Monday, May 20, 2024

OPINION AND ANALYSIS | 06-03-2021 09:15

Fernández conditions IMF talks with lines from Instituto Patria

Argentina’s Peronist leader has delivered the International Monetary Fund a clear message, echoing the lines of a Kirchnerite think-tank and modifying Economy Minister Martín Guzmán’s plans to seal a debt restructuring deal by May.

In his message to the Legislative Assembly last Monday, President Alberto Fernández opted for a tough tone and content against the International Monetary Fund, whom he held co-responsible for the colossal debt run up by the Maurico Macri presidency. The move kicks the chair out from under Economy Minister Martín Guzmán and the diplomatic strategy he has zealously pursued with the multilateral lender. A broadside fired by the Instituto Patria think tank responding to Vice-President Cristina Fernández de Kirchner, which is making giant strides in its capacity to influence state decisions.

The diatribe against the IMF is not just inflammatory militant rhetoric. It changes the equation of the negotiations, stretching them out just when Guzmán was hoping to reach an agreement before May when a debt payment to the Paris Club falls due.

The criminal lawsuit which Fernández instructed state lawyers to initiate against "the authors of the most fraudulent administration and embezzlement of public funds in history," an allusion to Macri’s government, was accompanied by a paragraph in which Fernández aimed directly at the responsibility of IMF authorities in releasing US$55 billion to "finance the electoral campaign" of Juntos por el Cambio.

The presidential speech tips the balance in favour of Instituto Patria, which seeks to double the period of 10 years for paying off the debt set by Argentina in the new programme which the government is requesting from the Fund. It is also pressing to postpone the talks until after the midterm elections.

"We don’t want to hurry to agree, which is what the rogues always want. The only hurry our government has is to get production going again to improve the situation of millions of Argentine families on the brink of poverty," declared Fernández, firmly in tune with Instituto Patria.

Cristina’s plan disrupts the intentions of Guzmán and his aides, who were working in silence towards an Extended Fund Facility (EFF) agreement with the aim of stretching the deadlines of the original stand-by agreement for US$55 billion reached by Macri’s government in 2018. Of this sum the state has already drawn US$44 billion, mostly to meet other debt deadlines. 

In the internal debate within the government regarding how to face the negotiations with the IMF, the hard-line wing represented by Fernández de Kirchner has ended up prevailing, with the pragmatic and technical wing represented by Guzmán in retreat. Still, the Joseph Stiglitz disciple retains the respect of the vice-president for his key role in restructuring the debt with the holdouts, which brought oxygen to state finances.

According to the vice-president’s reading, placing the focus on the original sin of the debt, with the IMF as quasi-auditors of the debt, would permit Argentina’s economic authorities to sit down at the negotiating table in a position of greater force, obtaining better terms and advantages for the country in an agreement. The Fund violated its own statutes which prohibit extending debt to countries with capital flight, especially regarding the percentage of the IMF’s total credit portfolio, with a sum and deadlines very difficult to meet for the Argentine state.

This reading is shared by sectors to the left of the ruling Frente de Todos coalition such as, for example, Claudio Lozano, who sits on the board of directors of Banco Nación. In the eyes of the former deputy, the decision to sue the local authors of the debt "permits stronger negotiations with the IMF, seeking to avoid the same result as always."

Lozano, the leader of the Unidad Popular party, pointed out that "by holding responsible the officials at the local level who made this disaster possible, we are in a position to present the Argentine case as the key of our foreign policy, denouncing the IMF before the United Nations."

"It does not seem reasonable that the Fund says that there can be no haircut or that their deadlines cannot be extended because their statutes prohibit it, basically because the credit they granted expressly violates those statutes. Nor is it reasonable to seek to interfere in our economic policy when its recommendations have produced such notorious effects," he concludes.

This vision follows the Instituto Patria line-by-line. But Kirchnerismo, the centre-left of Frente de Todos and now Alberto Fernández are not alone in taking on the IMF. In dialogue with Noticias Argentinas, Unidad Federal para el Desarrollo caucus chief José Luis Ramón expressed satisfaction with the presidential announcement, as well as with the promulgation last Wednesday of the Law to Strengthen the Sustainability of the Public Debt, establishing that any agreement with the IMF must be approved by Congress.

"We in Congress have to regain those prerogatives. We see this as a positive fact and are totally in agreement with lodging a criminal lawsuit over the IMF debt and the distribution of funds under the Macri government," the Mendoza deputy pointed out.

Another symbolic Kirchnerite victory in the speech was the president’s declarations regarding the problem of the public utility pricing, frozen throughout the Fernández presidency thus far. Here the decision for this year is for soft increases which do not go beyond inflation while at the same time discussing a bill for a scheme in 2022 based on "de-dollarising" public services.

In his speech, Fernández criticised the previous government, affirming that they authorised increases without the state requiring an investment plan and saying that energy prices "must be definitely de-dollarised and fitted to an economy in pesos."

by SEBASTIÁN HADIDA, Noticias Argentinas


More in (in spanish)