On January 10, the Minister of Economy, Luis Caputo, at a press conference with the President of the Central Bank of the Argentina Republic (BCRA), Santiago Bausili, announced the reactivation – at a technical level – of the agreement with the International Monetary Fund (IMF), which, after being approved by the Executive Board of the multilateral financing organization, will imply a disbursement of 4.7 billion dollars (USD) destined to pay commitments acquired with the same Fund. It is very unlikely – if not impossible – that the Board of Directors, fully supportive of the government plan of La Libertad Avanza (the right-wing political alliance in power now), will disapprove the new conditions of the historic loan that Mauricio Macri took between 2018 and 2019.
The IMF technical staff, made up of the deputy director of the Western Hemisphere Department, Luis Cubeddu, and the head of the Mission for Argentina, Ashvin Ahuja, together with the Minister of Economy, Luis Caputo, the President of the BCRA, Santiago Bausili, and the Chief of Staff of the Casa Rosada, Nicolás Posse, prepared a report that – in the coming weeks – will be submitted to the Executive Board of the IMF for approval. In this report, reference was made to the fact that the agreement aims to restore macroeconomic stability and get the current program back on track, since key objectives were not achieved (…) due to serious setbacks in the economic policy of the previous government.
The IMF defended Milei’s government plan: “The new administration inherited an exceptionally difficult economic and social situation, with macroeconomic imbalances (…) that reflect incoherent and expansionist policies.” “Continued dependence on Central Bank financing and interventionist measures led to further deterioration of the Central Bank’s balance sheet and excess commercial debt of importers. Real wages continued to fall and poverty is estimated to have exceeded 45%” , in the southern country. “The program (under the previous government) seriously deviated from its course,” stated the IMF technical team.
Continuing to support the current government, the report maintains that: “President Javier Milei and his economic team acted quickly and decisively to develop and begin implementing a solid package of measures to restore macroeconomic stability.” (…) Argentine authorities “are in the process of seeking social and political support for their stabilization plan” to “create a simpler, rules-based and market-oriented economy. The plan contemplates an increase in social assistance to protect the most vulnerable.” “Although the path to stability will be difficult, as conditions will worsen rather than improve, initial measures managed to avoid an intensification of the crisis,” maintains the IMF technical team.
In the press conference, Caputo explained this in his own terms as the result “of the failure to meet goals” and the “loss of credibility that occurred in the last two quarters of 2023 of the previous government.” The current holder of the Economy portfolio, who was also Minister of Finance (2017-2018) and, briefly, President of the BCRA (2018) during the administration that took the largest loan in the history of the IMF, that of Mauricio Macri, explained that Argentina’s structural financial problems are due “to the addiction to excess public spending, that is, to the fiscal deficit, which ultimately generates all the problems that Argentine society suffers.”
For his part, the Argentine president posted a Press Release that had published the account of the Office of President Javier Milei on the social network dollars of the debt contracted by former President Alberto Fernández”. This generated criticism and among them the response of former Economy Minister Martín Gúzman who described the statement as “shameful” and stressed that “the manipulation of public opinion is worrying, especially if it is from official sources.” “All the debt with the IMF was taken by the Macri government between 2028 and 2019. And it did so without going through the National Congress. (…) In December 2019 the debt with the IMF was 44.5 billion USD and today is still 44.5 billion,” Gúzman concluded.
Fresh money
Milei’s Economy Minister maintained that the IMF is open to studying a new agreement that involves “fresh money” or a new loan and outside the current agreement (Macri’s), however, Caputo clarified that although in December In 2023, a loan had to be requested from the CAF (Development Bank of Latin America) for an approximate value of 1 billion dollars to avoid entering into Default with the IMF, the LLA government considers that “it is on the right path and Thanks to the fiscal adjustment and the income of the agro-export sector, a new agreement will not be necessary.” It should be noted that the new goal for the accumulation of international reserves for 2024 is 10,000 million dollars; in December 2023, these BCRA reserves were 2,700 million dollars.
Since the 8th review (there are 10 reviews in total) of the agreement with the IMF will be carried out at a technical level next May 2023, here it will be known with greater certainty whether or not the Argentine government will need fresh money, always subject to the approval of the Board of Directors. Executive, depending on how the new goals between Argentina and the International Monetary Fund have been met.
Final reflections
The International Monetary Fund (IMF) has once again come “to the rescue of the Argentine economy”, when in reality the IMF cannot solve the monetary, fiscal, and macroeconomic problems of the southern country. For his part, the Argentine president has maintained that Argentina’s problem is the fiscal deficit, it is the “political caste”, it is the State (government) forcing the Central Bank to print money that has led the country into external debt.
In this new reactivation of the negotiations on the Macri agreement (2018-2019), the Milei government seeks to emphasize the fact that the agreement of the Alberto Fernández government had fallen, due to the failure to meet goals initially established by the former Minister of Economy, Martín Guzmán, and later by the person who replaced him when Guzmán resigned, Sergio Massa (the presidential candidate who lost infront of Milei). The truth is that the International Monetary Fund fully celebrates and supports Milei’s government plan, and, for this reason, there will not be any shock or disagreement between the Argentina of La Libertad Avanza and the IMF.
Meanwhile, the economy that is coming for the vast majority of Argentines will not be this benevolent: tariff increases, inflationary rise, devaluation of the Argentine monetary cone, collapse in consumption, fall in production, increase in unemployment, poverty and destitution. The crisis has and will have the perfect culprit: “the Kirchnerist and Peronist governments that took Argentina from being the richest country in the world to absolute decline” or, as Caputo said, “the addiction to excess public spending,” which in reality would be investment in social matters to raise the quality of life of the vast Argentine working class.
