Almost everywhere nowadays things seems to revolve around the agreement with the International Monetary Fund (except the extraordinary sessions of Congress starting last week, where this government’s autistic fixation with judicial issues takes pride of place over the Omicron ravages and economic uncertainties worrying most people) and yet there are reasons to question the IMF as today’s automatic editorial topic other than its awkward timing – written on the same day a major payment fell due with an IMF meeting underway in Washington to discuss the Argentine case while a low-intensity agreement at least is reportedly just around the corner (or not).
The IMF agreement is a classic example of that philosophical distinction between necessary and sufficient conditions – very much the former but not the latter. Rather than enter into the sticky details of the negotiations, it might thus make more sense to assume some sort of agreement between two sides both dreading default for entirely different reasons and look beyond. While averting default remains a long-term urgency (however much of an oxymoron that might sound), the immediate effect of yesterday’s payment was to make things worse by taking net Central Bank reserves down into nine digits (from 11 digits when Frente de Todos took office) with the future conditions for recouping those dollars looking considerably inferior to last year’s.
First and foremost, this summer’s dry weather thus far is reminiscent of the 2018 drought which was one of the prime factors behind the massive IMF stand-by that same year which is causing so many problems now – the prices of farm exports could hardly improve on last year’s lofty levels while their volume stands to be much lower (even without the government anxiety to give priority to domestic market prices). But 2021 also came with other windfalls permitting the Central Bank to close the year with its head above water – the US$4.3 billion of IMF special drawing rights as part of a global anti-pandemic package and the wealth tax bringing in some US$2 billion. Short of the current spike in Omicron cases and the rising death toll being taken seriously enough to repeat either or both of these extras, no re-run of these bonuses seems likely. Nor can last year’s impressive growth, an automatic rebound from the 2020 collapse, be repeated – impossible without investment (awaiting an IMF agreement) while any investment would only further deplete the scant dollars in the short term via capital goods imports and dividends going abroad.
While the export dollars and extra revenues are likely to be in shorter supply, at least one major spending item stands to rise sharply when deficit reduction will be a central point in any IMF agreement – namely, energy imports and public service subsidies (which have risen to over two-thirds of utility bills and transport fares from under a third when Frente de Todos took office). The former item ties in not only with the ongoing IMF negotiations but also with next week’s main presidential moment – his Sino-Russian swing – because it is precisely the Kremlin luncheon host of President Alberto Fernández next Thursday, Vladimir Putin, whose pressures on Ukraine are jacking up global fuel prices via complicating gas supplies to Europe. Needless to say, chumming up to Putin at his most disruptive and clinching an IMF agreement could hardly be described as interlocking aims.
This controversial upcoming visit to Russia and China for its widely boycotted Winter Olympics might well be a better editorial topic than the IMF agreement at this inconclusive stage were it not for the fact that it would be equally speculative. Hard to say whether President Fernández will return empty-handed or with several ticks on his wish list, especially when the answers here are not all up to him – more depends on his hosts and their self-image, whether they see themselves as rival superpowers to Washington accumulating satellites or as part of a globalised economy from which they have drawn much profit and with rules worth respecting. For meaningful comment it might perhaps be better to await the visit itself – or at least until Fernández is aboard the aircraft, given that the chances of this provocative visit being cancelled are far from zero.
A slow boat to China or no boat at all? Given the presidential talent for procrastination on display with the IMF agreement, we will just have to wait and see.