Talks between the government and the International Monetary Fund quietly began to get into gear this week, with Argentina seeking a quick renegotiation of the conditions of its US$44-billion loan.
President Alberto Fernández, a once-fierce critic of the IMF, indicated a new willingness to engage with the Fund, while the IMF's director for the Western Hemisphere, Alejandro Werner, said representatives would arrive to Argentina later this month to begin a "deeper dialogue.” Fernández's first economic reforms, which include tax increases and new social spending, are a sign of hope, Werner declared.
Meanwhile, the Vatican announced Wednesday that it would host a seminar on economics at the Holy See in early February, at which IMF Managing Director Kristalina Georgieva and Economy Minister Martín Guzmán may both be present. The meeting will take place five days after the president visits the pontiff on January 31.
Fernández, speaking last weekend in an interview with Horacio Verbitsky's El Cohete a La Luna website, said he had an "ardent desire" to reach an agreement with the Fund, but added that he had set a deadline.
“I think that from here to March 31 our trajectory is going to be very clear,” the president said. “That is the ceiling we have set, because there are significant maturities.”
On Friday, Georgieva said the Fund was looking "to do what we can to help Argentina."
"We agree with the need to restore the economy and address the increase in poverty that has negatively affected many Argentines, ” said the official, speaking at the World Economic Forum in Davos, Switzerland.
“We have had very constructive interactions so far with the new leadership in Argentina. I spoke with the president, with the economy minister and now with the staff working with the Argentina team,” she added.
The IMF granted the Argentina, then led by President Mauricio Macri a record US$56-billion in credit in 2018, when a currency crisis gripped the country, which is now gripped by recession.
The government, which took office last month, is "working non-stop to solve the foreign public debt crisis," Economy Minister Martín Guzmán said last week.
Argentina has had tense relations with the IMF, while Fernández and Guzmán have frequently criticised the Fund in public in the past. However, recent comments suggest a thaw, with the Peronist leader suggesting that the Fund's attitude toward her country has changed.
"Things have changed a bit at the Fund," Fernández said Sunday, noting that the IMF viewed its first steps favourably. "I have the ardent desire that this perception of mine is correct and that, finally, with the new leadership of the Fund, we can reach an agreement that gives us time to recover the economy and to start paying."
That last comment was a reference to former IMF managing director Christine Lagarde, who sealed the original agreement with Mauricio Macri. To date, only US$44 billion of the US$56-billion loan has been delivered, with Fernández rejecting the rest of the funds.
Former IMF officials say the institution will want to give Fernández some leeway to avoid a default. In 2001, Argentina defaulted and sank deeply into crisis after an agreement with the IMF collapsed.
"The IMF is going to be more flexible with Argentina," says Héctor Torres, a former IMF executive director who represented Argentina and other South American countries. "It would be a big failure for the IMF if Argentina went into default.”
The government's ability to conclude debt talks also depends on how flexible the IMF decides to be, says Siobhan Morden, head of Latin American fixed-income strategy at Amherst Pierpont in New York.
A goodwill intention to extend the fund's loans "should encourage participation by bond holders on terms that emphasise liquidity over solvency relief," she analysed.
The government also has a new, but familiar, face at the IMF to talk to. On Thursday, Sergio Chodos assumed office as the IMF's new director the Southern Cone. He held the same position during Cristina Fernández de Kirchner's second term in office, before leaving the post after a few months of the Mauricio Macri presidency.
To date, Argentina's new economy minister has declined to discuss the government's negotiating strategy. However, in November, before he was appointed minister, Guzmán published a detailed set of recommendations for debt talks, with March as the deadline for rescheduling and not paying the debt in 2020 and 2021. Since taking office, Guzmán has said that his views as an academic are unrelated to his position as minister.
Last month, lawmakers gave Fernández, who took office on December 10, broad powers to renegotiate the debt with private creditors and the IMF, passing an 'Economic Emergency' bill.
The outstanding debt to private bondholders is about US$120 billion, according to the latest figures on the Economy Ministry's website, which date back to the third quarter of 2019.
Argentina's sovereign bonds cut into last week's recovery after Guzmán said on Sunday that the national government will not help Buenos Aires Province with its own debt problems.
The government wants to put the debt talks behind it so it can focus on ending the economic crisis. Argentina's economy is expected to contract for a third year in 2020, with poverty on the rise and inflation currently running at more than 50 percent over the last 12 months.