Ramping up the rhetoric on the eve of crucial talks in Washington, President President Alberto Fernández has called on the International Monetary Fund to carry out a critical "evaluation" of the record US$57-billion standby loan it granted Argentina in 2018.
Firing off another pointed barb at Mauricio Macri, his predecessor in office, and his nation’s creditors Fernández pointed the finger firmly at the IMF for Argentina’s ongoing economic woes this week, saying the Fund should “do everything possible to prevent something like what happened with the programme signed by the previous government, which did so much damage to Argentina, from happening again."
“In order to write a new page, it is necessary to close the previous chapter,” he declared.
Speaking before business and industry leaders in Buenos Aires, Fernández said his government is “making progress in building understandings with the IMF” in order to “reach an agreement” over a new financing programme, but that previous mistakes had to be acknowledged and learnt from.
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"We ask the IMF, before we sign a new agreement, to make its assessment of the failed stand-by programme, which disbursed US$44 billion that was misused to pay unsustainable debt and finance capital outflows,” he alleged.
In 2018 the IMF granted the government led by Macri, then seeking re-election, a US$57-billion loan, whose outstanding disbursements were rejected by Fernández after he took office December 2019.
A 2020 Central Bank report alleged that between December 2015 and the end of 2019, capital flight exceeded US$86 billion.
The president’s statements, delivered as a mission team of Argentine officials were flying to Washington to reopen talks with the Fund this weekend, are designed to rally support behind the government before any deal is made.
Participating in the closing ceremony of the 27th annual conference organised by the Unión Industrial Argentina (UIA), the Frente de Todos leader said that talks were proceeding “at a steady pace and with a firm pulse.”
“We want to reach an agreement that will allow us to refinance the very large debt maturities for the next three years," said the president.
His comments came just a day after Economy Minister Martín Guzmán told the leaders of the CGT, the nation’s largest umbrella union grouping, that “there will be no austerity” in any future agreement.
Vowing to “create jobs and lower inflation,” the minister said Argentina would not adopt austerity as it would “mean preventing economic recovery from being given any continuity."
"When we are forceful with our creditors we demonstrate our seriousness,” said the president on Thursday. “Nothing serious can be solved in five minutes. The foreign debt problem is not a problem of Alberto Fernández's government, it is Argentina's problem."
Speaking Friday to the Reuters news agency, IMF chief Kristalina Georgieva said that a "common understanding" had been reached with Argentina "but that much remains to be done."
"What we have achieved so far is a common understanding of the importance of working on a programme that will significantly improve Argentina's macroeconomic fundamentals and put Argentina on a solid path to recover from this crisis," said the Fund's managing director.
She said that for now work has been done "in a constructive way. But much remains to be done.
"We are thinking about a programme that is balanced" to address the problems facing the country because only if Argentina "broadly supports it" is it likely to succeed, she added.
Georgieva said the IMF is well aware of Argentina's problems, citing inflation, insufficient private sector participation in growth and poverty.
After little progress over the past two years, Argentina is expected to ramp up negotiations ahead of a multi-year economic plan that President Fernández said he would send to Congress in December.
The plan is expected to include “initial understandings” with the IMF that would serve as the basis for a deal with the lender. A precise date for when it will be submitted hasn’t been set yet.
A team of government officials will travel to Washington today to move talks forward with the IMF. The delegation will aim “to continue advancing in technical understandings,” with IMF staff, according to an Economy Ministry statement.
Those officials travelling include the country’s representative to the IMF, Sergio Chodos, Economic Policy Secretary Fernando Morra, Finance Undersecretary Ramiro Tosi and Treasury Secretary Raul Rigo, according to a government official who asked for anonymity because the list wasn’t public. From the Central Bank, Jorge Carrera and German Feldman will attend.
Notably, Guzmán and Central Bank President Miguel Pesce will not attend, though the former will “oversee” proceedings from Buenos Aires, according to the president, whose close allies said the departing team was “entirely technical.”
While the government continues negotiations, it intends to make a payment to the IMF on the principal of US$1.8 billion due on December 22, said Secretary for International Economic Relations Cecilia Todesca, said on Tuesday.
Argentina, which fell into recession in 2018, is seeking to replace it with an extended facilities programme to postpone and lengthen payment deadlines. Under the terms of the current agreement, the country must pay the IMF more than US$19 billion in 2022 and 2023, as well as US$5 billion more in 2024.
The government wants to seal a new deal by March, before the largest payments, but has not ruled out closing an agreement before the year is out.
"We expect to have it for February, but Guzmán is optimistic, so we do not rule out that it could be for the end of the year," an unnamed source at the Economy Ministry told the Noticias Argentinas news agency.
Any new accord will not include an exchange-rate adjustment, Pesce told reporters on Wednesday, adding that he expected the economy to grow by nine percent this year.
‘Lot to lose’
Following a surge in Argentina’s ‘country risk’ rating towards the start of the week, Vice-President and Senior Analyst at Moody’s Investors Service Gabriel Torres said that a default would cause “other problems to arrive,” including the lack of lending from other multilateral lenders.
“Signing an agreement, moreover, allows it to design a multi-year plan, which has so far not been made public,” he said.
Economist Carlos Melconian was another voice who spoke in support of a deal this week, saying: "With the agreement I don't know how much you have to gain, but without the agreement you have a lot to lose."
"They are going to have to sit down and do numerology, the media show is over," Melconian said in an interview with Radio Mitre, observing that the IMF would seek to control public spending and lower inflation.
"The agreement that Argentina has in place today, or had that was broken in September 2019, was a short agreement,” he said. “I think that the person who has to negotiate understands that this agreement must be better than the current one, it is an agreement that must have structural reform because when the IMF gives you a 10-year agreement, it asks for the country to have structural reforms," he said.
"The Fund will never explicitly mention the exchange rate, the inflation rate or economic growth," he explained. "The focus will be on social spending, pensions, social plans and subsidies".