Alberto and Cristina’s “novela”: he sends signals, while she faces a very difficult dilemma

There is a date that the entire political sphere has marked in red on the calendar: Tuesday, February 8. That day Alberto Fernandez has its last leg of the international tour, with a stopover in Barbados, and returns to the country. Which implies that from there Cristina Kirchner she ceases to be interim President and recovers her “freedom” to make political statements without affecting institutional normality.

Up to now, Alberto Fernandez ran with political advantage in the dispute that separates both on the agreement with the IMF. The President was able to make statements about the negotiation, about Máximo’s resignation from the leadership of the block of deputies, he was able to attribute to Cristina herself a disagreement with Máximo and dedicated several sentences to her that the vice president was not in a position to answer.

For example, that the world was no longer the bipolar of the cold war as she thought, and that neither disbursements from the Russian Fund for Direct Investment not even the new swap of the People’s Bank of China could arrive without first finalizing the agreement with the IMF.

And, linking with Cristina’s remembered phrase about “the pen was, is and will be the President’s”, she explicitly said that the agreement with the IMF was going to be signed despite the differences in vision of the vice “Because I am the President”.

At the moment, Cristina is unable to respond while she is in office due to Alberto’s tour, but everyone rules out that, as happened in other key moments of the ruling coalition, a decision will come, in the tone of her post letter STEP titled: “As always, honestly.”

In recent days, the demand has been increasing -especially from the opposition, although in a low voice also from Peronism- for the vice president to break the silence and give the signals that everyone wants to see: will there or will not be a break between Kirchnerism and government? Will the votes be given in Congress to approve the agreement? And in the event that you vote with conditions, what will they be?

Alberto Fernández with Russian President Vladimir Putin: the Argentine stressed that, without an agreement with the IMF, there will be no help from other powers

A high cost decision

Cristina knows that her word is expected not only by the political environment but also by the financial market and by the Monetary Fund itselfwhich not by chance made it a condition for the signing that the Government ensure “the broadest political and social consensus”.

In principle, the reaction of the market has been ambiguous. Investment fund strategists believe that Cristina will not go so far as to break with the President and bring down the agreement with the IMF. However, the volatility continues and the blue is heading again to its maximum in the difficult month of February.

Now Christina faces a dilemma: if he aligns himself with Máximo’s speech and hints at his rejection of the agreement, then that will imply the rupture of the ruling coalition, and a high probability that the deal with the IMF will fall through. But Cristina does not want to be accused of pushing for default, much less of destabilizing a Peronist president.

If, on the other hand, she is in favor of the agreement, she will not only be contradicting Máximo’s arguments, but also those of herself, who on several occasions publicly warned about the risks involved in negotiating with the Fund.

There is a tendency among analysts to believe that Cristina will not force a breakbecause it would imply a Peronist defeat in 2023. “There are late-nighters who would like a break now, but that makes things much easier for the opposition,” says pollster and political scientist Carlos Fara.

“Many shareholders -governors, trade union mayors, those who asked for rationality and settlement with the Fund- are going to work to suture wounds and lower the volume because this government has half the mandate ahead of them,” he observes.

In the Government they believe that, finally, the votes will be in Congress to approve the agreement with the IMF. Although it is not so clear if the debate will be express, as Alberto wants, and without touching a comma of the original text, or if there will be modifications, as already announced Leopold Moreau which is the intention of Kirchnerism.

The “soft deal” arguments

In this case, news is circulating that may favor Alberto to soften Cristina’s position: contrary to what he said Martin Guzmanon the fact that the disbursements of the Fund would arrive in drops before each expiration, now there is the possibility that there will be a first large disbursement for a figure of around US$15,000 million.

At least, that is what the minister is trying to do. That figure, added to the US$5 billion that would re-enter from the SDR quota -which the IMF gave to its partner countries to help offset the effect of the pandemic and which Argentina used to settle the last three payments- would make up a cushion that would almost ensure payments for this entire year.

This fact would dissipate one of the issues that most fear and irritate the K universe: the possibility that, in the event of a breach in the fiscal plan or an unexpected event, the IMF could cut off the flow of funds and push the country into an unwanted default. .

The coming of the quarterly missions would not be eliminated, an image that Kirchnerism detests because it assimilates it to an intervention by government management and fears that it could subtract “symbolic capital” from the militancy, but it would provide predictability in terms of cash management .

The truth is that within Kirchnerism there is also a pragmatic wing that pressures Cristina to express her support for the agreement. They affirm that if there is an electoral defeat it will not be because of the missions of officials – something that ultimately will only be material for Chicanas on social networks – but because of the lack of control of inflation and the drop in wages.

And that is why at this time they are analyzed with a magnifying glass IMF agreements in other countries. Some do so with the aim of highlighting the “soft” nature of the deal with Argentina; others do it as a warning that an agreement can lead to a crisis.

Emblematic cases such as Portugal and Greece meant harsh adjustments and drops in income for public employees. And they derived, in the Greek case, that a left-wing coalition broke up and the president depended on the support of right-wing forces, a situation that many wonder if it could happen in Argentina.

Closer in time, agreements were signed with two African nations, Gabon and Kenyawhich implied much more demanding fiscal goals than the one reached by Argentina: they must reach a zero deficit in a period of just two years.

Ricardo Delgado, director of the Analytica consultancy, maintains that, next to these cases, Argentina’s four-year path is loose. “Reducing the primary deficit by half a point of the product this year, according to our calculations, can be achieved with lower expenses in items associated with Covid-19 (which represented 1.6% of GDP in 2021) and greater segmentation in energy rates, the point made by the Fund”, he argues.

In the last few hours, Kirchnerism also began to study the case of Costa Ricawhich committed to structural reforms, for example in the pension system, which finally encountered political obstacles to be approved, which led to a cut in IMF disbursements.

This example is pointed out, on the one hand, as a warning about the potential harm of failing to comply with any of the committed points, especially in an election year. But, on the other hand, it is also a reminder that Alberto Fernández is right when he speaks about the absence of political conditionalities in the agreement with Argentina.

Finally, from abroad arguments also arose to support the agreement that Cristina will not be indifferent to. One is from her favorite economist, the Nobel laureate Joseph Stiglitzmentor of Minister Guzmán.

“The IMF did not insist, as it usually does, on austerity. Instead, the agreement gives Argentina space to continue its economic recovery,” wrote Stiglitz, who even hints that the Argentine case could become a model to be used future by other indebted countries: “The Argentine deal gives them hope that they can turn to the IMF without it imposing damaging austerity and other counterproductive conditions.”

At the other end of the ideological arc, the influential daily Financial Times he did an involuntary favor to Alberto Fernández when complaining, in an editorialabout how soft the IMF’s attitude had been and having asked for greater demands on Argentina.

Cristina with Joseph Stiglitz: for the economist, the Argentine negotiation with the IMF could be a model case

Cristina with Joseph Stiglitz: for the economist, the Argentine negotiation with the IMF could be a model case

Suspicion of fit and reasons to break

Of course, Cristina also has her reasons for criticizing the agreement and sustaining the reproachful tone that her son has already begun.

She is angry because she thinks that Alberto is not tough enough in the speech about the inheritance received. In Kirchnerism they wield the fact that the latest surveys show how for two thirds of the population, the debt is a responsibility of this government and not of the macrista management.

In addition, he believes that not enough was done to make the Fund pay the political cost of having supported Macri with a program that not only failed, but has been criticized for violating the organization’s own statute. Cristina has made it clear that this situation should lead the Fund to have some differentiated treatment with Argentina.

But the request for 20-year financing failed, with the claim for the elimination of over-rates, and there was never a formal response to Cristina’s initiative in the sense that the IMF would help solve the problem of the “bimonetary economy.” Argentina by combating capital flight to tax havens.

From Cristina’s perspective, then, the fact that the zero fiscal deficit will only arrive in 2025 is not seen as a political victory but almost as a consolation prize. Something that Máximo already outlined when he asked for “call things by their name” and stop talking about tough negotiations.

In fact, Cristina has a suspicion that is even reflected in liberal media such as The Economist: that in reality what at first glance seems like a gradualist scheme is not so much. Because, if last year’s extraordinary income had not been accounted for, the tax redundancy would not have been 3.3% but 4.5%.

Consequently, he fears that the real cut should be two points of GDP and not half a point. And that the real adjustment comes from the inflationary liquidation of public salaries and pensions, something that he considers the prelude to an electoral defeat. Not by chance, private unions are closing above 50% and they ask for a new joint model with permanent review.

In short, Cristina has powerful reasons both to save the agreement and to condemn it. It’s her dilemma and her internal debate between her strategic side, which leads her to tolerate it, and her instinctive side, which drives her to confrontation.

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Alberto and Cristina’s “novela”: he sends signals, while she faces a very difficult dilemma