The International Monetary Fund statement was somehow a diplomatic but concise answer to the claim of the Argentine government of “Agree without adjustment”. Specifically, the IMF specified that Argentina must: 1) lower the fiscal deficit; 2) reduce the amount of pesos issued by the Central Bank to finance the Treasury; 3) establish a strategy to increase dollar reserves; 4) lower the inflation and 5) seek a monetary policy of positive interest rates.
Amid the hubbub of public conversation “Pimpinela duo” held on Friday night by Vice President Cristina Fernández with President Alberto Fernández, there were some doubts about the royal will of the Government to accept the conditions. Although for economic analysts there are not so many doubts about whether it is going to be signed or not (they think so) but about what is going to be signed and, not least, the chances that Argentina will fulfill what it signed.
Thus, for example, the economist Ricardo Delgador, he told Clarion. “The IMF said what it was expected to say: it asks for an adjustment of the macroeconomy and in my opinion I I saw Cristina resigned but realistic. Anyway there will be no adjustment, neither virtuous nor harsh, because it is very difficult to achieve it with this very complicated social situation. ” On the claim to lower the fiscal deficit, he was also cautious because does not believe that the collection will grow enough to lower the deficit: “The bulk of the collection is for consumption or for contributions to social security, and I do not think that in 2022 we will have a substantial recovery of these two variables.”
An important point is to take the interest rate from negative (lower than expected inflation) to positive (higher). Given the stock of leliqs that the Central Bank has placed, it is calculated that each point that the interest rate increases (38% nominal, 45.44% effective) increases the debt of the BCRA by 40,000 million pesoss, a rise in rates increases the quasi-fiscal deficit.
For Delgado, the Central It will not touch the Leliq rate but it will push a rise in the current account overdraft rate. “It is the rate that the market looks at, because it is what those who have access to the dollar at the official exchange rate pay to borrow in pesos at 33 or 34% and buy dollars. There is an interesting roll there ”.
Gabriel Rubinstein is moderately optimistic. “The Government does not have to make a big adjustment, has to define a pattern of descending fiscal deficit and that is credible. It is possible to do it if you have the will to do it. It can always happen that they do not comply, but the IMF is supposed to will evaluate before signing if what you ask for is compliant or not. In my view, the important thing is that the adjustment is already quite advanced and what is coming will not necessarily be recessive, because ultimately the Government is not financing its spending by liquefying thanks to inflation “. The rate, says Rubinstein, “is more complicated, because if it emits less inflation would drop and then the current rates would be less negative. If the rate is less negative, the exchange gap would also narrow ”.
The Economist Gabriel Zelpo he was very cautious, almost skeptical, about the next steps in the negotiation. “The statement, beyond the statements of local officials, says the IMF wants a classic fix. And the truth is that this leaves the government very uncomfortable, which for now refuses to abandon its position of demanding exotic things, such as a new international financial architecture. Negotiating an agreement takes a long time, time cannot be wasted in discussions that lead nowhere ”.
In his opinion, kicking the ball forward “no more”. And he says: “It is no more because wages in dollars are already destroyed, poverty is going to crystallize at a very high level, inflation will stay above 50%, there are no reserves … the Government is going to have to advance in a traditional arrangement. In addition, the IMF is very interested in an agreement, but it will be somewhat more lax, because knows that the traditional agreement is unfulfilled “. In any case, Zelpo concludes that signing an agreement and complying with it will not bring benefits to the Government, because the impact will be recessive. But not signing or not complying with it will also be very bad for the Government.
Martin Redrado, in radio statements, he noted: “I learned to look at the facts and not so much at the speeches and words. I would not be distracted so much in yesterday’s speeches, but in deeds. I see that the shareholders of the governing coalition all want an agreement with the Fund. Interests converge, even though it is something unwanted, but they know that they have to face this. The problem is how they face it, if it is with an adjustment or if they are looking for a growth program ”. And he predicted: “I see it very difficult to reach an agreement with the Fund before the end of the year. There, the economic team has tried to buy time or play with expectations. Two weeks ago we had a moment of currency tension, and every time there is currency tension, the economic team comes out to say that we are close and that only details are missing. From my experience, I see that there is a long way to go and we have to work a lot in the month of January. The Fund’s bureaucracy until the first week of January is not active. IF one of the issues is deficit financing, I hope the solution is not that of 2018, which is to increase the withholding on exports and thus collect more.”