Without interrupting the negotiations, Martín Guzmán is already designing strategies to reach the end of the year without agreement with the IMF

More and more voices take for granted that the agreement with the International Monetary Fund (IMF) to renegotiate the debt amounting to $ 44 billion will remain in effect until after the midterm elections. They admit it within the economic portfolio, in the Rosada and even within the multilateral credit organization itself, where they consider that it is better to wait than to sign an agreement without macroeconomic support.

“We are going to continue our negotiations in full awareness and with the firmness that we have always shown, we do not want to rush,” declared the Head of State during his speech at the opening of the legislative sessions. And he added: “Our government, the only hurry it has is to get production and work back on its feet,” he said. And that was not all. What ended up confirming that the deal will stand for later is the criminal complaint he said he will file against former Macrista officials for the debt obtained from the IMF in 2018. They are accused of “fraudulent administration”.

Fernández’s remarks were very badly received by the staff, who warned against a “kirchnisation” of the government., said a source close to the negotiators. And although it seemed that Economy Minister Martín Guzmán would stay away from this controversy – he had not discussed the matter during the day, when other peers, such as the Minister of Development productive, Matias KulfasYes, they had come forward very early to defend the presidential speech, finally he could not avoid the question and was energetic: “The IMF loan was to support Mauricio Macri’s campaign”, he said. he stated in televised statements.

Either way, technical discussions within the ministry with staff members continue – in fact, virtual meetings are scheduled for this Wednesday and Thursday – and in a few days the minister will be traveling to Washington to meet in person with officials. the IMF and representatives of the newly formed North American government Joe Biden.

“The populist radicalization of the government is not good news for Argentines. Making economic policy legal is a great institutional damage. Politicizing debt with the IMF is irresponsible; incomprehensible when the renegotiation of this debt is underway ”, he declared via Twitter the Economist Federico Poli. The Economist APC Furiase, of the consultancy firm EcoGo, agreed that “it is not right to politicize the question of the debt”. “There is debt because there is a budget deficit. We know that in certain periods, it is financed by monetary issues, which then end in an inflationary shock, and in others by indebtedness, which also ends badly, by a currency crisis which also leads to the ‘inflation later,’ he said.

In the economic team, they continue to work to reach an agreement as quickly as possible, but they are already clear that the political decision is not to accept the orthodox recipes to settle scores in an election year where the government is putting a lot at stake. Worn out by the pandemic, the economic consequences and the scandal of the VIP vaccines, the Alberto Fernández administration will seek, in number one priority, to improve the pockets of the population this year. In fact, the plan to increase the minimum tax on non-taxable income goes in this direction. The same goes for segmenting the tariff adjustment and proposing a new revision for 2022. All the decisions that do not go well with the body, which calls for a larger budget adjustment, less monetary stake and a reduction in the exchange difference.

The question they are asking in the market is how the government will reach the STEP, scheduled for August, without an agreement with the IMF. But what until a few months ago seemed unimaginable, has now become possible thanks to the Fund itself, which will make a new issue of Special Drawing Rights (SDRs) and some 3.3 billion USD would reach Argentina, and the countryside, which projects – if there are no weather surprises – a very good harvest with prices much higher than last year. According to industry estimates, around $ 30 billion could be settled this year, up from $ 24.5 billion in 2020.

If the transfer of the SDRs were to take effect, the first installment of the IMF’s capital could possibly be paid with these funds, as well as part of the interest which decreases in the months to come.

Debt maturities for the full year stand at $ 10,444 million, according to figures reported by EcoGo. Of this amount, USD 5,179 million correspond to commitments to the Fund (USD 3,812 million in capital and USD 1,367 million in interest); $ 2,419 million increases debt to the Paris Club; and the rest was contracted with the IDB, the World Bank and other multilateral organizations.

Regarding the debt to the Fund, interest remains in 2021, maturities of USD 1,100 million, distributed in May, August and November, while the main maturities are in September and December, for USD 1,920 million each. If the transfer of the SDRs were to take effect, the first installment of the IMF’s capital could possibly be paid with these funds, as well as a part of the interest which decreases in the months to come. It would also help, analysts say, field dollars, since the central bank could buy these currencies, it would increase reserves and with it could face higher debt repayments.

The responsibility vis-à-vis the Paris Club expires in May and the maximum time that the Government could take to make the payment is two months, that is to say until July 30, according to a clause of the agreement signed in 2014, during the administration of the old one. Economy Minister, Axel Kicillof. Could the government ask this group of countries for an extension of the term while it continues to negotiate a facility extension program with the IMF? If at another time this would not have been possible, the context of the pandemic favors these types of requirements., the sources of the market coincide. For now, after visiting Washington, Guzmán plans to make a road show in Europe where he will meet officials from these countries. The bet is to get the dollars to delay the agreement with the IMF as long as possible. Today the odds are high. Elections take priority.

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