Argentina’s powerful vice-president Cristina Fernández de Kirchner and her allies in the leftwing administration want to postpone a crucial $44bn debt deal with the IMF until the pandemic has eased, officials said, avoiding painful spending cuts before October’s midterm elections.
While finance minister Martín Guzmán recently said that the government wanted to wrap up negotiations on a new IMF agreement by May — later than the originally touted March — powerful voices in the Peronist government of President Alberto Fernández want an even longer delay.
Argentina, the IMF’s biggest debtor, is mired in a deep recession and is low on foreign currency reserves. A 2018 loan agreement ran into trouble months after it was first signed and the South American grain and beef exporter is vulnerable to another financial market crisis if investors lose confidence.
With more than 50,000 coronavirus deaths, the country is now easing restrictions after one of the world’s longest and strictest lockdowns.
“Cristina wants [to close a deal with the IMF] after the pandemic,” said an influential official close to Argentina’s vice-president, who is also president of the Senate and controls a large Peronist grassroots organisation. The official’s view was echoed by other people briefed on the talks.
The official admitted it was impossible to say how long the coronavirus crisis might last. “It’s not very serious to make an economic agreement at a time when you don’t know if [Argentina’s] economy is going to remain open or closed,” said the official. “We are in an emergency [in Argentina] . . . Let’s not rush this.”
Gerry Rice, the IMF’s communications director, said: “We continue to have very constructive discussions with the Argentine authorities as they work on laying out their economic plan that could be supported by a Fund programme.” He noted that Kristalina Georgieva, IMF managing director, recently said a deal by May would require “further efforts from both sides”.
The bulk of Argentina’s debt repayments to the IMF come due in 2022-23 and a deal with the fund to reschedule them would bolster market confidence. Argentina’s endemically volatile economy contracted by more than 10 per cent last year, its third consecutive year of recession.
Net liquid foreign exchange reserves languish close to zero, threatening yet another devaluation. Argentina’s last currency crash in 2018 precipitated the fund's historic bailout. International investors remain unwilling to lend to Argentina after its ninth sovereign default last year, forcing Buenos Aires to borrow on local markets and print money to cover deficits.
But some members of the Peronist coalition argue that a 30 per cent jump in soya prices since November gives Buenos Aires more time to agree an IMF deal. This would help to avoid the need for politically difficult spending cuts before midterm elections in October, when the Peronists are defending their majority in congress.
“Politically, the best time for Argentina to do a deal is after the elections, but from the point of view of the economy, the best time is as soon as possible,” said one person briefed on the talks.
While President Fernández is a pragmatist and Guzmán a technocratic former academic, Cristina Fernández is known for her incendiary rhetoric against the IMF. She has already claimed that the fund’s agreement with Argentina was illegal and breached the IMF’s own rules because it financed capital flight, an argument the fund has rejected.
Fund officials are understood to be concerned that after more than three months of talks, scant progress has been made. Some worry that once an agreement is signed, clashes are inevitable in the run-up to the election campaign.
“There was momentum [for a deal with the IMF] after the conclusion of the negotiation with private creditors last September, which the economic team lost,” said Martín Redrado, a former central bank governor, referring to the government’s successful restructuring of $65bn of bonds last year.
“Although Argentina needs a comprehensive economic programme to create a path for sustainable growth, it seems that foot-dragging is convenient for both parties,” he added.