Sustainability the focus as IMF mission team returns to Buenos Aires

Officials from the International Monetary Fund have departed for Buenos Aires for a series of meetings with Economy Minister Martin Guzmán, along with other members of the Government,

Talks are expected to focus on the government's tax system and see how reforms can help make Argentina’s external debt "sustainable." The Economy Ministry may also disclose information about which banks will advise the government in negotiations with Argentina's creditors.

The return of IMF mission team will be led by Deputy Director of the Western Hemisphere Department, Julie Kozack, and Venezuelan economist Luis Cubeddu. 

Talks on tax are expected to be on the agenda. The government is looking at increasing duties for the agricultural sector. Speculation has persisted that soybeans and their derivatives will face a three-point hike, taking the level to 33 percent. Increases for other sectors have not been ruled out. A rise is also expected in duties for meat, especially certain cuts that have a high demand in the East, PERFIL reported over the weekend.

As already discussed with the agro-industry representatives, the government may look to compensate small producers and regional economies that are facing difficulties. 

In addition, an increase of tax for some alcoholic beverages, cars and high-end motorcycles has also been explored.

Fiscal surplus

According to government sources these measures, together with a potential economic recovery, would lay for the foundations for a more solid fiscal horizon.

"With a more robust fiscal outlook and a restructuring of the private debt, we believe that the general situation will allow us to have a sustainable economic scheme," a source within the government's Economic Cabinet, told Perfil.

The goal is to maintain this year the point of quasi balance achieved in 2019, meaning a deficit of 0.5 percent of GDP, a trend that would be strengthened by 2021 and from 2022 could be a slight fiscal surplus.

However, for that to happen, an aggressive and successful restructuring of private debt is needed – a far from easy task. 

Gerry Rice, IMF spokesperson, highlighted last Thursday "the level of constructive dialogue that exists with the Argentine government," recalling the recent agreement to continue with "Article IV and a future agenda."

Argentina signed, first in June and then in September 2018, agreements with the Fund that secured a credit-line of some US$53.7 billion, of which it effectively disbursed US$ 44 billion until July of last year. 

That agreement is expected to be modified, with a re-negotiation of repayment terms and conditions. Nonetheless, it is ruled out that it will take the form of a long-term agreement, such as extended facilities or ECF, since they imply reforms that the current government does not have in its plans.