The background of the agreement with the IMF to try to stop the dollar – 05/02/2019

There was an arduous political negotiation with Washington for the Monetary Fund to forget its "dogmas and principles" and accept that the central bank must intervene without limits to stop the fury of the market. Strong pbadages with IMF staff repulsed, secret orders of the US Treasury and salutary dialogue of Sunday with Christine Lagarde. Part of the IMF learned of the decision after the announcement of the BCRA. Roberto Cardarelli could not produce a concrete report and the dome of the Fund had only an informal explanation. Monday afternoon, at an emergency meeting convened by David Lipton.

The directors of Germany and the Netherlands asked questions. But finally, all reluctantly accepted the extreme game. Technicians and managers were surprised by the speed of events: Argentina announced last Friday – at the end of the markets – that there was no change, Monday could suffer from greater instability and seriously compromising the electoral chances of the president.

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This is why the agreement was concluded without IMF mission and without "memos". Cardarelli resisted first to the political order that emanated from the White House: seek a solution for Argentina. They raised innumerable technical objections and the discussion with Guido Sandleris was "hard". But in the end, the Fund's bureaucrats have laid down their economic convictions and accepted a 180 degree turn in the agreement in September.

The decisive support of the White House is much more than a technical issue: Donald Trump's unusual political support for preventing Macri from going to the polls. Washington played and will play hard to support the re-election of the president.

The dollar escalation and inflation have weakened the re-election project. So, something paradoxical happened: The irruption of Cristina helped Macri at the IMF. The essential warning was Nicolás Dujovne's communication with Treasury Secretary Steven Mnuchin. It arrived between Thursday and Friday. Mnuchin informed via David Lipton – his man at the IMF – the directive to forget his dogmas and to get closer to the BCRA. In Casa Rosada, the version of a direct call from Macri to the White House has been distributed.

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The president has deflated the version. He told his team: "The dialogue was exclusively with Sandleris." But Clarin He confirmed that in previous weeks there had been a fluid contact between Macri and the White House, monitoring the tembladeral exchange rate.

Now, the snob The economists – including Lipton himself – of the Fund were strong. Alejandro Werner and Cardarelli themselves had to accept the weekend, just as they rejected it in 2018. Both, in this crisis, were the ones who had asked for the head of Luis "Toto" Caputo. The IMF accused it of intervening in the market and wasting money in Washington. Caputo has not resisted the offensive. Lagarde posited as a condition of the new agreement the relief of Caputo. To speed things up, the IMF has released malicious versions against the former BCRA official. Nicolás Dujovne helped and Macri gave up what he called "the Messi" of finance.

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Now, he has turned to interventions that the IMF and the Argentine government have described as inappropriate: the need has the face of a heretic. Both – faced with the urgency – accepted the "shortcut" exchange, which they had repudiated. Argentina did it not by conviction, but because in September, I needed the IMF loan.

The only announcement of the intervention ended the escalating dollar. Until now, the BCRA has not intervened. Casa Rosada proposed for the first time to intervene on the market a month ago. That happened in Washington on the weekend of April 13 and 14, during Dujovne's meetings with Lagarde and the Treasury Secretary.

Sandleris told the IMF staff. The rejection was difficult. Secretly, the ministers explained the reasons for the Copernican turn in the trading strategy. Both had warned that Argentina would be subject to exchange rate volatility in the weeks leading up to the PASS. But investigations – and unresolved issues – have accelerated the times: the eventual unstable future It has become a gift of torment. Last week, the dollar had climbed 9.3% and last Friday, a warning of investment funds was announced: Monday could be a "black Monday".

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This deepening of the crisis frightened everybody: Casa Rosada, the political direction of the IMF and, in particular, the White House. In the afternoon, Dujovne again spoke to Mnuchin: it is there that the Treasury ordered Lagarde to close the changes. Sandleris – later – was in charge of negotiating the technical fence with the IMF's furious technicians. The help gave oxygen to Casa Rosada. He gave him an instrument to defend himself against bullfighting. But it is clear that this does not solve the underlying problems: recession and inflation and lack of credibility. On Thursday, Citi Bank of Manhattan released a report to its investors.

This is positive for Casa Rosada. He says that the exchange measures "Can create multiple equilibria" and allow a political revival of Macri. The work was written by the economist Fernando Díaz. The Wall Street guru dedicated an evocative title: "Vision on the Argentine economy: the day of the groundhog?".