Attention to the IMF on the next steps with Argentina

Market volatility and tense political signals have raised doubts about the continuation of the program set up with the country and the $ 5400 million disbursement that remains to be made.

WASHINGTON.- The agreement with the
International Monetary Fund (IMF), the only source of fresh funds available to Argentina, was in limbo after the worst week of
crisisstained by
political signals Daily market badping and bleeding toxic reserves. Until recently, in the United States, there was still a belief that the Fund, even reluctantly and perhaps with new conditions, would make a critical
$ 5400 million this month. This has now changed.

The relationship was locked in between four dynamics:
the elections, the crisis, the decisions of the president
Mauricio Macri and declarations – public and private – of
Alberto Fernandez.

The Fund indicated that, at best, investors and badysts considered investors and badysts to be cautious and, in the worst case, distanced. As in the past, no explicit support has been given to the series of measures announced by the government or the Central Bank since the primaries. Faced with this void, there was only one formal promise: badyze them and continue "next to Argentina". On the turn, nothing.

"Frankly, the economic policy decisions and statements of political leaders and their advisors are changing so much in Argentina that I am sure that neither the leaders, nor the management, nor the members of the board of directors of the IMF have decided what to do with about the next disbursement, "summed Arturo Porzecanski, a professor at the American University.

Wall Street reports echoed this uncertainty. The most optimistic point of view is that the turn is delayed, but it happens. Porzecanski thinks that this week "the prospect is remote" to receive these funds, and he is considering two scenarios: postpone this decision until, as the government has proposed, a new program and a new commitment to the winner of the September 27th elections are negotiated. October; or, less likely, "a break in relations" and a cancellation of the agreement and the turn "de facto, but de jure".

The "reperfilation" of debt has garnered a symphony of criticism and no eulogy. According to a first reading, the plan could help unblock the shift – some, even, do not exclude that it has been discussed with the Fund's mission – because, if successful, it could improve debt sustainability and provide guarantees to the population.
board on the use of the resources of the Fund, thus contributing to the sustainability of the program.

But the reception was bad. And the statements of Alberto Fernández –
his critical statement on the IMF, first, and
The Wall Street Journal interview then sparked fear and confusion among investors and badysts. A note from XP Securities called them "Machiavellian Nature", pointing out that they contradicted Fernández's own advisers on Wall Street and warning that they would generate more mistrust among investors.

This double facet also marks the link with the Fund. This is not a minor problem: if the result of the primary is confirmed in October, Fernández must repay the loan contracted by Macri. Alejandro Werner and Roberto Cardarelli, senior Argentinian officials of the Fund, had "a productive meeting" with Fernández and his team, according to a statement. The doors inside, there are coincidences. Outside, criticism prevails, to which the Fund does not respond. The question is what weighs more.

For Porzecanski, Fernández's statements were "such a soup so strong that all the will of the officials, the management and the board of directors of the Fund to help Argentina has probably disappeared".

"Let's not forget that the disbursement of the IMF, wasted and heavily criticized in September 2001, has not been forgotten," he concluded. In December of this year, the Fund took another turn, a decision that precipitated the crisis. Analysts believe the fund will avoid repeating this story. But nothing is guaranteed.

Faced with this panorama, political signals take a lot. The "exceptional access" obtained by Macri, which enabled it to obtain $ 57,000 million from the Fund, depends on four criteria. The first is that the debt is "sustainable, but not with a high probability". Another is that Argentina can recover access to capital markets on a scale and within a period of time to repay the loan to the Fund. And the last is for staff to feel that the program "offers a reasonably strong prospect of success". There plays the political commitment.

In his last report to
advice, Cardarelli reiterated, referring to this point, the Macri government's determination to "restore fiscal discipline and macroeconomic stability". But he also mentioned critics of the opposition and his intention to "renegotiate the details" of the program. Cardarelli highlighted a consensus, confirmed by Werner's and Alberto Fernández's own economists: Peronism is willing to deal with structural reforms.

But to the fragility of the economy and the mistakes of the government adds uncertainty as to what Peronism will offer to a future government of the Fernández-Fernández duo. "The IMF is in a difficult situation – it can not lend on the dream of a moderate Peronist," summarized Benjamin Gedan, director of Argentina's Woodrow Wilson Center project.

The vital support of the United States seems to last. The State Department has renewed its support for the Macri government. A spokesman for the Western Hemisphere Department said that "the United States continued to support" Macri and recalled the "close and productive relations" between the two governments. He also sent a message to Fernandez before a possible negotiation with the Fund: "The United States is willing to work with any democratically elected government, democratically governing and approaching our bilateral relationship with goodwill."