Martín Guzmán confirmed it this week: March’s official inflation will be above 4%. Marco Lavagna, the head of Indec, sent a confidential report to the Palacio de Hacienda: the first exact projection is 4.2%. But at the highest level of government they fear that things will be worse. In the hermetic conversations between Pedro’s Wado, Maximum Kirchner, Sergio Massa and the President himself admitted that the number can climb to a shocking 4.5%.
The news complicates the official intention to recreate consumption. Workers’ wages are experiencing the worst time of the year: reheated prices and ironed wages.
The issue rekindled internal fights in the economic cabinet. Several criticize Guzmán’s “patience of Buddha” and call for action. Among them, Santiago Cafiero, Cecilia Todesca, Daniel Arroyo placeholder image Y Claudio Moroni. But the toughest offense comes from Axel Kicillof. Inflation collapses its image in the Conurbano.
The governor competes with Guzmán. And he is jealous of his political ancestry over Alberto and Cristina. Kicillof demands “firewood” and demands greater “control” over companies. He accuses Guzmán of treating them gently. Guzmán fights back: March will be the last high index and in May inflation touches 2%. Kicillof had a week of rage. Over the weekend, he asked the Casa Rosada for an “extreme Covid” measure. This is how he transmitted it to the President: “Everything must be closed for 15 days.”
The Chief of Cabinet Santiago Cafiero in the meeting with his peers from Province and City, Carlos Bianco and Felipe Miguel to define the new restrictions.
On Monday there was a strong crossing at the Casa Rosada. Santiago Cafiero and Carlos Bianco had a serious verbal exchange with Felipe Miguel. “Cagones “,” liars “,” exaggerated “and” lukewarm “ were some of the terms that were used.
Tuesday the meeting was more tense and ended in another fiasco. Four top figures intervened to calm things down. They all spoke with Alberto, Cafiero or Wado de Pedro. Horacio Rodríguez Larreta led the rebellion and he was accompanied by Juan Schiaretti, Omar Perotti and Rodolfo Suárez.
The quartet communicated that they were not going to abide by Kicillof’s extreme claims. And they warned that there could be a social reaction. The first and very hard measures, they washed a little. Kicillof is still calling for more confinement.
Economy, health and country risk
In short, at stake is the delicate balance between economic activity and health. Guzmán is focused on negotiating with the IMF. Yesterday there was an internal brawl that spoiled everything in Washington and had a strong impact: country risk overheated again.
Alejandro Werner, the IMF’s Western Hemisphere director, spoke in front of bankers. The bureaucrat was a guest of Standard & Poor’s. Werner put his finger on the sore: “there are significant differences on the government front” regarding the agreement with the Fund and the economic policy itself. Something that is common in Buenos Aires.
But the bomb shook IMF staff and sparked a complaint from Guzmán himself. It happened when the economics and Washington technicians were meeting to keep the negotiation on the pulse.
Werner and Roberto Cardarelli were the IMF technicians who closed the agreement with Mauricio Macri. The Italian was directly penalized for the failure and displaced from his post. Werner still has his chair but is prohibited from intervening in Argentina. He has strong support from the head of the Basel Adjustment Bank, Agustin Cartens, also from Mexico. Both – and other Mexican officials – make up what is known in Washington as the “rosca del tequila.”
Guzmán relayed his disgust with Warner. In the Casa Rosada they accuse Warner of muddying everything and playing the game to the “hard wing” of Juntos por el Cambio. According to this astonishing conspiracy theory, the Macrista opposition wants to torpedo a deal with the IMF.
Julie Kozack held a formal meeting with Sergio Chodos on Thursday. It was in person and in Washington. Kozack is Werner’s second, but acts as his boss. Kozack debunked Werner’s stinging statement. So he said: “It is in a personal capacity and does not involve the IMF.”
In Washington they also have furious fights. The discussion of Kristalina Georgieva on the issuance of extra funds in the international fight against Covid. The pandemic has been ravaging the world economy for 16 months and the IMF board still deliberates and doubts about exceptional aid.
The top of the Fund received the order of the powerful G-7, but the bureaucrats in Washington continue to deliberate to be late everywhere. Before his Covid contagion, the President had a lonely, and long, meeting with Guzmán.
The minister insisted on the need for an agreement with the IMF. It was after the President aligned himself with Cristina and said that Argentina could not pay the debt.
Guzmán informed that now the dollars are going to enter in quantity. But – at that meeting – he admitted that in the second semester, and prior to the elections, there may be a shortage of foreign exchange.
The minister said: “To avoid turbulence, the agreement clears uncertainty.” The current financial dollar has a delay with a technical value of the currency of 20%. This could move on the eve of the election.
Alberto and Cristina would only be willing to agree with the Fund on one condition: that Guzmán manages to include special clauses that allows the Casa Rosada to generate an epic electoral “narrative” of the negotiation. The “wolves” of Wall Street translate it as just “smoke.” Thus, the President conditioned the negotiation. There are three political conditions that he asked Guzmán.
First than Argentina I managed to lower the interest rate. Martín Redrado put it in Cristina’s head. It was in November, when they met again and the dollar was at 195 pesos.
They also asked him to “be clear” that the plan agreed with the IMF is a program developed in Argentina.
But the central point is another: that Guzmán achieves that there is a political clause of “pari-passu”. That provision would read the following: in case there are new and future benefits from the IMF to member countries, they are automatically extended to the agreement signed this year by Argentina.
The microworld of Instituto Patria
It is a short cut to meet Cristina’s unrealizable ideas. In the microworld of the Instituto Patria, the vice president insists on a 20-year agreement. That political hallucination collides with the frontality of Washington. The agreement would be for 10 years and the “pari passu” clause would justify Cristina’s defeat.
The minister travels to Europe on Saturday with that objective: to gain support for the inclusion of these political clauses. Centrally, the one that interests the vice: “el pari passu”. The negotiation is not easy, because many directors are tired of the “inventions” of Argentina. The “Guzmán mission” is important and will have as interlocutors the main references from Germany, Spain, Italy and France. All more influential than their interlocutors in the US In Paris, the key meeting will be with Odile Renaud-Basso, the head of the Paris Club.
Kicillof – six years ago – signed a leonine contract in favor of the creditors. He recognized millionaire non-existent debts. Now, Guzmán will advance in another specialty of the Casa Rosada: kicking everything forward.
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