IMF: questions in the United States to Kristalina Georgieva could impact negotiations with Argentina

Kristalina Georgieva, the Director of the International Monetary Fund, the person with the greatest political discretion in the institution, and the Argentine Minister of the Economy, Martin guzman, arrive weakened at what seems to be the last stage of negotiations to renegotiate the deadlines that Argentina must face before the international organization from next year, due to the stand-by credit granted in 2018 to the administration of Mauricio Macri.

The two parties have already agreed to refinance these maturities on the basis of an “Extended Facilities Agreement”, with a term of ten years, so that Argentina does not have to face any maturity of four or four years. five years and cancel the debt within 6 or 5 years of the decade (in principle 2022-2031) covered by the new agreement.

“This is bad news: Georgieva is accused of using political considerations to distort technical assessments” (Torres)

What remains to be defined, however, is the macroeconomic program, with its budgetary and monetary objectives, and the “structural reforms” to be included in the new agreement.

Guzmán arrives weakened by the recent crisis of the ruling party after the defeat of PASO: although he retained his post in the cabinet, his management of the economy was severely criticized by Vice-President Cristina Kirchner, the undisputed political leader of the government coalition, who undoubtedly shortens his room for maneuver and subjects every word and action to close scrutiny by the Kirchner wing, which, among others, does not agree with the deadline for ten years of repayment (he intends to extend it to 20 years, which is not provided for in the menu of IMF programs) nor with the minister’s criticisms of energy subsidies, which he considers “pro- rich ”and fiscally very expensive.

Problems for Georgiev

Georgieva, meanwhile, faces serious questions about her previous role, as head of the World Bank, and was recently accused of lobbying and influencing officials under her command to manipulate the readiness of the World Bank. ‘a Bank report, the widely circulated “To do business», A sort of work emblematic of the business environment, regulatory quality and competitiveness of countries, to improve China’s position in the resulting ranking.

“Let me tell you very simply: it is not true. Neither in this case, nor before nor after, have I pressured the staff to manipulate the data, ”Georgieva told IMF staff, once the accusations were known, according to Reuters. But the accusations are serious. According to WilmerHale’s study report – contracted by the World Bank itself – Georgieva and other senior officials at the entity exerted “undue pressure” to improve China’s ranking.

A question of classification

The report of the investigators of the case specifically says that during the preparation of the “Doing Business 2018“Senior Chinese officials complained Jim yong kim that the ratings given to China were not correct and that, following these comments, Georgieva and Simeon Djankov, the report’s lead author, lobbied staff to change 3 of the indicators it is based on, moving China from 85th to 78th place in the rankings.

The accusation is not light and is now before the IMF’s ethics committee, which will study the accusations contained in the WilmerHale report.

Paul Romer, a prestigious economist, winner of the 2018 Nobel Prize in Economics, took the opportunity to express via Twitter that he had done well when he preferred to be sacked from his high post at the Bank – of which he was the chief economist – than to continue to report to Georgieva. In addition, last week, the World Bank decided to stop the publication of the “To do business”, Whose 2020 edition has also been accused of favoring Saudi Arabia, to the detriment of Jordan.

To what extent can this Georgieva situation affect the IMF’s negotiations with Argentina?

“This weakens her ability to make political considerations to mitigate technical assessments that IMF staff may do, because that is precisely what she is accused of doing at the World Bank,” he said. . Hector Torres, former representative of Argentina on the Board of Directors of the Fund. Torres doesn’t think the case reaches the extreme where Georgieva ends up losing his job, “but it’s very clear he’s being questioned.”

“This is bad news: Georgieva is accused of using political considerations to distort technical assessments. Now, if the IMF staff technically assesses that the program with Argentina requires certain reforms that the government does not want to carry out or wants to postpone, it will be expensive to use political arguments, it will make it much more dependent on the Staff ” , Torres explained, who recalled that “political considerations” are one of the letters that the government of Alberto Fernández uses to reach a softer deal and more benevolent treatment from the Fund.

It should also be noted that the staff of the organization involved in the negotiation with Argentina has just been added Ilan Goldfjan, brand new director of the Western Hemisphere department, on which they report Julie Kozack and Luis Cubeddu, the most common treatment agents with Guzmán. An orthodox economist, Goldfjan was president of the Central Bank of Brazil and is a friend of several Argentinian economists who criticize the economic policies of the government of Alberto Fernandez.

Torres recalled, for example, that Christine Lagarde, The former director of the IMF, used her political margins to overcome the doubts and technical objections of IMF staff on the state of play of the agreement reached in 2018 with Argentina. Staff, he recalled, argued that Argentina’s debt was “sustainable, but not with a high probability” and basically depended on whether the country regains access to private external credit or at least realizes one. full refinancing, which was completely lost in August. 2019, after the defeat of the Macri government in PASO that year.

Another former Fund official said the accusations against Georgieva are almost proven, but it should also be taken into account that the current IMF chief was working under the wing of North American Jim Yon Kim, and the US Treasury all two were overseen by David Malpass, former Trump administration official and current President of the World Bank. This implicit protection could be lost, the Observer said, if Republicans in Congress target Georgieva on “the Chinese question” and pressure the Treasury to withdraw its support.

The truth, in any case, is that two key players arrive weakened at the final stage of the already long saga of negotiations between the government of Alberto Fernandez and the International Monetary Fund.

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