Paris Club: what is the government’s deadline to avoid a default with this group of countries during negotiations with the IMF

The director of the Western Hemisphere department of the International Monetary Fund (IMF) already said on Monday, Alexander WernerRegarding the possibility of the government reaching an agreement with the organization in May: “I do not see this as unworkable. It is an ambitious date ”. These statements confirmed the versions that have started circulating in recent weeks about the possibility that the negotiations will be stretched more than necessary and that the economic team will not meet the target for the fifth month of the year.

Why are we talking about May? Because On the 30th of this month, the debt with the Paris Club expires, amounting to 2400 million USD and this group of countries would only agree to restructure it if Argentina signed an agreement with the Fund.. The Minister of the Economy, Martin guzmanHe will put all his efforts, and he has said it, to get to that date, but he has a trump card up his sleeve in case the negotiation takes a little longer. As confirmed by official sources, a clause of this agreement signed in 2014 by the head of the economic portfolio at the time, Axel Kicillof, establishes that after this period, “There is a 60 day window in which the Club can report the defect.”

That is to say If the time has not come to conclude the agreement with the IMF, the government has these two additional months to avoid defaulting with the Club countries. Creditors could, if they wanted, declare the default sooner, but no one in the economics team or at Casa Rosada thinks this is feasible, especially since the Club members are the same as the Funds. However, once that period has elapsed, if the deal is not in place, the country must pay or it will default.

Negotiation with the presidential body Kristalina Georgieva pushing back the $ 44,000 million deadlines is going slowly. Sources close to the negotiation recounted Infobae that IMF staff are waiting to see an economic program; and that the main discussion between the parties today is about the figures for inflation, the budget deficit and the exchange rate. “They are waiting to see a program. Guzmán tells them that the program is the budget, but not only is it unreliable, but they are also looking for a plan for 2022 and 2023. The IMF is thinking about medium-term fiscal sustainability and this cannot be guaranteed with the model current, ”said a source familiar with the discussion.

Werner also spoke about it a few days ago. Asked about the acceleration of inflation, he clearly stated that “staff’s opinion is that the most important point in reversing the upward trend lies in medium-term fiscal and monetary policies, and not so much to operate directly on certain prices regardless of their importance ”.

In all cases, negotiations between agency staff and the economic team are continuing. In fact, it appeared that the Minister would be traveling to Washington in the next few weeks to hold face-to-face meetings with IMF officials and would also take the opportunity to meet with the new US Secretary of the Treasury, Janet Yellen.

“The geopolitical factor, the risk that Argentina will end up strengthening its ties with China and turning to this financial of last resort, will undoubtedly be a factor that will weigh on the G7 to end up accepting a low intensity agreement for the refinancing of the IMF loan to Argentina ”, the economist and former director of the IDB for Argentina and Haiti at the IDB considered, in consultation with this media, Federico Poli.

The feeling that the Monetary Fund technicians who negotiate with the economic team have is that everything will be done to achieve objectives consistent with a sustainable plan in the medium and long term, but that in the end, the resolution will be more political than economic

In turn, the former representative of Argentina at the IMF, Hector Torres, noted that “for the IMF, an Extended Facilities Agreement (FEP) is a way to help countries that need long-term financing to implement reforms that need to be do it slowly and sequentially, but it seems that the government is seeking with the EFF to extend the maturities with the Fund as much as possible ”.

He recalled Georgieva’s recent statements on negotiation that “it takes two to tango” and that both sides need to do their job and find a way to come to an agreement. “We are not yet at this stage of a full agreement,” said the head of the agency a few days ago. “Beyond the usual courtesies, Kristalina Georgieva seems to be looking for answers to two questions:Is there agreement within government policy space on the structural reforms that would be needed (if necessary) to make the economy competitive? Does the government have the political capacity and the intention to agree with the IMF on the reforms that Argentina’s economy needs?Torres added.

The feeling that the Monetary Fund technicians who negotiate with the economic team have is that everything will be done to achieve objectives consistent with a sustainable plan in the medium and long term, but that in the end, the resolution will be more political than economic. And that ultimately the agency will accept a more flexible plan. Elections over, the government will not accept guidelines that jeopardize victory in the midterm elections.

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