Prodding for a more benign agreement with the International Monetary Fund (IMF) was always going to be central for the bilateral meeting scheduled for last Tuesday between President Alberto Fernández and his Washington counterpart and host Joe Biden but its indefinite postponement due to Biden testing positive for Covid-19 with Economy Minister Silvina Batakis representing Argentina stateside last week made the IMF agenda even more exclusive. She was greeted on Thursday as she touched ground in Buenos Aires with a major cabinet reshuffle, seeing Sergio Massa anointed “superminister” in charge of Economy, Production, and Agriculture, while she was appointed to lead Banco Nación.
Arriving in Washington on Sunday (accompanied only by Economic Policy Secretary Karina Angeletti), the new minister had the difficult mission of attempting a renegotiation of the IMF agreement only four months after its conclusion without being able to offer much in the way of austerity, given the potential resistance from most of the Frente de Todos administration. But she had scant margin for avoiding renegotiation with the fiscal deficit reportedly around four percent of Gross Domestic Product (as against 2.5 percent as per the IMF agreement) and Central Bank reserves way below target when they should be peaking between the harvest season and winter energy requirements.
On Monday Batakis already met up with past and present IMF chiefs –current Managing Director Kristalina Georgieva and key United States Treasury advisor David Lipton (who briefly filled the gap between Georgieva and her predecessor Christine Lagarde). In only 20 minutes the two women ran through both the current business cycle of Argentina and its future economic programme.
“Another productive meeting with Minister Batakis. We welcomed her initial efforts to reinforce fiscal sustainability and agreed on the importance of the implementation of a programme to confront the socio-economic challenges of Argentina,” ran Georgieva’s less than conclusive Twitter summary of the meeting.
Even less was divulged about the meeting with Lipton although he was more generous with his time, giving Batakis an hour.
“Mission accomplished,”was the minister’s verdict.
A third meeting was with the IMF’s new Western Hemisphere Department director, Brazil’s Ilan Goldfajn.
The day’s most concrete result came not from the IMF but the World Bank where the minister’s meeting with its Executive Director Axel van Trotsenburg was followed by announcement of a US$200-million loan to back the investments of PyME small and medium-sized firms in technology and innovation.
Yet this good news was offset by an even larger loan of half a billion dollars from the Inter-American Development Bank (BID in its Spanish acronym) being pegged by its Florida-born president Mauricio Claver-Carone to Argentina meeting all its commitments with the IMF.
Furthermore, Fundación Mediterránea president Carlos Melconian forecast that the IMF tranche of US$4 billion due in September would not be forthcoming without austerity while the Financial Times spoke of “evaporating confidence.”
Rounding out her Washington swing on Tuesday, Batakis ratified both the sustainability of the current agreement with the IMF and the political support of the ruling coalition in its entirety for fiscal austerity (which, she assured a Cabinet meeting prior to her departure, would not be applied to “sensitive” areas such as social spending and public works). The new minister blamed the 36 hours between her predecessor Martín Guzmán’s exit and her own confirmation for much of the volatility. Incredibly, rumours of her replacement ran like wildfire while she was still in Washington, confirmed on Thursday with Massa’s appointment which also counts with the support of the ruling coalition in its entirety.
The IMF described the situation in Argentina as “very worrying,” demanding stern action against inflation as an “absolute priority” since it was not “anchored,” in the words of IMF chief economist Pierre-Olivier Gourinchas, who met with Batakis on Tuesday. Nevertheless, despite its dim view of the situation, the IMF stood by its forecasts of four percent growth this year and three percent next.
Batakis spent much of Tuesday on Wall Street, talking to a score of bank and investment fund executives, many of them Argentina’s creditors, while her return flight on Wednesday was delayed, bringing her back on a day ending with her move to the helm of Banco Nación.