Mighty Argentine Vice President Cristina Fernández de Kirchner and her allies in the left-wing administration want to postpone a crucial $ 44 billion debt deal with the IMF until the pandemic subsides, officials said, avoiding painful spending cuts ahead of the October midterm elections.
While Finance Minister Martín Guzmán recently said the government wants to conclude negotiations on a new deal with the IMF by May – later than the originally touted March – the powerful voices of the Peronist government of President Alberto Fernández want an even longer delay.
Argentina, the IMF’s biggest debtor, is mired in a deep recession and lacking foreign reserves. A 2018 loan agreement got into trouble months after signing and the South American grain and beef exporter is vulnerable to yet another financial market crisis if investors lose confidence.
With more than 50,000 coronavirus deaths, the country is now easing restrictions after one of the longest and strictest lockdowns in the world.
“Cristina wants [to close a deal with the IMF] after the pandemic, ”said an influential official close to the Argentine vice president, who is also president of the Senate and controls a large grassroots Peronist organization. The official’s point of view was echoed by others briefed on the talks.
The official admitted that it was impossible to say how long the coronavirus crisis could last. “It is not very serious to conclude an economic agreement at a time when we do not know whether [Argentina’s] the economy will remain open or closed, ”the official said. “We are in an emergency situation[in Argentina]. . . Let’s not rush this.
Gerry Rice, IMF Communications Director, said: “We continue to have very constructive discussions with the Argentine authorities as they work on their economic plan that could be supported by an IMF program. ” He noted that Kristalina Georgieva, Managing Director of the IMF, recently said that a deal by May would require “additional efforts on both sides”.
The bulk of Argentina’s debt repayments to the IMF are due in 2022-2023 and an agreement with the fund to reschedule them would boost market confidence. Argentina’s endemically volatile economy contracted by more than 10% last year, its third consecutive year of recession.
Net liquid foreign exchange reserves languish near zero, threatening further devaluation. Argentina’s last currency crash in 2018 precipitated the fund’s historic bailout. International investors remain reluctant to lend to Argentina after its ninth sovereign default last year, forcing Buenos Aires to borrow in local markets and print money to cover deficits.
But some members of the Peronist coalition argue that a 30% rise in soybean prices since November gives Buenos Aires more time to strike a deal with the IMF. This would help avoid the need to cut politically difficult spending ahead of the midterm elections in October, when the Peronists defend their majority in congress.
“Politically, the best time for Argentina to strike a deal is after the elections, but economically speaking, the best time is as soon as possible,” said a person briefed on the talks.
While President Fernández is a pragmatist and Guzmán a former technocratic scholar, Cristina Fernández is known for her inflammatory rhetoric against the IMF. She has previously claimed that the fund’s deal with Argentina was illegal and violated the IMF’s own rules because it was financing capital flight, an argument the fund rejected.
IMF officials are said to be concerned that after more than three months of talks, little progress has been made. Some fear that once the agreement is signed, clashes will be inevitable as the election campaign approaches.
“There was a momentum [for a deal with the IMF] after the conclusion of the negotiation with private creditors last September, which the economic team lost, ”said Martín Redrado, former governor of the central bank, referring to the successful restructuring of the government of 65 billion dollars of bonds last year.
“Although Argentina needs a comprehensive economic program to create a path for sustainable growth, it appears that the crowbar is practical for both sides,” he added.