Uncertainty grows in discount time so that Argentina close a deal with International Monetary Fund (IMF) to negotiate its debt of more than 40,000 million dollars, amid differences over the country’s fiscal path and the lack of full support from the international community.
(Read here: Argentine President reports progress with the IMF and asks to evaluate ‘stand by’)
The country risk began to show a greater probability of a non-agreement of Argentina with the multilateral organization before the payment that must be made on March 22, approaching 1,900 basic points.
(Also: Argentina: Fernández even uses climate change to pay the IMF)
“The negotiation is very tough,” Delphos Investment partner Leonardo Chialva told Efe, because “Argentina is trying not to impose all the conditions.”
Argentina negotiates against the clock with the Fund an agreement of extended facilities to refinance the debts contracted from the financial aid agreement signed in 2018 between the organization and the then Conservative Government Mauricio Macri (2015-2019), which as of last December amounted to 40,952 million dollars.
According to the 2018 agreement, Argentina should pay the agency, between capital and interest, 19,020 million dollars this year, 19,270 million in 2023 and 4,856 million in 2024, maturities that the Government of Alberto Fernandez He has already said that the country, which is experiencing macroeconomic imbalances, is not in a position to cope.
The most voluminous commitments this year begin in March, when Argentina would have to pay 2,838 million dollars, but by not having access to debt markets, it would run out of net reserves.
“The purpose of the government is to achieve a technical agreement that is digestible by the IMF and Argentine politics. If everything is handed over to the IMF technicians, the politicians will not accept it because they lose the election,” Chialva described, as Argentina celebrates presidential in 2023.
(In other news: Argentina: seven years of the mystery surrounding the death of prosecutor Nisman)
The different causes of delay with the IMF
On a technical level, the low propensity of the IMF to accept a lax economic program is observed, while the government of Peronist Fernández has insisted that it seeks to close an agreement that does not imply a fiscal adjustment that threatens economic reactivation.
The Minister of Economy, Martín Guzmán, showed that Argentina intends to reach the primary fiscal balance in 2027 instead of doing it in two or three years and the Central Bank raised the reference interest rates and the devaluation rate, but not in a forceful way .
At the geopolitical level, Argentina admitted to having difficulty in persuading the directors of several countries with high weight in the board of directors of the organization to obtain the necessary votes to approve the agreement.
In this sense, the US position is key, but the Treasury’s position was to question Argentina’s technical criteria.
The Argentine Foreign Minister, Santiago Cafiero, traveled to the US to convey to the Secretary of State, Antony Blinken, that “a message from the political authority to the Treasury is necessary” to have the support of the US, but the official US encouraged to present an “economic policy framework”.
Meanwhile, Argentina maintains differences regarding the human rights policy in Nicaragua, Venezuela and Cuba. Another difficulty is Argentina’s internal politics, as the ruling coalition has been reluctant to reach an agreement.
However, the country has so far paid the IMF all principal and interest maturities corresponding to the 2018 loan, which represents a willingness to reach a new agreement.
If it is not fulfilled, Argentina would enter a ‘backward’
If Argentina were to default in March, the country would enter a “backlog” with the IMF, whereby it is not allowed to use IMF resources or make requests to the board until the backlogs are resolved.
For the director of Macroeconomic Analysis of the consulting firm Equilibra, Lorenzo Sigaut Graviña, the IMF can find some mechanism to avoid these delays, but “the parties have to have good will” and “the agreement has to be close”, so he foresaw that Argentina “avoids default” with the Fund after March and advances to “managed stagflation.”
If there is no agreement, this would imply the closure of access to financing from international financial organizations and would compromise the disbursements already agreed, the Paris Club would charge punitive interest and the private sector would lose letters of export credit, preferential access to international markets and foreign investments. direct.
In addition, exports would slow down, there would be more country risk, currency devaluation, inflation of 85 percent and recession, according to Equilibra.
For the IMF and the member countries there would also be an impact if Argentina incurs arrears, according to Sigaut Graviña, because “they would have to recapitalize the IMF” and “admit a failure” because three years after granting the largest loan in the history of the Bottom line, the South American country enters into default.
EFE
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