Argentina has 'valuable support' from European nations for IMF debt talks

Economy Minister Martín Guzmán says that Argentina is making "progress" in its debt restructuring talks with the International Monetary Fund and that the country is receiving “valuable support” from European leaders.

“Very valuable support is being constructed," said Guzmán, who met with his economic counterparts from Germany, Italy, Spain and France last week, as well as Pope Francis, during a weeklong stay in Europe.

Argentina, which has received US$44 billion in credit from the US$57-billion programme signed in 2018, is seeking to agree a new financing programme with the multilateral lender.

According to the President Alberto Fernández, who inherited the loan from his predecessor Mauricio Macri, Argentina’s debt "is unpayable" under the conditions under which it was agreed.

The government is seeking an Extended Fund Facility (EFF) agreement and to delay repayments for more than four years.

How do you sum up your tour?

We have had a set of meetings that have allowed us to move forward, build understanding and consensus at the international level on what Argentina is proposing as the basis for the programme with the International Monetary Fund.

We were in Germany, Italy, Spain and France and in all the countries there was a very constructive position of willingness to cooperate with Argentina and find solutions for the problems that we face.

And so did you find support for [Argentina’s] negotiations with the IMF?

Yes, I believe that very valuable support is being constructed. That has been the position we have received in all the European countries we have visited.

Will Pope Francis help?

Pope Francis is a leader [who is] very committed to just causes to solve core problems facing humanity today. He is committed to a multilateralism that acts in a healthy manner and that allows States to have the resources to be able to carry out public policies that are healthy for inclusive and sustainable development, and that when countries face crisis situations they are not condemned to situations of vulnerability and millions of people in poverty.

What kind of agreement does Argentina need to reach with the IMF: is it a matter of refinancing the US$44 billion dollars already sent by the Fund or will you seek to increase the amount?

There are two questions here. On the financial side, what is sought is to be able to refinance the sum of the principal owed, plus interest. On the other hand, regarding the bases of the programme, the first premise is that there must be "ownership" – that is, a programme that must be designed by Argentina on the basis of what the Argentine government considers a healthy vision to reassure the Argentine economy, [and] to solve the structural problems of the economy.

We also consider that for the programme to work, it must have multiple levels of consensus and that is why the government is going to send the programme to Congress for approval there, so that macroeconomic stabilisation is not only government policy but also more general political policy of the State.

On what terms could a debt restructuring be obtained?

The first objective is to do it well rather than do it quickly – if it is done quickly, that’s welcome, but the most important thing is to do it well, and doing it well requires precisely reaching those multiple consensuses that are necessary for the programme to have legitimacy and robustness.

Inflation seems to be exceeding official targets: are there any measures that the Argentine government plans to adopt to contain price increases?

We had already taken into account in our projections that there would be a concentration of inflation for the year, mainly in the first quarter, and this is for multiple reasons, partly because of how the sequence of macroeconomic policies was implemented, and partly due to the situation that is being experienced with the evolution of international prices.

It is true that in the first quarter there was a deviation of approximately two percentage points between projected inflation and actual inflation, that is the measures that were announced last week were adopted, seeking to promote better coordination among all actors in the economy in order to return to the path of the macroeconomic objectives that we have set.

What has been put on the table is a consistent macroeconomic programme that is consistent with fiscal, monetary and exchange rate policy, which aims at a recovery in economic activity together with a gradual reduction in the fiscal deficit and monetary financing from the Central Bank, with the State playing a countercyclical role to prop up that economic recovery.

This macroeconomic scheme tells us that it is feasible to reduce inflation by around five percentage points, year on year, at least for the next three years.