Thursday, May 23, 2024

ECONOMY | 14-03-2020 10:08

Washington backs Alberto on debt but fears the ‘CFK risk’

The United States government is backing President Alberto Fernández’s debt restructuring efforts and hopes he will emerge strengthened after a successful outcome.

The international support for Argentina and its debt renegotiation seeks to lay a doubt to rest. It is raised at every meeting, in every office of the financial sector and in government offices: How much weight does Cristina Fernández de Kirchner carry in the Casa Rosada and what is the balance of power within the Executive branch?

Within that scenario the White House gambles on helping President Alberto Fernández to resolve the discussions with the International Monetary Fund and other creditors, in order to emerge reinforced.

The “riesgo CFK” is a constant theme in Washington offices, while US companies operating in Argentina voice their fears of a return to the restrictions on imports and the remittance of dividends or the freezing of utility rates beyond the emergency period of 180 days declared following the change of government.

“The president is asking for two years to win the economic battle” within the dilemma of “Alberto versus Cristina,” assure market sources in contact with bondholders, ahead of the Economy Ministry’s designation of the Bank of America, HSBC and Lazard to broker the debt negotiation.

The interest in bolstering Alberto is also explained as favouring a rapid solution, in order to produce the growth which is the precondition for repayment.

With macro-economic factors “pretty much in order,” Argentina still needs to “bring order to the micro-economic,” once the debt problem has been settled, sources in Washington said, in order to reverse the emergency measures which, according to the private sector, have investments and production on the blink.

According to Jorge Argüello, Argentina’s ambassador to Washington, “there are no differences between Alberto and Cristina, just different styles of management,” as he told an American Chamber of Commerce (AmCham) meeting with the press and businessmen last week.

He also assured them that the domestic measures are “temporary” and “not the result of an ideological vision but an emergency.”

The newly arrived ambassador repeats this explanation to those in the private sector who recall the policies deployed between 2011 and 2015, such as the restrictions on the remittance of dividends, the purchase of foreign currency (the cepo) and imports (unless preceded by exports to the same value, as mandated by ex-internal trade secretary Guillermo Moreno), among others.

Washington rates Alberto Fernández as a “very capable, intelligent and moderate” politician who “makes his own decisions.” But at the same time, it is pointed out that the axis closest to Cristina and her son, lawmaker Máximo Kirchner, handles questions like the aviation market or the negotiations around the pharmaceuticals for the PAMI healthcare scheme for pensioners.

Meanwhile, Economy Minister Martín Guzmán’s message of no fiscal surplus until 2023 has been read as a signal that there will not be any payments beforehand and “nor do they have any intention of doing so,” they say in Washington.

Nevertheless, some of the main debt negotiators on the foreign side point out that the Argentine strategy is at odds with common practice. They see negotiating with private bondholders ahead of concluding an agreement with the IMF as something “unusual,” pointing out the risk that if the bondholders do not accept the offer at the end of March, there will be no time to resort to a salvage package from the Fund.

Argentina is at a crossroads with the post-swap deadlines for peso debts with Luis Cubeddu, the IMF staff director for Argentina, and Julie Kozack, the deputy director of the IMF’s Western Hemisphere Department, back in town last week.

Due to the coronavirus, the IMF and the World Bank will be holding their April spring meeting in virtual form, only maintaining “essential” trips – the Argentine debt issue has entered into that category.

Nevertheless, the visit was to “continue getting to know each other,” it was indicated in the IMF entourage, without reviewing accounts. Neither is there an audit as per Article IV, which would allow them to show the bondholders the economic plan for which they are calling before acceding to a haircut or a new deadline. The IMF could grant a new standby and there is goodwill on the part of the US and European countries to approve a short-term agreement.

In the most conservative quarters of Washington, such as the Heritage Foundation, they claim that “the IMF broke its own rules with Argentina,” according to James Roberts, their Economic Freedom expert. He questions why there should be new loans for a country “which has not learned its lessons.”

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Patricia Valli

Patricia Valli

Editora de Economía y 50y50 de Diario Perfil.


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