Paris and the IMF will have to wait | Results of the g …

What did Martín Guzman look for during his European tour? What results have you obtained? “Gestures of confidence”, replies almost rhetorically a source who has followed very closely in the minister’s footsteps since he left Ezeiza. Specifically: Argentina is unable to meet the $ 2.4 billion deadline with the Paris Club at the end of May, but it must start negotiations now and not let the negotiations conditional on the conclusion of a new agreement with the Monetary Fund International. Agreement that, also conveyed the Minister, there is no possibility that it will be finalized before the October elections. The interlocutors of Minister Guzmán took note of these data, which, at this stage, even the IMF itself admits as an immutable reality. There are no memoranda or commitments signed on letterhead paper, but it can be argued that Argentina has obtained a Paris Club waiting period for the impending expiration of two more months, until ‘to July 29, period during which the terms of a new agreement.

Guzmán did not go to Europe in search of agreements, but to explain Argentina’s negotiating position before international organizations and why his proposal is to change the rules on debt refinancing. He seeks “understanding and support” from the developed world for the situation in Argentina, which “runs through a narrow throat” that leaves him no chance to stumble and get up. But he explains that this is not an isolated case, but the result of bad financial and economic policies that the organizations themselves have sponsored. And that it is time to correct them.

It’s not that you are looking for a life jacket because you feel in dire straits, as evidenced by the fact that the trip was planned well in advance, and a month before leaving for Washington to participate in the joint annual meeting of the IMF. . and the World Bank, all the old world meetings were already scheduled. Even the trip to Russia, although the combination of meeting with the finance minister and management to bring Sputnik vaccine production to Argentina was not being considered at that time.

The Argentinian case

Guzmán, accompanied by Sergio Chodos, permanent negotiator with the IMF, Maia Colodenco (in charge of international affairs) and Melina Mallamace (chief of staff of advisers), explained in the capitals of five European countries, during a week , the complexities of the Argentine situation and its relationship with the Monetary Fund. It did not take much effort to capture the interest of his interlocutors.

That a country like Argentina is mired in a level of poverty above 42% is not only explained by the pandemic. It is also the country that received the largest IMF stand-by credit just three years ago and has now become the IMF’s largest debtor. There are many reasons for wanting to hear firsthand the explanations that your Minister of the Economy might give.

Guzmán did not go to negotiate with the European ministers of the economy, but to explain to them what Argentina is negotiating with the Fund. He explained that it was not simply a negotiation based on payment limitations, of not being able to comply with what had been agreed by the previous government, but that it was proposed to “break the molds “of traditional IMF agreements. “These are schemes designed for the economy of the twentieth century and today we have a different global economy, with other needs and other restrictions, to which is added a global pandemic”, he argues in front of each of his interlocutors , seeking to involve them in rethinking the role of international organizations.

What Guzmán seeks to convey is that what is being discussed is not only a rescheduling agreement, but also new instruments for a new global financial architecture. There were gestures and winks that the minister collects as positive results of his tour. “These are the consensuses which are realized in a different approach that Argentina adopts before the IMF, and which advances before the main European powers give a critical mass to the position defended by the Argentinian negotiators”, declared a member of the Guzmán staff.

Break the molds

It is clear from this balance that Argentina finds space to make more understandable its need to deepen an agreement that transcends the usual canons of the IMF menu. The proposal to extend the period beyond the ten years that the Fund offers in its extended facility agreement programs has been put on the table at every ministerial meeting. The proposal would consist of an EFA with a four-year grace period (without payment of principal or interest), after which consensus will be reached to renew the plan for another ten years. There was no explicit agreement from the interlocutors, but the need to raise alternatives before cases which, like Argentina, clearly end with respect to the current menu, is accepted.

Guzmán also presented to his European peers the proposal he shared with Mexico for a different allocation of the expansion of funds that the IMF would solve by issuing special drawing rights. The proposal is that it is not proportional to the participation of member countries, as this would concentrate the availability of funds in the strongest countries, but rather they would give resources to heavily indebted intermediate developing countries, as the case from Argentina. There was no immediate response to this request. The European powers prefer to take time before giving in to demand.

There was also time to discuss other topics suggested by the host officials. Germany shows great interest in Argentina’s energy strategy. It has the ambition to participate strongly in wind energy but also in other alternative sources. The concern of Italians is more oriented to how the rules for the movement of capital will be in the future, noted that some companies of this nationality have had difficulty in returning profits to the peninsula. In the case of Russia, the possibility of increasing trade and, above all, of giving a greater projection to its capital goods industry, is part of its own geopolitical strategy.

Inside

Certain situations of tension experienced internally, in the country, were not unrelated to the meetings of Guzmán and his team abroad. During the minister’s stay abroad, the 4.8% jump in the CPI in March was known. Data that Guzmán anticipated, predicting the day before that it would be “the biggest increase of the year”. And this, within the framework of the most rigorous announcements concerning the restrictions on the movement of people. But there was more concern from those who transmitted the events in Buenos Aires than from those who received them in old Europe.

In the coming days, it will be necessary to see how the minister manages to reverse in an upset internal scene, the gains he seemed to capture in his European foray. The tension in the distribution offer via prices imposed by the most concentrated strip of the local economy is causing political noise. His peers from the economic cabinet are also awaiting his return to define the next steps.