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ECONOMY | 09-09-2022 09:42

In Washington, Massa secures loan boost from World Bank, IDB

Argentine delegation meets with officials from the Joe Biden administration and secures vital funding from Inter-American Development Bank, World Bank in lead-up to talks with IMF.

Economy Minister Sergio Massa unleashed a charm offensive on Washington this week as he sought to secure vital funds from non-government institutions, investors and business leaders to boost Argentina’s economy.

The 50-year-old, making his first trip abroad since he was appointed head of the economy portfolio last month, was welcomed at the White House by officials from the United States government as his visit to the US capital began in earnest.

The meetings came amid a key week for the minister, who will also visit Houston before heading home next week. Crucial meetings with staff from the International Monetary Fund (IMF), including facetime with Managing Director Kristalina Georgieva, are on the agenda for the coming days.

"The main objectives are to convey that, on the one hand, we are going to work with the IMF, to close what was left pending for [former economy minister] Martín Guzmán," a government source who requested anonymity told the AFP news agency on Tuesday.

Guzmán, the architect of Argentina's US$44.5-billion debt renegotiation deal with the multilateral lender, resigned his post at the beginning of July and was replaced by Silvina Batakis, who didn’t even last a month in the post.

Under the agreement Guzmán renegotiated with the Fund earlier this year, Argentina committed to reducing the fiscal deficit from three percent of Gross Domestic Product in 2021 to 2.5 percent in 2022, 1.9 percent in 2023 and 0.9 percent in 2024.

Coinciding with Massa's visit, a delegation of Argentine officials have been in Washington since Monday to meet with IMF technical staff to “work on the second review of the programme," an IMF source told AFP.

"The teams, which have been working closely together virtually, will continue discussions on the macroeconomic outlook and on policies to strengthen stability and ensure compliance with the programme's objectives," they added.

Massa also sat down on Tuesday with US chief of diplomacy for Latin America Brian Nichols and Undersecretaries of State Ricardo Zuniga and Mark Wells to explore geopolitical areas of mutual concern.

"We discussed the agenda of global food security, energy, protein and development with inclusion," Massa said in a tweet.

The so-called “super-minister” has also met with multiple international financial institutions, leading successful negotiations in the trip’s opening days. On Tuesday, government sources confirmed that the Inter-American Development Bank (IDB/BID) has agreed a loan package with Argentina worth some US$5 billion over the rest of this year and next. 

In total, the country expects to receive more than US$3 billion this year: US$1.2 billion to swell the dwindling international reserves of Argentina's Central Bank (BRCA) and another US$1.93 billion in credit "programmes," which are still pending approval and signatures, the source, speaking on condition of anonymity to the AFP news agency. 

According to an IDB communiqué transmitted on Tuesday evening, several hours after the meeting between Massa and Claver-Carone, the US$1.2 billion due this year corresponds to eight loans already approved by the bank's board of directors that "make an important investment in social infrastructure." 

The remaining US$725 million (taking the 2022 total up to US$1.933 billion) constitute the "IDB's financing potential for the rest of 2022," it clarified. 

For 2023, "technical teams are in advanced stages of discussion to define the programme of credit operations" that "is expected to add at least another US$1.8 billion," the IDB said. In total, throughout 2022 and 2023, the amount that the IDB will lend to Argentina amounts to US$4.933 billion, according to the source in Argentina's government. 

 

‘Mission accomplished’

"I think that if the minister's mission was to come and unlock what was not only the relationship, but operationally the programme with the IDB, we can say that the minister has accomplished his mission," said Claver-Carone at a joint press conference with Massa following their meeting in Washington. 

The funding announcement came as a surprise to those who doubted the strength of the country’s relationship with the IDB, which has been noticeably strained in recent months. 

One of Massa’s top priorities going into the meetings was unblocking the disbursement of US$800 million that has been frozen since Alberto Fernández questioned the IDB's management at the Summit of the Americas in Los Angeles back in June. 

In addition, IDB President Claver-Carone – who is under investigation for an alleged scandal – suspects that Argentina is one of the countries behind an anonymous complaint accusing him of having a romantic relationship with an IDB colleague and of corruption. 

Massa considers that the "uncertainty or doubts" about the relationship between Argentina and the IDB have now been cleared up. 

"Having this assertive programme with disbursement dates allows us not only to strengthen the [Central Bank's] reserves but also guarantees financing for the federal state for different programmes and for the provinces," declared Massa, who cited planned investments in roadworks, tourist infrastructure, water and housing. 

The government source pointed out to AFP that the disbursements designed to boost international reserves will be made in two tranches: US$500 million on September 30 and the other US$700 million on December 30. The move "shows the strength that we want our Central Bank to have in reserves to strengthen our currency" because it is "one of the tools" in the country's ongoing fight against runaway inflation, explained Massa. 

Wednesday’s meetings were similarly fruitful. Massa’s delegation met with World Bank Managing Director of Operations Axel van Trotsenburg and secured a new loan of US$900 million.

These funds will be disbursed over the next six months; they add to the US$1.1 billion approved this year, which is contingent on the Argentine government allocating part of the money to sanitation works, the health system, training of workers and poor children. 

In what is widely seen to be the most consequential meeting of the trip, Massa is scheduled to sit down with IMF managing director Kristalina Georgieva on September 12.
 

– TIMES/AFP/BLOOMBERG

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