(From Washington) Argentina today begins its participation in the spring sessions of the International Monetary Fund (IMF) and the World Bank (WB) with the main objective of seeking multilateral credits to consolidate the economic stability plan, in the midst of an intricate scenario global that includes China’s geopolitical offensive and Russia’s war against Ukraine.
The debt contracted by Mauricio Macri in the times of Donald Trump and Christine Lagarde became a leading case for the IMF board and a professional curse for its staff. The most powerful directors of the Fund – the United States, Germany and Japan, for example – are fed up with accepting changes in the committed goals, and the bureaucrats who endorsed the Stand-By granted to Macri were expelled from the multilateral credit organization.
Alberto Fernández and Sergio Massa now have the political responsibility of avoiding a new institutional crisis with the IMF, and here in Washington the objective of the Palacio de Hacienda and its technical team is to articulate a roadmap that allows the Central Bank’s reserves to be strengthened to leverage the economy and meet the new goal negotiated with the Fund’s staff.
The president and his economy minister have the advantage of the institutional support of Joseph Biden, who has decided to support Argentina in a possible confrontation with the IMF board. This political endorsement occurred in the solo meeting between Alberto Fernández and Biden, and during the joint meeting held by the cabinets of Argentina and the United States at the White House.
However, in the Treasury Secretariat led by Janet Yellen and in certain chairs of the Fund’s board of directors, the political will exhibited by Biden during the ninety minutes he shared with Alberto Fernández in the Oval Room and the Cabinet Room is taken at a distance.
Alberto Fernández and Joseph Biden during their meeting at the White House
The representatives of the United States (under the direct orders of Yellen), Germany and Japan have no intention of accepting Biden’s decision on a closed book. They understand their regional and global political reasons, but they already know the institutional and personal results caused by the granting of the 53,000 million dollar credit guaranteed by Trump in favor of the Macri administration.
The President of the United States had trusted Lula da Silva as a regional actor and as a possible geopolitical limit to China’s offensive in Latin America. But Da Silva exhibited an international agenda that contrasts with the interests of the White House: he will sign the Silk Road in Beijing together with Xi Jinping, he allowed two warships from Iran to station themselves in a port in Rio de Janeiro and the next On April 17, he will receive Sergei Lavrov, Russian Foreign Minister.
In this context, Biden mitigated the diplomatic setback by inviting Alberto Fernández to the White House. And during their meeting alone, both presidents closed a tacit and win-win deal: Argentina froze the geopolitical projects agreed with China, while the United States promised to support the country in a possible confrontation with the most reluctant directors of the IMF.
The win-win result of the conclave in the Oval Room implies that Xi would lose influence in Balcarce 50 and Alberto Fernández would obtain political insurance against the resistance of the Fund’s board, already tired of accepting changes in the goals committed in the Extended Facilities Program that Guzmán closed and is now under the control of Minister Massa.
In a short time – they estimate in DC – Biden will have to keep his word. The severe drought complicated the strength of the Central Bank’s reserves and limited the levels of income forecast for the first half of 2023. Massa managed to recalibrate the reserves forecast for this year, but the number negotiated with the IMF is beginning to be overstated in the face of the economic crisis that Argentina is enduring.
Likewise, the agreement with the Fund establishes an annual fiscal deficit of 1.9 percent, a figure that was also put in check by the macroeconomic consequences caused by the drought. It is that not only withholdings fell, but also the level of commercial activity was affected with its consequent drop in tax collection.
Alberto Fernández has no intention of cutting spending on education, science and technology, public works, health, social security and housing to compensate for the drop in income and comply with the 1.9 percent fiscal deficit negotiated with the IMF. “That is an adjustment and I plan to do it,” he commented on Balcarce 50.
That is to say: if the government does not reduce the planned spending, there is no way to reach a 1.9 deficit in 2023. And in this scenario, Balcarce 50 will have no other way than to warn the IMF that the goal will have to be recalibrated -also- of the fiscal deficit closed in 2022.
Sergio Massa and Gita Gopinath, Deputy Managing Director of the IMF, during an official meeting in Washington
Argentina’s position may show a certain amount of weakness before the IMF board, but it has certain strengths caused by the complex international scene. The country suffers from drought due to climate change, increased energy prices due to the war in Ukraine and explicit support from the White House to mitigate China’s advance in Latin America.
From this perspective, Argentina should not be left at the mercy of the technocratic stance of the Treasury Secretariat, and the directors of Japan and Germany. The geopolitical equation is easy to explain: the main players on the international board will be willing to recalibrate the goals of the program agreed with the Fund rather than deepen the country’s economic crisis and open a regional flank that can be capitalized by Beijing through its credits. soft grants without institutional controls.
Despite this geopolitical equation in favor, in the Fund’s spring sessions there will be endless questions to Minister Massa and his technical team regarding the electoral process. In Washington it is still not understood how the president does not speak to the vice president, and a party faction -Kirchnerismo- blocks the possibility of re-election of Alberto Fernández.
These questions can open a diagonal from the IMF staff to the economic consultants of Horacio Rodríguez Larreta and Patricia Bullrich, who will be in DC also participating in the sessions of the multilateral organization managed by Kristalina Georgieva. The staff of the Fund assume that Together for Change can recover the Casa Rosada and informal contacts were not ruled out here to find out where they would go from December 10.
Meanwhile, Massa will begin an international tour that begins in Santo Domingo and ends in Washington. The Economy Minister will land in the Dominican Republic on Wednesday the 15th, and there he will hold a key meeting with Wendy Sherman, US Undersecretary of State, and Ricardo Zúñiga, Deputy Undersecretary for Western Hemisphere Affairs.
Sherman was appointed as coordinator of the work agenda that Biden and Alberto Fernández closed at the White House, and Zúñiga is a State Department official who knows the region and has maintained a friendship with Massa since the beginning of the 21st century. In Santo Domingo, the Minister of Economy will insist on the need for fresh funds derived from the IDB and the World Bank -where the United States controls its boards- to strengthen reserves and face the economic crisis.
When he arrives in DC, Massa will follow a road map that includes meetings with the OECD, the World Bank, the IDB, the Saudi Fund for Development, the US Chamber of Commerce and the National Security Council, in addition to his participation in the various panels organized by the IMF and the WB.
In those 72 hours of a busy schedule in the capital of the United States, the minister tries to advance agreements with multilateral organizations and sovereign wealth funds in order to increase reserves and strengthen the economic stability plan.
On Friday, April 14, at 5:30 p.m., Massa will have his most important meeting with the Fund. That day, the minister will meet with Gita Gopinath, deputy managing director of the IMF. Gopinath is the brains of the International Monetary Fund and has an ups and downs relationship with Massa.
The deputy managing director knows how the levels of compliance with the goals agreed in the Extended Facilities Credit are, and she was very critical of the minister -during the G20 in India- when they analyzed the early redemption of bonds in early 2023. In that meeting, the minister and the deputy director collided head-on with Georgieva as a witness.
On Friday the 14th, Massa and Gopinath will meet again at Headquarters 1 of the International Monetary Fund. It will not be a protocol conclave.
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