They warn in the US that disagreements in the ruling party regarding the adjustment will further delay the agreement with the IMF

Martin Guzmán and Alberto Fernández

Political disagreements in Congress will further complicate the negotiation of a new agreement with the International Monetary Fund (IMF), which had called for a broad internal consensus for the corrections it negotiates with the Government to be successful..

Observers of the conversations told Infobae from Washington, New York and Buenos Aires that, with the budget that fell or with a corrected one, what the Fund intends is a “consistent plan”, as repeated on numerous occasions by both the technical staff and several members of the board of directors.

This means, as the agency expressed in a statement last Friday, that The Government must implement measures to reduce the monetary financing of the fiscal deficit and raise interest rates to lower inflation, among other fundamental axes to regain macroeconomic balance.

“What the Fund said in that statement is that it will not approve anything and that he is going to insist on the need for a serious economic plan, “said a qualified source from Washington.

In Washington and New York they believe that the complications of the Government in Congress reflect internal disagreements to make the adjustment requested by the IMF to reach a new agreement

“Even if the budget sent by the Government had been approved, that is not a basis for serious negotiations. because it contains macro assumptions that do not coincide with what the Government will need to do to comply with the new program, “the source clarified.

In this sense, he warned that, even if there was a condescending attitude at the political level among the most influential directors of the board -Something that for now is in doubt-, it would be enough to approve the agreement initially in March, but “in June the country would have a similar or greater problem, because if it does not comply, there will be no more disbursements.”

In this regard, he clarified that The voices of support from State Department officials should not be confused with an endorsement by the Biden administration of a new program, since the fundamental voice on this issue is that of the Treasury led by Janet Yellen and, in particular, her council. advisor David Lipton, former number 2 of the IMF.

FILE PHOTO: International Monetary Fund (IMF) Acting Managing Director David Lipton attends a news conference after a meeting at the Chancellery in Berlin, Germany October 1, 2019. REUTERS/Hannibal Hanschke/File Photo
FILE PHOTO: International Monetary Fund (IMF) Acting Managing Director David Lipton attends a news conference after a meeting at the Chancellery in Berlin, Germany October 1, 2019. REUTERS/Hannibal Hanschke/File Photo

This is because any program involves a quarterly technical review and the Fund’s technicians will not play to give their approval if they do not see that the Government is implementing some of the measures that are initially agreed upon.

Furthermore, the source indicated that, If the Government chose to enter into arrears with the IMF due to the impossibility of reaching a new agreement, some disbursements to the country by the World Bank and the Inter-American Development Bank (IDB) would also be complicated. Nor would it be possible for bilateral credit to advance in this context, because “even China signed the principles by which any financing to a country can only be done with the assistance of the Fund,” clarified the source since the warm end of autumn in Washington.

In this vein, the former Argentine director before the Fund, Hector Torres, affirmed that the disagreements in the ruling party do not help to advance with the multilateral organization in the renegotiation of the USD 45,000 million, but clarified that “the Executive Power can live without a budget approved by the National Congress.”

“Much more worrying for the IMF are the statements made from the government’s own political space“Torres said.

Much more worrying for the IMF are the statements made from the government’s own political space (Héctor Torres)

“Probably the IMF has doubts about the budget presented by the Government, and probably some of those doubts coincide with the observations expressed by Together for Change in Congress. But I don’t think IMF financing will depend on Juntos por el Cambio approving the budget”, He explained.

“If this were the case, the IMF would be giving Juntos por el Cambio a virtual veto right. The issue of consensus is related to an extended facilities program: the IMF calls for a long program (EFF) to have consensus on policies and reforms that should be able to continue after 2023 ″, he said.

“But that does not mean that if Juntos por el Cambio does not approve the 2022 budget, the possibility of having some IMF financing will be closed.”, He clarified.

In the same vein, the former director of the Western Hemisphere Department, Claudio Loser, maintained that “congressional rejection of the budget complicates matters. I believe that implicitly in the negotiations, a condition is to approve the budget and that with their differences in color or makeup, it was agreed ”.

“If there is no validation from Congress, I don’t think Goergieva can ‘sell’ the program to the Board of Directors. That failed with Macri. So you will have to negotiate with the majority and see what is done. It’s difficult and I think this is ‘I’m a shock’ for the government, ”Loser said.

More complex negotiation

Along these lines, the UTDT economist Eduardo Levy Yeyati He said that yesterday’s scene in Congress may have been a staging: “Maybe that was the idea from the beginning: to force the rejection of the budget, extend the previous one by decree and continue improvising without a plan. Bad start to negotiation with the IMF, which asks that the letter of intent be approved in Congress. And bad for the country in crisis ”.

“I would not be surprised if the government used the rejection of the budget to justify the delay in negotiating with the IMF, when the delay arises from the government refusing to present a budget consistent with that negotiation, ”he indicated.

Also Econviews chief economist, Andrés Borenstein, argued that internal political complications, “In the end they will not prevent an agreement, but it will be a more tedious process.”

“The opposition has already shown that it does not give any more blank checks and the government forced itself to pass the agreement through Congress; in other words, some time will be lost in the negotiation, “said Borenstein.

On the other hand, “All this serves as an excuse: now they can blame politics since they have nothing with the Fund”, as reflected in the caution of the statements from Washington about the advance of the agreement.

From New York, the head of the investment fund Mogador Capital, Guillermo Mondino, expressed: “Kirchnerism always had the problems inward. Today, the one who dynamited everything was Máximo Kirchner. The problems had them and will have to solve, reasonably, the government. And the costs of political decisions as well ”.

“The IMF knows, and now more clearly than ever, that, if they want less deficit, the only politically passable way is with a reduction in spending. That, precisely, is one of the central problems of Kirchnerism ”.

Anyway, the economist who also had to negotiate with the Fund in 2001, clarified that “Either way, we were a long way from an agreement. I do not think that this contributes in a relevant way to what we already knew was a long process ”.

In this sense, a report from Itaú bank stated that the Government’s desire to reach an agreement with the IMF “is a positive step, but we note that a quick understanding seems difficult, due to the government’s reluctance to apply the necessary macro adjustments and the fact that an agreement needs the support of Congress ”, by the Executive’s own decision.

“We expect a weaker peso and the necessary rate hikes to boost inflation in 2022. As a result, we have increased our inflation forecast for 2022 to 60% (from 50%). And we expect the Central Bank to tighten monetary policy next year (although it still keeps it flexible), bringing the 30-day Leliq rate to 48% by the end of 2022, from 45% previously. “

“There are no growth drivers for 2022, given the expected adjustments in a less benign regional and international environment. We maintain our growth forecast at 1.4%, after an upwardly revised rally of 9.5% for 2021 ″, concluded the Brazilian bank, in line with the not very optimistic forecasts of the rest of the market for next year, especially if no solid agreement is reached with the Fund.


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