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ARGENTINA | 04-11-2019 17:07

Why Venezuela will influence Argentina’s IMF talks

An imposing debt load and uncertainty about his economic policies already limit Alberto Fernández’s room for a renegotiation of the record IMF credit line, but his views on the Venezuelan regime of Nicolás Maduro are also softer than those of outgoing Mauricio Macri.

President-elect Alberto Fernández’s stance on Venezuela may pose another challenge to his ability to renegotiate the terms of an aid package from the International Monetary Fund (IMF).

An imposing debt load and uncertainty about his economic policies already limit Fernández’s room for a renegotiation of the record credit line, but his views on the Venezuelan regime of Nicolás Maduro are also softer than those of outgoing Mauricio Macri.

A more sympathetic approach toward Maduro could hurt Argentina’s standing with US President Donald Trump, who has put Venezuela among his priorities in Latin America. The US holds the most influence at the IMF as its biggest shareholder and was key in the approval of the US$56-billion package given to Macri last year amid a sharp currency crisis.

“Whatever policy the new government decides to do with Venezuela will have repercussions in the bilateral relationship with the US,” said Héctor Torres, a former IMF executive director from Argentina who represented South American countries. “Argentina depends heavily on the IMF and the US has a lot of interest in Venezuela right now.”

During the campaign, Fernández suggested Argentina could leave the Lima Group, an ad-hoc outfit created in 2017 by nations seeking free elections in Venezuela, and align with Mexico and Uruguay, which have taken a less confrontational approach. He’s also demurred on calling Venezuela a dictatorship – a term Macri has repeatedly used.

A week after beating Macri in the election, Fernández has yet to comment specifically on his policy for the country stricken by a deep humanitarian and economic crisis.

The US State Department and Fernández’s campaign didn’t provide comment for this story. A spokesperson for the Fund said “the decision to support a country’s economic program with IMF lending is a prerogative of the IMF’s Executive Board which represents the 189 members of the Fund.”

Mexico Visit
Fernández may start to show his foreign policy cards in Mexico, where he makes his first international trip as president-elect in a wink to the leftists governments of the region. He’ll meet on Monday with President Andrés Manuel López Obradorr, a leader who has tried hard to keep a distance from the Lima Group, calling for a peaceful resolution in Venezuela without labeling Maduro a dictator.

If Fernández adopts a similar middle-ground stance, it wouldn’t go well with the U.. said Benjamin Gedan, a former White House National Security Council director for South America in the Barack Obama administration.

“It would likely provoke a negative response from the Trump administration, and potentially jeopardise US support, including at the IMF,” he said from Washington. “That’s particularly because President Trump is a very transactional leader.”

Gedan points out that Argentina’s relationship with the US doesn’t hinge on many other issues beyond the IMF and Venezuela. That leaves Fernandez, who swears in on December 10, with few alternatives to appease the US.

On Friday, Trump called Fernández to congratulate him and said he asked the IMF to work with the incoming government. Fernández told Trump he hoped they’ll have a “cordial” relationship, according to a statement distributed by the president-elect press team in Argentina. The White House readout of the call made no mention of the IMF.

Economic Policies
To be sure, the IMF will negotiate with Argentina through the prism of economic policies, not foreign policy, said Claudio Loser, an Argentine who served as the Fund’s western hemisphere director between 1994 and 2002. Closer ties with Venezuela would increase tensions in case Fernandez comes up with a “very undisciplined” economic program, but wouldn’t be enough to derail the program, he said.

“The Argentines will have to go beyond just having closer relations with Venezuela for the IMF to withhold their help,” Loser said.

Sticking to Macri’s Venezuela policy isn’t much easier for Fernandez. His running mate, former president Cristina Fernández de Kirchner, was one of Venezuela’s top allies when she governed for eight years until 2015, at one point even giving Maduro the country’s top honour. Maintaining Macri’s confrontational policy would reflect on Fernández’s judgment as president and likely anger her noisy radical left base.

Torres, the former IMF official, says there is a chance Fernández’s strategy may embody a phrase made famous by Juan Perón, Argentina’s three-time president last century and founder of the political movement Peronism: Put your left turn signal on, but then go right.

“Part of what Alberto Fernández is doing in visiting AMLO and giving signs that the Lima Group isn’t his favourite – that’s putting on the left turn signal, but he may turn the steering wheel to the right,” said Torres. “I’m optimistic that Fernández is pragmatic.”

by Patrick Gillespie, Bloomberg

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