The IMF has the keys to Macri’s re-election. Will it use them?

The name Trevor Alleyne does not feature in opinion polls, and hardly any Argentine would spontaneously come up with it. And yet this little-known Jamaican economist who has sat these past four months in an office inside the Central Bank might end up having an even greater say in the outcome of this year’s presidential elections than the candidates.

Alleyne, a senior economist at the International Monetary Fund (IMF) who has been implementing aid-for-reform packages for over a quarter of a century, is the last link in a chain of command that starts at the lender’s board – where the White House has 16 percent of the voting power – and trickles down through Managing Director Christine Lagarde and mission chief for Argentina Roberto Cardarelli.

As the fund’s “resident representative,” Trevor’s job is to monitor the performance of the economy day-by-day, in real time. He landed in Buenos Aires in October, when the IMF decided to re-open an office in Argentina, six years after closing it down during the Cristina Fernández de Kirchner administration.

Having nowhere to settle down quickly, he initially ‘Airbnbed’ a room inside the Central Bank (he is only now moving to his own office in Recoleta). According to the strident progovernment economist Carlos Melconian – who served as head of Banco Nación under President Mauricio Macri – with the IMF in town “the treasury minister and the Central Bank governor are drinking mate all day until 5pm, when they send an Excel file to Washington with the numbers.” Alleyne would be at the ‘To’ field of the email, presumably Melconian exaggerates, but his joke finds some truth. The government needs empathy from the IMF, in at least two aspects, in order to increase its electoral chances this year, especially with the race for the presidency seemingly heading toward a penalty shoot-out between Macri and Fernández de Kirchner, the former two-term president.

The first one is defensive. The Cambiemos (“Let’s Change”) coalition is strategising from a base scenario that the economy will not suffer a foreign exchange convulsion like the two it suffered last year. However, nobody is taking that scenario for granted. The carry trade bonanza that seduced the financial markets during the summer is likely to be over before Autumn arrives.

As the electoral season begins to climax and aversion to risk grows, investors will stampede from pesos to dollars, as has happened in the run-up to every recent election. Such pressure on the currency might require the Central Bank to show off its firepower, i.e. to shed reserves.

Under the terms of the US$57-billion stand-by agreement with the IMF, the peso floats freely in between a range that adjusts daily but is consistently ample (this week it spanned from 38 to 49 pesos to the dollar). Ask any Argentine who does not know who Trevor Alleyne is and they would agree that if the price of a dollar moves in a day or two from the bottom to the top border of the floating range, that would amount to another devaluation. Argentine negotiators want the IMF team to approve holding the dollar at a lower ceiling, at least until the election, even at the cost of artificially strengthening the peso. It’s the lesser of two evils, they argue.

A second nod from Washington might prove even more crucial. The prospect of the government reaching its fetish-like zero primary fiscal deficit goal this year is looking increasingly difficult, but an elegant way out of such commitments is to secure a deficit waiver from the IMF to allocate cash to social assistance, which the agreement allows for.

As they were walking around town to meetings on Wednesday, Alleyne and Cardarelli saw with their own eyes the massive protest to demand state help that seized downtown Buenos Aires. Negotiations underway would allow the Treasury to run a deficit of around 0.4 percent of GDP to increase social aid. With those two OKs from the Fund, President Macri would gain some air for the tough electoral battle that lies ahead.

This week, the president decided to speak about the economy, contrary to the ideas put in his head from some political marketing geniuses within his entourage who would rather he just ignore it altogether during the campaign. And the first thing Macri tried to do, wisely, was to show some empathy.

This week, in an interview with a tiny FM radio station from San Luis, he said he acknowledged some voters might be “angered, and in anguish, because it is hard to make ends meet.”

Now the president needs the same sort of empathy and understanding from Trevor, Roberto, Christine and ultimately, that’s right, Donald in the White House. For them, one might guess, chipping in a few extra bucks should sound like a rational investment to scare away the populists who they fear could eventually kick them out of the country all over again.