gives room for negotiation. And the first three months of this year are proving key to the negotiation between the Government of Fernandez and the new management of the Fund. “Argentina,” ditch Oddone, “we just don't have the money to meet these future debt maturities or to stop a potential run on the bank. So you have to restructure. Yes or yes”.Updated Date: 04 January 2020, 09:00