International banks warn Argentina must speed up deal with IMF to deal with “Doomsday”

International banks have asserted in a biblical tone that Argentina will have to sign a program with the International Monetary Fund (IMF) because of its precarious financial situation.

And north of the Rio Grande, the situation of her “friend”, the Managing Director of the Fund, Kristalina Georgieva, is getting more complicated every day, which, although she is not fired in the short term because of the political difficulties that her replacement implied. , has remained very weak in the multilateral forum.

A report by the Institute of International Finance (IIF) noted that “In Argentina, the allocation of Special Drawing Rights (SDRs) has implications for the timing of a new IMF program.”

“Despite favorable commodity prices, some FDI inflows and strict capital controls, the country remains in a precarious external financing situation” (IIF)

However, economists of the thinking group international banks have specified that the country will have to face in a few months the “Judgment Day”.

“Despite favorable commodity prices, some FDI inflows and strict capital controls, the country remains in a precarious external financing situation”, noted the team of economist Robin Brooks.

In this regard, they warned that “The external debt being still impossible, Argentina will have to return to the IMF to manage the repayments of the previous program which started in September”.

“We believe that even taking into account a current account deficit in the fourth quarter of 2021 due to seasonally weak exports, liquid reserves will not be depleted after returning $ 3.7 billion to the IMF this year.”

They immediately made it clear that “A new program before March 2022 is inevitable; if the SDR had not been awarded, the apocalypse would have arrived in December ”.

In this sense, two executives of the financial world who were in meeting this week with foreign investors declared Infobae What, Since the ruling party’s defeat in the primary elections, there has been more interest in Argentinian assets, although some are waiting for a confirmation of the results in November to buy at cheaper prices.

The electoral cycle leading up to the November elections will be marked by increased spending, which could translate into greater challenges to contain macroeconomic imbalances (Torino Economics)

“A lot of people want to invest and I tell them that the Kirchner risk that scared them so much has gone down a lot, so Argentinian assets need to be revalued. In addition, I clarified that there is no money to spend and, if they print it, the crisis will be worse ”, explained the businessman, who suggested to them“ d ‘buy dollar debt under New York law and wait’.

His peer remarked that “The mood is bad, but at least the interest has increased; there are some optimists, but in general investors think that a crisis is coming and they will buy cheaper ”.

In this sense, a report by Torino Economics indicated from New York that after the PASO result, “Argentina’s already fragile economic situation is undergoing even greater turbulence”.

“Despite public criticism of economic management Cristina Fernandez de Kirchner, the economic management structure, which directs Martin guzman, remained intact. Even if it remains to be seen whether there will be a change in economic direction ”.

And although the result came as a surprise to investors, the political earthquake within Frente de Todos, the consultancy firm Torino Economics does not exclude “a scenario in which the Fernández administration becomes radicalized before the November elections”.

It would be given “through the implementation of a series of policies to reduce budgetary expenditure more broadly, which translate into increased pressures for macroeconomic imbalances, including the budget deficit and the exchange differential between the parallel dollar (blue) and the official exchange rate, ”Torino said in his post this week.

A priori, they indicated, “the electoral cycle for the November elections will be marked by an increase in spending, which could translate into greater challenges to control macroeconomic imbalances, in particular the budget deficit and the exchange rate between the parallel dollar (blue) and the official exchange rate ”.

“The last four IMF officials have been in trouble with the law: Rato ended up in prison for embezzlement; Strauss Kahn sued for sexual abuse; Lagarde convicted, although without a pronounced conviction and now Kristalina, troubled ”(Torres)

On the other hand, he warned that “liquidations for exports in the agricultural sector will be reduced, which in turn will reduce the room for maneuver available to the Central Bank to recover the level of liquid reserves”.

“The legislative elections in November could mean the ratification of unfavorable results for the ruling party, which would imply an adjustment of the balance of power within the Chamber of Deputies and the Senate, which would cause the ruling party to lose absolute majorities. necessary to approve, without having to agree with the opposition on vital issues such as the new financing agreement that would be being negotiated with the IMF, ”they expressed from Manhattan.

Georgieva, more and more complicated

Across the counter, growing discontent in Washington with the Managing Director of the Fund, Kristalina Georgieva -Reflected in The Economist and Financial Times- it will complicate a rapid resolution of the negotiations, because, if it is not moved, it will surely be weakened and at the mercy of a “double tightening” of the technical staff and representatives of the G7.

In this regard, the technicians of the agency and its main shareholders agreed to emphasize, with nuances, that Argentina must have a clear economic program, with deep reforms that allow it to again accumulate reserves, reduce the exchange rate differential and budget deficit, grow again and be able to pay off her debt when she cannot regain the voluntary capital market access she lost in 2018.

In this sense, the former Argentine representative at the IMF, Héctor Torres said Georgieva’s situation “is very compromised, but I don’t know if they will push her to fire her”.

“The Europeans want to keep the job in the hands of a European and for that they have to agree on a substitute candidate. Withdraw him without knowing to whom they will propose to offer the possibility of increasing the pressure so that the replacement is chosen on merit, whatever his nationality) ”, he declared.

Torres recalled that “the last four IMF leaders have had trouble with the law: Rato ended up in prison for embezzlement; Strauss Kahn sued for sexual abuse; Lagarde condemned, although without conviction, for mismanagement of public funds when she was Minister of Sarkozy, and now Kristalina, troubled ”.

“According to the Financial Times, ‘Toxic Work Practices – Pressure on Staff to Improve China’s Doing Business Rating.” Beyond that, I think their possibilities of helping us, by making the technical assessment of staff more flexible, have been reduced. If he survives, he will have to align fully with the head of the Treasury, Janet Yellen, read David Lipton, who continue to be highly respected by staff, ”Torres concluded.

Georgieva’s fate appears to be cast, even if she remains in office for some time, since the board of directors of the Fund will launch an investigation similar to that carried out by the World Bank, in which, categorically, she is found guilty of serious irregularities.

“Georgieva has been directly involved in efforts to improve China’s position in the ranking,” said the report of the entity in which the Bulgarian economist became managing director, which concludes that she “Educated” his subordinates to manipulate the World Bank’s corporate index in favor of Washington’s biggest geopolitical rival.

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