“And what do we plan to do with the IMF?” asked the deputy Maximum Kirchner in Congress speaking to his deputies, shaking his head and searching in an inquisitive way the eyes of his peers on the bench. He spoke to his deputies and at the same time to the whole country since his speech in the Chamber of Deputies, half a year ago.
The son of the Kirchner leader sounded very angry: the president Alberto Fernandez I finished of “waver” and repeal by decree a “negligence clause” that prevented vaccines manufactured in the United States from reaching Argentina. More and more Argentines were dying from COVID, and the vaccines that the Government had bet on (the Russian Sputnik, the Chinese Sinopharm and the one from AstraZeneca) were not arriving in time and form, as the President had promised.
Read also: Martín Guzmán assured that he has the endorsement of Cristina Kirchner to close an agreement with the IMF before the end of the year
According to the son of Vice President Kirchner, Argentina had just knelt before the large laboratories. It is not something that now has to “kneel down” also before the International Monetary Fund.
But after the electoral defeat of Kirchnerism, President Alberto Fernández can no longer procrastinate an agreement with the IMF that stretches a debt with strong maturities in the next two years.
Máximo’s alternative, which tacitly suggested not paying the IMF or demand delusions such as change its statutes for Argentina, it would only lead to default. A default with the Fund at this point would aggravate the economy in such a way that it would call into question the governance of the country probably before 2023.
Argentina staggered because the President was postponing all opportunities to close an agreement with the international organization to give some certainty to the economic catastrophe that Argentina became.
He could have done so as soon as the agreement with the private creditors was signed. Could have taken advantage of a Fund more “Understanding” at the height of the pandemic. But he let time go by. Máximo Kirchner, with his inquisitive gaze on Congress, gave the key: her mother seemed not to like the idea that Kirchnerism would close a debt deal with the IMF that, according to the story, only served to prop up the government of Mauricio Macri.
Confession of President Alberto Fernández: “I do not like economic plans”
Added to this are President Fernández’s own words: he left the markets speechless shortly after taking office by stating that he “He doesn’t like them” economic plans. He did not say so at a meeting of the hyper-Kirchner organization La Cámpora. He told a journalist from the newspaper Financial Times, one of the main “bibles” of the financial markets.
Little sense of timing for a politician who tends to tell everyone what they want to hear. That untimely confession embittered the already low expectations that the arrangement with the private bondholders had generated. Precisely, that negotiation should have been the first brick of an economic plan and a quick agreement with the IMF to leave behind two decades of high inflation, stagnation and increasing poverty.
Wouldn’t the result of last Sunday’s elections have been different in which the Government “lost by winning or won by losing”, according to your peculiar interpretation?
Now from “I don’t like plans” the President went on to promise a mysterious “Multi-Year Plan”. It sounds like a Five-Year Plan, like one that Juan Domingo Perón presented and it did not work, or the infamous Five-Year Plans of the former Soviet Union: they were made, they were presented with great fanfare and then they could never be fulfilled, because the state was tremendously inefficient. to meet the minimum needs of Russians.
Late, but it is clear that the President realized that it is less embarrassing to the electorate himself to present an economic plan that seems “his own” before it “Run to the left” with an “IMF adjustment plan”: Already in December, 2,000 million have to be paid due and it is not clear if there are enough reserves, or where the money will come from. In the next two years, 20,000 million each will expire.
It is an insignificant debt in any country in the world, which could be covered by issuing new debt or by refinancing it with the IMF itself. But it is the end for a country -like Argentina- that It was left with practically no reservations and to which no one is going to lend it for many years, Except for the IMF itself or multilateral organizations, such as the World Bank or the IDB: and none of these institutions can lend without prior agreement with the Fund.
In the weakness of the electoral defeat, the Government could lean on the opposition that won the elections and do what the former president himself did not dare to do Mauricio Macri: a kind of Moncloa Pact, like that of Spain in the 70s, to agree among all the urgent structural reforms so that the country can grow again, put an end to chronic inflation and attract investment.
Macri could have done it after his electoral victory in 2015 and the strong ratification he had in the 2017 legislative elections. Now, Alberto Fernández, who shortly after winning the 2019 presidential elections promised an Economic and Social Council for the reforms to be agreed upon by businessmen and trade unionists (which never happened), could have called an “Argentine Moncloa” on the same electoral night.
Read also: As of Monday 15th, Argentina needs a “Moncloa Pact” … but it is almost impossible
Well, he did just the opposite: he recorded a speech with a “statesman” tone the night of his defeat in which he once again blamed the government of his predecessor, Mauricio Macri, for the economic crisis. The President denied that he had been defeated at the polls, called for a march for 72 hours later in the Plaza de Mayo to celebrate the “Day of Peronist Militancy” and, the icing on the cake: loudly, he said that with Macri or with the liberal elected deputy Javier Milei he had “nothing to talk about.”
It is a bad sign for the markets that it will not serve to improve its “electoral economy” in the two years until the presidential elections of 2023.
To make matters worse, he tied his hands and feet, promising quite irresponsibly that he did not think “lower public spending ”. That can only be achieved in three ways: by increasing taxes, or by printing more pesos. The third option is to generate a lot of growth. But that option would only be available if the previous two do not occur and with an economic stabilization and deregulation plan that is credible and generates enthusiasm.
In desperation and haste, Alberto Fernández is asking Congress for all kinds of new taxes before the new legislators take office in three weeks: taxes on packaging and cryptocurrencies are among the first inventions. Let’s wait more for the next few days. Only the tax on the air you breathe is missing. Today Argentina is already the country with the highest tax pressure in the world, not for nothing is the economy doing so badly and the results of the government elections were so bad.
The mere agreement with the IMF without a credible program will only serve to anger Máximo Kirchner and will hardly bring strong growth with stability to change economic and electoral expectations in the next two years. Wouldn’t the President need to make a small Moncloa Pact with his vice-president beforehand?
Later, he could ask the opposition for an agreement in Congress for reforms that allow him – and the vice president herself – to improve economic expectations and, eventually, obtain a better result in the 2023 elections. Argentina, which approaches 50 percent poverty, I would end by thanking you.
