Help requested in April that arrived 4 months later | The International Monetary Fund and the good offices of new financial partners faltered

The four months of negotiations with the International Monetary Fund – which culminated last Wednesday – for a new distribution of resources have left, at the same time, a bitter aftertaste for the Argentine authorities, but also a relief for the new relations that open up a different expectation. Negotiations began at a request from Argentina last April in order for the fund to allow an “advance” for expected payments until the end of the year, or about $10 billion, to meet emergencies and obligations (including the maturity of the debt itself with the International Monetary Fund), considering that the country suffers from Shortage of foreign currency due to the dire consequences of drought. In response, the International Monetary Fund turned Argentina’s “state of emergency” into a long, intricate process that yielded results only this week, or four months.

“They[the IMF officials]questioned the figures we presented regarding the impact of the drought, insisting all the time that the problem was the delay in the exchange rate and demanded a massive devaluation. And so they brought us to the point of confronting the drought.” They fled the place of the lender of last resort to become creditors demanding payment of maturities, and instead, those who reached out to us to save the emergency were the Confederation of African Football (today the Latin Development Bank). America), the Bank of China and the Qatar Development Fund, which allowed us to avoid defaults through bridging loans that were approved within hours,” said a member of the delegation who participated in the activities in Washington last week.

The culmination of this four-month episode with the disbursement of $7.5 billion, which entered into force on the same day of approval, also occurred in parallel with the approval of Argentina’s entry (along with five other countries, three of them from the Arab world) into the BRICS group, the door that opens before a nucleus abounding At the same time, in countries with high financing capacity and great demand for goods that Argentina can produce and export.

It is clear that the recent negotiations with the IMF focused on the emergency, resolving the situation, and removing concerns about new maturities. As for the following commitments with the International Monetary Fund, they are worth $923 million on September 21, and $2,652 million on October 30. It suffices to reserve part of the current exchange to pay it off, but the Central Bank has also begun to recover reserves.

“But it was not because of the devaluation, but because of the tax measures we applied on imports, which are criticized by the IMF but have been more efficient in accumulating reserves than the devaluation that was imposed on us from August 14,” they stressed. Economic leadership. The discussion that is not anecdotal, but its suggestion, and a review of its consequences in terms of inflation and social tension, must have been the harshest moment in the face-to-face verbal exchange between Sergio Massa and Kristalina Georgieva after the crisis. Approval of the exchange.

There was also an opportunity to think, during this trip to Washington – Massa traveled with half of the members of the economic team – about alternatives to external financing that could be opened to a potential government headed by the current minister, while benefiting from existing relationships. in recent months.

“We’ve made a lot of progress with China. We’ve had a swap agreement that’s been in effect since 2009, but only this year we converted it to fund imports directly in yuan; less than six months after it came into effect, overseas purchase payments” in yuan account for 25%. of the total. This means that it has replaced the use of the dollar. It’s not a little, right?” Comments a high-ranking source from the official delegation.

Additionally, due to an emergency expiration situation with the IMF, the People’s Bank of China made a temporary rollover of the equivalent of $1,700 million in freely available swap funds, which was used to make the payment to the agency. Funds that have been exchanged immediately after the central bank receives the transfer for exchange.

The other fact is that the interest rate that China charges for these financial operations is 30% lower than the rate charged by the International Monetary Fund. It’s said in numbers: If the interest rate (including surcharges) of the IMF were in the range of 6.5 per cent, the swap rate would be about 4.5 per cent.

Another relationship of great interest to the economic team is the result of the efforts made against the CAF (Development Bank of Latin America) as well as the Qatar Investment Fund, to obtain bridging loans that would allow the country to be rescued from the alley. Delivered by the country’s International Monetary Fund in July. Not only was the solidarity stance appreciated, but it began to be seen through projections what it would mean to revitalize the role of CAF in the region and strengthen the relationship with Arab investment funds, which are official funds and are present in many countries that have and offered their services to the homeland. It is, in addition to Qatar, money from Saudi Arabia, Kuwait and the Emirates. As for the first and third countries, they are also newcomers to the BRICS group, along with Argentina.

Such is the expectation that this new method of financing can hold, that in Sergio Massa’s head there is a proposal, which he is believed to have been already discussing with his current team-mates and even the leaders of the countries: open the doors of CAF so that they can. Entering as shareholder partners in the capital of some of the aforementioned Arab funds. Close to Massa, a confidant reviews some notes and points out that “CAF’s current capital is about $8 billion, and the entry of Arab countries could contribute about $2 billion more in the first phase. To measure the loanable capacity, the capital provided should be.” It should be increased fivefold. In other words, we are talking about increasing the lending capacity of the Development Bank of Latin America by $10 billion.”

CAF has partners not only with Latin American and Caribbean countries, but also with European countries and even private banks. However, the possibility of entering the Arab countries does not contradict.

Excessive enthusiasm? In some team members, there is even an expectation, or intention, to go above and beyond. “If we enhance the lending capacity that will be contributed by the strengthened CAF, the exchange agreements with China, the direct financing of the Arab funds and add the entry of Argentina as a client of the BRICS Bank, we can say that we face the opportunity to completely replace relations with the IMF and the World Bank: even at a lower financial cost. Certainly, with fewer conditions for our policy.”

Whether this is possible or not, it will be a topic for another trip.