Guzmán and IMF chief Georgieva meet on Pope Francis’ turf

Wednesday was not only D-Day (D for debt, and also possible default) for Buenos Aires Province but also at the Vatican where a major seminar – attended by International Monetary Fund (IMF) Managing Director Kristalina Georgieva and Economy Minister Martín Guzmán, among others – saw Pope Francis throw strong support behind debt renegotiation.

Without specifically mentioning the current problems of his native country, the Pope said that debt repayment had to be subordinated to “the fundamental right of peoples to subsistence and progress,” urging that ways of reducing, rescheduling or even pardoning debt should be sought ahead of imposing “unbearable sacrifices.”

Many of the papal words were not actually his own but quoted from the 1991 encyclical Centesimus Annus authored by John Paul II in which the Polish pontiff said that debts had to be repaid but not at the price of “the hunger and despair of entire populations.” Francis pointed out that the United Nations also favoured that financing be sustainable in the long term with debt relief and rescheduling as options.

Georgieva preferred to lay more emphasis on how debtor countries could boost their capacity to repay by increasing their tax revenues and improving the quality of their public spending while fighting corruption harder. But, insisting that the IMF “has a heart,” she agreed with the papal words that “the main objective of the economy is to place itself at the service of persons” with inclusive growth and attention to climate change among the top priorities (as outlined in the encyclical Laudato Si).

Noting that many at the seminar hailed from Latin America, Georgieva delivered some advice specific to that region. In the light of recent upheavals greater progress was needed against a “terrible inequality” by building a “culture of solidarity.” Educational spending should not just mean more schools and teacher training but improving the quality, social spending should not just entail expanding programmes but effectively reaching the vulnerable, etc., she said.

Far more public spending was also needed on infrastructure, she continued, and that was where corruption came in as “an obstacle to growth.” The kickbacks added up to no small sums, she said, pointing out the wealth stored in offshore havens has been estimated at US$7 trillion or around eight percent of the world economy, most of it stemming from tax evasion, corruption and other illegal activities.

Flanked by Georgieva on his right and his mentor Joseph Stiglitz (winner of the 2001 Nobel Prize for Economics) to his left, Guzmán entitled his speech “New forms of solidarity,” arguing that the debt was “unsustainable” but that Argentina was willing to seek alternatives for repayment with the IMF as part of the solution. Apart from the seminar Guzmán was able to hold lengthy meetings with Georgieva during his time in Rome.

Others present at the seminar included Central Bank Governor Miguel Pesce, various colleagues of Guzmán from around the world and leading economists such as Jeffrey Sachs. All agreed that capitalism is in crisis today with an acute need to react to growing inequalities and climate change, as urged by the Pope.

BACK IN ARGENTINA

Guzmán has continued to stick to the timetable for the restructuring of Argentina’s sovereign debt, which was released two weeks ago as the Chamber of Deputies approved his “Recovery of Sustainability of the Sovereign Public Debt” bill. On Wednesday, the Senate had its chance to debate the bill with the glaring absence of its president, Cristina Fernández de Kirchner, who the following day flew to Cuba to visit daughter Florencia, leaving Senator Claudia Ledesma Abdala de Zamora in charge.

The bill, which delegates authority on the Executive and the Economy Ministry to carry on the negotiations with the IMF and private creditors on the restructuring of the foreign debt, passed unanimously, as Juntos por el Cambio (Together for Change) lent its support in exchange for an agreement that provincial debts be included in the broader negotiations. Those conversations began during the last week of January, when Lower House Speaker Sergio Massa received opposition governors including Radicals Gerardo Morales (Jujuy), Rodolfo Suárez (Mendoza), Gustavo Valdés (Corrientes), along with Buenos Aires city mayor, Horacio Rodríguez Larreta.

Minister Guzmán is now scheduled to face legislators next Wednesday, the same day an IMF mission will land in Buenos Aires. They will be greeted, as during Macri’s tenure, with a day of protests and piquetes.