The fine print that does not close and the wink that does not arrive

Due to a perverse paradox of fate, last week’s hermetic negotiations between the Monetary Fund and the delegation that chartered Martin Guzman to Washington they passed in the imposing hall “Eva Peron”From the Argentine embassy in that capital. Although the six technicians who flew into the harsh northern winter joked with each other with the fate that the spiritual head of the movement would bring them, what they were discussing is the fine print of the second Extended Facilities Agreement that will be signed by a justicialist administration, with the only precedent being that of Domingo Cavallo Y Roque Fernandez in 1992. A peculiar tribute to the standard-bearer of the humble, who died when her husband still resisted joining the organization thanks to which the United States would project its post-war military-technological hegemony to finance.

The Argentine envoys hurried with the American Julie Kozack and the Venezuelan Luis Cubeddu some details of the letter of intent and the memorandum of understanding that Alberto Fernandez it aspired to have closed before the Holidays and that now dreams for after the end-of-year Washington exodus. There were technical advances and exchange of spreadsheets of all kinds, but the sources of the delegation and the IMF consulted by BAE Business they agreed that in order to unlock two key discussions, a call “from above” was needed. That is, from the Treasury. And that call never came.

The two issues to unlock are the deficit that the Fund is willing to tolerate for public accounts in 2022 and 2023 (3.3% of GDP in the latest drafts) and the sources of financing for this deficit. It is a complex inequality for Guzmán because it occurs on simultaneous boards: one with the Fund itself and another with Kirchnerism within the Frente de Todos. And the two forces pull in opposite directions.

The uncomfortable silence of the Treasury not only disturbed the head of the Palacio de Hacienda, who talks there with valuable terminals thanks to his mentor Joe stiglitz, winner of the Nobel Prize in 2001 together with George Akerlof, husband of the current secretary Janet yellen. He also aimed all eyes towards Gustavo Beliz, the main champion of US interests in Fernández’s cabinet. Although he brags behind closed doors of his arrival to the national security adviser of Joe biden, Jake sullivan, of a self-perceived counterpart, their photos together were not enough to lubricate the last stretch of the negotiation.

There was a gesture of clear alignment to try to get that wink from the majority shareholder of the IMF to arrive on time, with the mission still there: participation in the Summit for Democracy that Biden called to criticize Russia and China, excluding allies of Argentina like Bolivia and with guests like the bankrupt Juan Guaidó, for Venezuela, instead of Nicolas Maduro. But it was too ambiguous a grimace for Uncle Sam, because Fernández clarified in his speech that “democracy is not exported or imposed with sanctions or by force.” A diplomatic subtlety that – according to friends of the President later boasted – they thanked both from La Paz and from Beijing.

The chimera of non-adjustment

The discussion on the deficit yesterday marked the debate on the Budget in Deputies and promises to do so in the Senate as well. Despite the rhetorical effort of the ruling party to defend the project, it is impossible to show the IMF a reduction in spending without affecting social items. This is, without the adjustment affecting “those who have the least”, as the slogan says.

It is clearly seen in the item of the Empower Work plan, in which the State will invest $ 226,000 million in 2021 according to the current credit in the Open Budget system. That is, according to the allocation of resources for this year including the modifications to date. For 2022, the official project sets an amount of $ 243,000 million, just 7.5% more nominal. Deflated by the average inflation of the same project, that implies a real fall of 20%.

The same happens with national food policies. The current credit for 2021 is $ 246,500 million and the one budgeted for 2022 is $ 296,000 million, which implies a cut in real terms of 10.7%. In Economics they clarify that these items can later be modified, as happened this year, and that is why the comparison has to be between initial credits and not between accrued and projected. Of course, it is one thing to retouch a budget item with a majority in both chambers and without strict quarterly reviews by the IMF, and it will be another thing to do it next year.

Regarding energy subsidies, in addition to the still open wound between segmenters and freezers, there is another tension between the objective of reducing spending and that of lowering inflation. Only a large tariff would allow meeting the planned goal of reducing subsidies without affecting the poorest half, and that will invariably push the Consumer Price Index (CPI). An indicator that gave the Government a break with the drop of one point in November, from 3.5% to 2.5% per month, but that predicts new pain on the back of the records that it set again this week around the world .

To make the adjustment required by the Fund more digestible, there are also traps like the one detected by the Congressional Budget Office (OPC) in its last budget execution report. Although total spending grew by an unprecedented 40% in real terms in November, supposedly on the back of what the opposition called the “silver plan”, a good part of this increase is due to capital transfers to organizations such as AYSA, IEASA (the ex ENARSA) or the PROCREAR Trust Fund, which will keep these funds in cash and that next year they will not be used for works but for “intra-public sector credit”. That is, to lend to the Treasury so that the Central Bank reduces the issuance of pesos, as the IMF wants.

Bad and worst

The method of institutions like the IMF to delineate old responsibilities is simple: change their officials. It is what explains that none of the hierarchs of the era Lagarde subsist today in key staff positions. That is why it causes so much uncertainty in the economy that in 10 days he assumed as head for America of the ultra-orthodox Ilan Goldfajn, who chaired the Central Bank of Brazil with Michel Temer, beneficiary of the institutional coup against Dilma rousseff.

Born in Israel, Goldfajn received his doctorate from MIT under the tutelage of Rudi dornbusch, like his predecessor in office, the Mexican-Argentine Alexander Werner. It is not known if he thinks that “you cannot negotiate with these guys,” as Werner from the Frente de Todos said a month ago. “It is necessary to see if he wants to reason the whole agreement back and toughens it more or if he looks at it from above but avoids the responsibility of what is signed,” one of the negotiators told this newspaper.

In the Government they admit that the correlation of forces may worsen in any quarterly review of those in the coming years. “If they are going to save you from a bullfight, there they can demand much more. But it is still worth buying time, even if it is to kick the abyss of default to 3 or 4 years. Because if we grow strong in that time, the renegotiation that comes later will be better, “said another of those in charge of the fine print.

Not what economists believe Alfredo Serrano, Mariana dondo Y Guillermo Oglietti, from the Latin American Strategic Center for Geopolitics (CELAG), an institution that could hardly be called an opponent, to the point that it has just published a book (“Evo, rescue operation”) prefaced by the same Alberto Fernandez. Serrano, Dondo and Oglietti plotted on a non-paper reserved eight scenarios for future repayment of the debt left as an inheritance Mauricio Macri, depending on the term, grace, rate and surcharge set in the agreement that the Government wants to close this summer. They concluded that “nothing that is agreed will be good” and that “among the bad, the least bad is what the IMF does not usually negotiate, but that Argentina is obliged to consider it as exceptional.”

There are only two scenarios with “less worse” results, “in which it is proposed that the IMF assume its responsibility, both for the excess of the loan granted and for having allowed a large part of the borrowed money to escape”. In the first, the Fund forgives more than a quarter of the debt. In the second, it only charges 15% of the capital that is repatriated, as suggested Cristina Fernandez last Friday. In this scenario – more than optimistic – the debt ends up being covered in 2053, twenty-two years more than what the agency is willing to grant.

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The fine print that does not close and the wink that does not arrive