Martín Guzmán: “The important thing in a deal with the IMF is to do it well, rather than quickly” | Economy

Martín Guzmán (La Plata, 38), Argentine Minister of the Economy since December 2019, is on tour in Europe. This Thursday, he landed in France to renegotiate debt maturities for $ 2,200 million with the Paris Club. Previously, he had talks with his counterparts in Germany, Italy and Spain, whom he asked for support in conversations Argentina has with the International Monetary Fund (IMF) to defer credit payments. of the $ 44 billion his country received in 2018 Guzmán attends EL PAÍS via videoconference at a high point on the French agenda, after being unable to do so in person during his visit to Madrid. He denies that in his government there are sectors which encourage the postponement of a possible agreement with the IMF after the legislative elections in October and says that inflation (which has increased by 17.5% since January) will come down little. little.

Question. The most pressing is the debt with the Paris Club which expires in May. This Friday, he met the president of this organization, Emmanuel Moulin. What did you suggest?

Reply. We propose to redefine the conditions and reschedule the commitments in order to be able to face them in a sustainable manner. There were three major issues to be resolved regarding the debt crisis: restructuring with private creditors, a new program with the Monetary Fund to refinance maturities and carry out rescheduling with the Paris Club. The first part, that of the private sector, was already resolved in 2020 with a reduction in interest in dollars from 7% to 3% and a reduction in capital which implies a reduction of 37 billion dollars in a decade and that Argentina does not has no deadlines with private creditors until July 2024. The Paris Club and IMF processes go hand in hand, but in the first case we try to find more time.

P. How is it received by its European counterparts?

R. There has been a constructive welcome in Germany, Italy, Spain and France to ensure that Argentina will have conditions that will allow us to organize our macroeconomy without disruptive shock.

P. They must have an agreement very soon. How long have they been given to them?

R. We need some agreement, although it doesn’t necessarily mean having something permanent, before May 31st. We have a month and a half.

P. How is the Argentine proposal received in relation to the IMF?

R. We need the support of the shareholders of the Fund, and for that we need to reach consensus and agreement on Argentina’s proposal. In all of these visits, we have had the opportunity to have detailed briefings on the macroeconomic situation and how we are going to get to where we want to go. The important thing is that you understand what you are looking for in terms of economic policy and productive proposals. The dialogue was really very constructive.

P. So you understand that the world is patient with Argentina in the face of everything that has happened.

R. Clearly, what happened to the 2018 program was not a restoration of confidence: it was based on macroeconomic policy precepts that ended up undermining the foundations of growth. Our government’s vision is to solve this program structurally and to seek consensus. That is why we are committed to submitting the program we accept with the Monetary Fund to Congress for approval. We highly appreciate the value of multilateralism. This is the line in which we operate and which we believe appreciated by our peers.

P. How long do you think the patience of the United States and Europe with Argentina will last?

R. The priority is to achieve a broad consensus at all levels – internal and international, including Staff of the Fund – to have a program which replaces the previous one and which allows debt refinancing. More than a matter of patience, there is a program for solving problems in a consistent and constructive manner.

P. Do you feel outside the tension in the government alliance, between those who prefer to speed up negotiations with the IMF and those who prefer to wait until after the legislative elections in October?

R. There is a unified government position. What is sought is a lasting agreement. If it is done quickly, the better. But the important thing is to do it well, rather than doing it quickly. There is a time frame that is acceptable, but we are continually working to achieve all the consensus necessary to move forward. At the same time, it is important to work on building consensus with the opposition, because the effects of a program of this type transcend a period of government, and what we are looking for is that stabilization macroeconomic is not only a government policy but also a state policy. The pillars cannot change every decade.

P. The situation of the Argentine economy remains very delicate: bonds are trading at levels close to the default and country risk continues to increase. How to instill confidence in the markets and in the rest of the IMF countries?

R. The real economy has been on a recovery path, with nine consecutive months of positive growth. At the same time, the fiscal position has strengthened with an increase in collection in real terms, the Central Bank has accumulated reserves since December, the exchange differential between the official rate and the parallel has increased from 130% to 60 % in less than five months, and there was job creation in the last quarter. This coexists with a strong set of problems, with a poverty rate that has increased by seven points with the pandemic, to 42%, with unemployment still in double digits. Regarding country risk, we have a clear financial horizon in front of us, with no capital maturities with private companies until 2024.

P. How does a non-Argentinian explain to him that Argentina cannot reduce inflation?

R. There are two great blocs that fed on each other: There were times when economic growth was accompanied by increased imports and not increased exports. This resulted in a weak exchange rate and an increase in inflation. There have also been persistent budget deficits over time, financed by external debt and monetary issuance. And finally, there is a coordination problem: in an inflationary economy, anchoring expectations is a more complex process. This is why we are attacking inflation in a comprehensive way.

P. With the issuance of currency due to the pandemic, what will they do? Is there a plan to sterilize her?

R. In 2020, just as the pandemic began to hit Argentina, the country did not have access to credit. And, despite the sharp increase in currency issuance, inflation has declined compared to 2019. We have put a lot of emphasis on rebuilding the domestic capital market, which has eased the pressure on the exchange rate and prices in general. It is necessary to continue to reduce the monetary issue, as the macroeconomic program says, but respecting the premise that the state must play a countercyclical role so that the economic recovery can be sustained over time.

P. When will inflation be under control?

R. What we have proposed is a gradual reduction path consistent with the speed at which other macroeconomic imbalances are being resolved. To solve inflation, we must be able to increase exports, which generates exchange rate stability, and we must gradually reduce the budget deficit. It will take time to bring inflation down to single digits.

P. The prices of raw materials have increased in recent times. Is this good news?

R. For Argentina, this has two opposite effects. One is positive, because it allows the country to have more currencies and to strengthen its external position. But on the other hand, it puts pressure on domestic prices. What we are looking for is that this shock is not regressive: that it does not benefit a few and harm many. It is essential that the recovery is fair: otherwise, it will not be a recovery.

P. When will Argentina return to pre-crisis GDP levels?

R. We are still in a pandemic, but the growth forecast for 2021 is 7%, higher than in the rest of the region. Argentina is one of the fastest recovering economies, and this is due to the fact that during the pandemic policies were adopted to avoid the destruction of jobs in the formal economy and of capital in organizations. . Thanks to this, the production capacity is now available.

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