Latin America Advisor

A Daily Publication of The Dialogue

Will Argentina Be Able to Reach a Deal With the IMF?

Even though Argentina and the International Monetary Fund have been discussing a debt restructuring for a year and a half, there is still no agreement, Finance Minister Martín Guzmán said recently. // File Photo: Argentine Government. Even though Argentina and the International Monetary Fund have been discussing a debt restructuring for a year and a half, there is still no agreement, Finance Minister Martín Guzmán said recently. // File Photo: Argentine Government.

Argentina is facing a late March deadline to come to an agreement with the International Monetary Fund as it seeks to restructure $40 billion that it owes the lender. That is when a $2.8 billion payment, for which Argentina appears to lack the international reserves to pay, comes due. In early January, Finance Minister Martín Guzmán told provincial governors that the government still has no deal with the IMF despite 18 months of talks. What are the main obstacles to an agreement between Argentina and the IMF? What effect are internal politics, and a shift in political power following last year’s legislative elections, having on the negotiations? How likely is Argentina to reach a deal with the IMF by March, and what are the consequences if it doesn’t?

 

Alberto Ramos, managing director and head of Latin America economic research at Goldman Sachs in New York: “Investors have been waiting and hoping for a new IMF program since Argentina’s last debt restructuring operation in August 2020. After 18 months of inconclusive talks the authorities and the IMF appear to still be far apart on a core policy platform that could underpin a new program. The authorities are keen on achieving budget balance only by 2027, while preserving central bank funding of the budget for another five years. This is an extremely gradual, risky and most likely unsustainable proposition. The current model of funding the budget through heavy central bank monetization, rising central bank local currency liabilities and a loss of reserves has very limited longevity. The IMF would like to see faster fiscal consolidation backed up by credible measures and other fiscal and monetary actions to rebalance the economy and ease some of the current micro and macro distortions. Reaching an agreement with the IMF remains an open issue with a difficult and uncertain…”

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The Inter-American Dialogue publishes the Latin America Advisor every business day for a distinguished membership of informed corporate leaders, scholars, and government officials invested in Latin America’s development and future. The Advisor‘s highly regarded Q&A section covers questions submitted by subscribers themselves. Commentators regularly include heads of state, business leaders, diplomats, economists, analysts, and thought leaders from around the world. Many of the world’s largest and fastest-growing companies subscribe to the Advisor. To subscribe click here or for more information, contact Erik Brand, publisher of the Advisor, at ebrand@thedialogue.org.


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