Thursday, March 30, 2023

ECONOMY | 12-02-2020 08:41

Protesters set to rally as IMF arrives for debt restructuring talks

Demonstrators will take to the streets of the capital this afternoon, as IMF officials arrive in Buenos Aires and Economy Minister Martín Guzmán presents his fiscal plan before Congress.

Delegates from the International Monetary Fund are to arrive in Argentina on Wednesday against a backdrop of protests, as officials begin talks on restructuring the country's crippling foreign debt burden.

On a day of high-profile economic activity, Economy Minister Martín Guzmán is also due to present his fiscal plan to Congress later today.

President Alberto Fernández's government is hoping to renegotiate US$195 billion out of a total debt of US$311 billion – including a deeply unpopular US$44 billion bailout loan from the Washington-based IMF agreed in 2018.

The Peronist leader insists Argentina cannot pay its debt without economic growth, which is currently hampered by inflation of more than 50 percent, as well as mounting poverty and joblessness.

"With the IMF meeting, we'll start to see what the government's economic plan is," economist Héctor Rubini from Salvador University told AFP. "The creditors need to know what chance Argentina has of paying its debt."

"Despite its statements that it wants to pay (its debt), so far the government has lacked clarity around key political decisions," said the risk evaluation company Verisk Maplecroft.

Guzmán has already met with the IMF, while Fernández embarked on a European tour to drum up support for his proposals.

So far, the IMF and the Argentine government have both spoken positively about their exchanges. But the Fund's officials are not expected to be given a warm welcome on the streets today, with anti-IMF protests set to take place downtown, led by left-wing political groupings, unions and social organisations.

Organisations including the CTA Autónoma, la Corriente Clasista y Combativa (CCC), la Unión de Trabajadores de la Economía Popular (UTEP), la Confederación Argentina de Trabajadores del Transporte (CATT) and la Federación Marítima Portuaria y de la Industria Naval de la República Argentina (FeMPINRA), among others, will rally at Congress, where Guzmán is expected to address lawmakers.

Demanding Argentina not pay down its foreign debt, the demonstrators will rally at around 4pm at the intersection of Avenidas 9 de Julio and Independencia before marching on Congress. Other satellite protests will also take place across the country. Left-wing parties will hold a separate rally at 5..30pm, beginning at Avenidas de Mayo and 9 de Julio.

"The Fund can change its officials, but never changes its nature," protest leader Juan Carlos Schmid said Tuesday.

However, some experts say the IMF is showing a different attitude this time around.

"The IMF is showing a willingness because it wants to get paid and also in part because it contributed to this situation," said Rubini, referring to the original bailout loan agreed with former president Mauricio Macri for a record US$57 billion.

When assuming power two months ago, Fernández refused the final US$13 billion of disbursements outstanding, bringing the total to US$44 billion.

Speed is key

Practically unable to borrow from the markets, the government has until March 31 to reach an agreement with its creditors before it will almost certainly be unable to meet its repayment obligations.

Fernández wants to avoid another devastating default like in 2001, when Argentina bailed out on a US$1000-billion debt.

"There's room to negotiate a win-win situation, but the problem is delaying," said economist Marina Dal Poggetto, from consulting firm EcoGo. "The best agreement is the quickest one."

It is estimated that Argentina will need to fork out US$34.3 billion in repayments and interest in 2020.

Rubini says the country will have to pay US$200 billion over the next four years – a hard ask for a country with international reserves of just US$44.68 billion.

Argentina has proposed to make its offer to creditors in mid-March.

"It's a simultaneous negotiation with the IMF and creditors," said Rubini. "At some point everyone's going to have to get together: Argentine authorities, IMF experts and creditor groups."

He said the IMF usually expects other creditors to agree to a reduced debt repayment, but those creditors will be looking for the lender to not only accept one itself, but also take partial responsibility for Argentina's debt crisis.

Argentina has yet to miss a debt payment but did postpone some bond repayments under Macri. And on Tuesday, Buenos Aires postponed the payment of another bond that was to have come due later this week.

"This debt issue has to be resolved because either Argentina returns to growth or there will be another outbreak of social unrest," said Rubini.


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