IMF warned of "considerable risk" of "change of agenda" for elections

WASHINGTON.-

International Monetary Fund

(IMF) warned against the risk that a change in economic policy as a result of the upcoming presidential elections may hinder the recovery of the Argentine economy from the crisis caused by the drought, lower rates of change and the obstacles of the national government the year before.

The director of the Western Hemisphere Fund, Alejandro Werner, warned during a press conference in Washington to present the latest prospects for Latin America that "a change in the world" will be the first time. economic agenda "after the elections this year" could have a significant impact "economic progress and stabilization achieved through the program agreed with the Fund, in addition to discourage investment.

"In emerging economies, a major shift in the direction of economic policy has always represented a considerable risk," said Werner.

"Obviously, a change in the economic agenda could have a significant impact on the favorable movements observed in the financial markets and on the Argentinian economy, which should be done in 2019," he said. he adds.
THE NATION on this year's elections.

Werner downplayed the possibility that the campaign undermines compliance with the "zero deficit" fiscal goal before the interest payment agreed with the Fund for this year, balancing the government's "very clear commitment" to reduce the public accounts, an inevitable condition for receiving dollars from the
Package of 56,300 million USD concluded with the IMF.

"We see rather the effect of uncertainty on the prospects of the Argentine economy to the extent that investors must not only know how will behave the Argentine economy over the course of eight, nine or the next ten months, but also the next 24 and 36, "said Werner, who then added:" Obviously, what will be the political framework that will prevail in Argentina from 2020 will be very important for someone who wants to invest in Argentina for the next decade ".

The unusual warning from the highest fund manager for Latin America was given when the campaign began to heat up in Argentina. In Washington and Wall Street, the main question regarding Argentina is whether President Mauricio Macri will be re-elected this year or whether, on the contrary, Cristina Kirchner or some "alternative" Peronist personalities, such as Sergio Mbada or Juan Manuel Urtubey are imposed in elections. Cristina Kirchner has strong relations with the Fund and Sergio Mbada told Washington that the current program is "horrible" and should be renegotiated. "Between the Fund and the Argentines, I chose the Argentines," said Mbada.

The Fund has agreed with Argentina the largest loan in its history, amounting to $ 56,300 million. Almost all this money will be spent before the end of Mauricio Macri's first term.

For the resumption of investments in Argentina, insisted Werner, it will be very important to know what will be the political framework not only this year, but "over the next four years". The same goes for an investor who is considering buying a one-year or 24-month bond or for an investor who plans to extend the maturities of his maturities. Werner also pointed out that when it came to seeing the pace of the transition of the Argentine economy towards parameters "more compatible with stable economies", it was important to see what happened. there would be "sustainability" in medium-term policies.

"A political turning point in the next presidential election can derail the program?"
THE NATION. "Of course, as a political shift in Uruguay, Mexico, Brazil, it is clear that in emerging economies, a major shift in the direction of economic policy has always posed a considerable risk," he said. Werner.

Higher inflation

Werner reiterated his confidence that the monetary policy of the

central bank

will get a "significant" reduction in price increases this year, while recognizing that, with a higher cap and greater resistance, it will be higher than initially expected.

Werner said the expectations of

l & # 39; inflation

will fall "slowly" and predicts that, probably, the body retouches its latest forecast of inflation for 2019, set at 20.2%, before inflation is "so high" that She left 2018, the highest of the last 27 years.

The market consensus according to the latest Central Bank's Market Expectations Survey (MER) showed an inflation forecast for this year of 28.7%.

"It would be desirable that we have not witnessed such a high inflation review in 2018, but I think we should focus on the change of trend, which will be important in 2019, with inflation two-digit, "he said.

"This will be a significant change in trend and as long as monetary and fiscal objectives continue to be achieved, this will lead to a stabilization of the inflation rate at a single-digit level over the medium term", he said. -he adds.

In its latest commentary on Argentina, the Fund recalled that "the government's stabilization plan, based on revised and strengthened monetary and fiscal policies, had helped to mitigate the financial turmoil and stabilize the rate. exchange rate ".

Werner stressed that "it would always be better if inflation is lower than higher inflation", but insisted that monetary policy that continues

Guido Sandleris

at the Central Bank "gave a lot of predictability" and gave favorable results. From the first negotiation, monetary policy was the most delicate issue in the negotiations with the Fund and, after the failure of the inflation targeting system, organizations now believe that the framework is the right one and that it would be better to avoid any retouch or change of rudder.

"Inflation and inflation expectations have been trending down since October, and all indications are that they would continue to decline slowly in 2019. This would allow for a gradual reduction in the interest rate badociated with inflation. an increase in real wages and exports., this would generate a recovery of economic activity from the second quarter of 2019 ", writes Werner in his commentary on Latin America.