The International Monetary Fund (IMF) has set a precise limit to the negotiating ambitions of Argentina. “The IMF’s ability to restructure its debt, to postpone repayments or repurchases is limited by our policy frameworks. It’s not just about Argentina, ”the agency’s spokesman, Gerry Rice, warned Thursday during a press conference in Washington. Earlier this week, the vice president, Cristina Fernández de Kirchner, had asked for a capital reduction considering that the financial bailout for 57,000 million dollars that the Fund granted to Mauricio Macri in 2018 “it violated the statutes of the agency.” “I can assure everyone that there was no violation of the IMF rules,” Rice replied.
The round trip between Cristina Kirchner and Rice marked the pulse of the formal start of negotiations for the future of external debt that Argentina considers unpayable. In discussion is the return of the 44,000 million that the IMF delivered to Macri of the agreement and another 64,000 million in the hands of private bondholders. The former president launched from Havana, where the weekend presented your book Sincerely, that the IMF was responsible for this excessive debt. He also said that the money given to Macri “financed capital flight”, something that is prohibited by the Fund’s bylaws.
“I wonder, when they say‘ no, you cannot make a take away from the IMF capital because its statute prohibits making removals. ” But how does the IMF statute prohibit taking off? It also prohibits loans to be allowed to allow money to escape. And why are we going to enforce one ban and not the other? ”Kirchner said over the weekend. Rice has picked up the glove this Thursday. He has said that “it is not news” that the IMF cannot make capital withdrawals from its debtors and rejected any violation of the house rules in the financial rescue granted to Macri, the oldest in the agency’s history. End of the matter for Rice, who immediately tried to differentiate Kirchner’s statements with the health of the negotiations he is carrying out with the Government of Alberto Fernández.
“We have a very active dialogue between the staff technician and the Government [argentino]. We characterized this dialogue in the past as constructive and I still think so: we share the Government’s objectives to stabilize the economy and protect the weakest with inclusive growth, ”said the spokesman. From the Argentine side, there were hard words. During a presentation at the Congress on Wednesday, Economy Minister Martín Guzmán blamed the responsibility of the debt crisis on the Fund, for demanding a policy of fiscal adjustment that ended in recession, and “the bondholders, who decided to bet on a high rate and a model that failed.” Guzmán also warned that markets should not expect a fiscal adjustment policy at least until 2023, because a different calendar would imply more recession and less resources to stabilize the economy and, finally, pay off debts through a “sustainable” plan.
The markets took note of Guzman’s statements, convinced that 2023 will be the departure date to postpone payments. The response was an increase in the Argentine country risk of 7%, to 2087 points. The index, prepared by JP Morgan, marks the rate differential that the emerging ones must pay for their bonds against a similar one of the United States Treasury. If today Argentina were released in dollars, it would pay more than 20% annually for its debt. The Buenos Aires Stock Exchange, meanwhile, fell more than 4% at the close of the wheel and shares of Argentine banks sank 7% on Wall Street.
Inflation truce
The national statistics office (Indec), received the IMF mission with inflation data for January. Prices rose 2.3% last month (52.9% in the year-on-year calculation), against the 3.7% recorded in December. It has been the lowest data since July 2019 and the first inflationary slowdown in six months, as a result of the freezing of public service and fuel rates decreed by Fernández and the exchange tranquility that followed state control over the purchase and sale of currencies . However, the monthly average conceals that food rose 4.7% in the itemized by items, partly due to the end of the VAT reduction policy for products in the basic basket.
The battle against inflation will continue to lead the priorities of the Argentine economic team. Neither the recession (GDP has been falling above 2.5% for two consecutive years and something similar is expected by 2020), nor has the turnstile in the issuance of pesos managed to stop it at sustainable levels. The year 2019 closed with a price increase of 53.8% and private forecasts for this year, collected by the Central Bank, exceed 40%.
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