Analysts rule out an agreement with the IMF before October: what effects does the postponement generate? – Economic, financial and economic news

Limited progress in negotiations with the International Monetary Fund (IMF) and government questions are starting to dispel expectations that there will be a new funding program before May, a desirable deadline until a few weeks ago.

So much so that analysts are already taking it for granted that Argentina will not agree with the Fund before the legislative elections in October, thanks to the margin granted by the rise in the prices of raw materials such as soybeans and to the ‘possible distribution of extraordinary aid by the government, the IMF itself.

It is because both the United States and major members of the European Union are supporting the Fund to disburse nearly US $ 500,000 million to countries whose economies have been severely affected by the pandemic. Guzmn’s bet is that Argentina receives its share: some 3.3 billion US dollars.

In contrast, soybeans, Argentina’s main export, continue to grow. rally bullish in international markets: in the past three months it has already risen by more than 20%, while since August it has skyrocketed by more than 60%. This dynamic would ensure a greater inflow of foreign currency and an expansion of the trade surplus.

These two factors will allow it to get through the pre-election period without the fiscal ties implied by an Extended Installations Program (EEF) and with the possibility of adopting expansionary measures to support its electoral base in the current crisis context, although the postponement of the agreement carries potentially greater risks.

“I consider that the agreement with the IMF is excluded in the short term and partly the country risk increases because of this interpretation ”, he explained. Esteban Domecq, from the consulting firm Invecq, in reference to recent increases in the indicator reflecting the surtax at which states are funded against the low-risk bond in the United States: Argentina’s trep 37 basis points (2.4%) in the last three days, until 1549 units, a worrying fact that speaks of the depreciation of Argentine government securities.

Gabriel Caamao, of Ledesma consultant, agrees to exclude the possibility that the agreement is before the elections by ensuring that the government does not deem digestible to comply with the requirements of having a new program with the Fund. “If the executive wants an EEF, the IMF will ask them for a plan to consolidate the budget and rationalize monetary policy, in addition to engaging in a series of structural reforms. None of this seems politically digestible for the October elections, ”he commented.

In the event that the government eventually confirms that it postpones the deal, the macroeconomic scenario would suffer from greater uncertainty, as this would represent a negative sign that the government shows that it “prioritizes electoral performance over stabilization.” “, He explained. Matas Carugati, of Seido.

Further, Caamao added that this decision would limit the potential economic recovery, without actually erasing it. On the other hand, he considers that the government seeks to lighten the pocket with specific measures such as the exemption of salary ceilings from income tax.

For its part, Matas Rajnerman, of Ecolatina, argues that the latest statements from officials are part of the strategy of negotiation with the Fund and has not yet ruled out that there is an agreement on the expected conditions.

In any case, the external front should give the economic team an additional margin to negotiate. “By distributing Special Drawing Rights (SDRs, the IMF’s ‘currency’) plus soybeans, the government has the ability to meet its multilateral commitments and even delay the exchange rate for the elections,” Rajnerman noted.

These two factors will ensure a flow of foreign exchange that will allow Argentina to free itself from the payment obligations it has towards multilateral organizations for which the agreement with the Fund is decisive.

On the one hand, in May expires a debt with the Paris Club for $ 2.4 billion that the government intends to renegotiate, but the creditors’ group has a general requirement that before sitting down to dialogue, there is a signed program with the IMF, hence the intention that the Guzmn team had to close before the expiration. Although the payment has a 60-day grace period, analysts do not see that it is agreed with the Fund, even during this period.

Argentina does not have a net reserve buffer, at least currently, to make such expenditure, so different avenues are open. Can fall into default with the creditors’ group until it agrees with the IMF, which would greatly increase financial instability and may even complicate relations with member countries.

But it can also aspire to convince them to reschedule by showing that the negotiation with the Fund is on track, given that the members of the Paris Club are very relevant in the multilateral body.

“Last year an agreement was made with the Paris Club without having one with the Fund and payment was postponed. These charges are a result of interest that has accrued due to late payments. It is necessary to see if a partial payment can be made with the special drawing rights, it can happen. I think it’s a chatty thing, ”thought Caamao.