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OP-ED | 04-02-2022 23:13

Into More Frustration

The distinction between an “agreement” and an “understanding” might seem like semantic quibbling but there is a world of difference. Máximo Kirchner and other critics within and beyond the government might be entitled to a certain scepticism as to the rosy picture painted by President Fernández a week ago.

Last weekend’s editorial failed to factor into its analysis the presidential announcement of the closure of negotiations with the International Monetary Fund (IMF) for the simple reason that it was written too early in the day, but with less intellectual honesty and with the advantages of hindsight we could almost boast that we knew better all along. The distinction between an “agreement” and an “understanding” might seem like semantic quibbling but there is a world of difference – President Alberto Fernández deliberately confused the two because he could not pay up virtually half of the Central Bank’s remaining net reserves without simulating an almost ideally soft deal to show for it, but all he really announced was acceptance of a fiscal deficit reduction timetable (which includes zero deficit – for 2025 – contrary to what he said), not any full-fledged agreement.

Just as well that Máximo Kirchner chose to stage his dramatic exit from the Congress caucus helm of Frente de Todos at the start of the week and not at this end because otherwise there might be a similar rush to premature conclusions as to the impact. Impossible to deny the negative consequences of thus complicating the political consensus also essential for an agreement still missing various economic and technical definitions but there could have been method in the madness rather than the almost childish irresponsibility alleged by opposition critics.

Quite apart from Máximo Kirchner’s main argument (pleading inability to muster support for an agreement in which he himself does not believe) seeming sincere enough within his logic, the move might well be more geared to the unity than disunity of his caucus. This display of gesture politics (as if he had no idea anything was cooking with the IMF until last Monday) might well serve to keep the more leftist quarter of the caucus on board without sacrificing ideological purity while the agreement moves ahead – and move ahead it will because both sides have such a horror of default for different reasons. Meanwhile the dynastic heir’s departure from the caucus helm seems equally testimonial – Germán Martínez has every appearance of a figurehead with Máximo Kirchner having neither less nor more control than before (even if Congress Speaker Sergio Massa now gains more prominence).

Even taking the most charitable interpretation of this disruptive move, Congress approval looks fraught with uncertainty (especially with the Juntos por el Cambio opposition insisting on unanimity before lending its support). But in the meantime there is still a deal to seal. For a start the IMF technocrats will not be easily budged from their conviction that the energy and transport subsidies least resist marginal cost-benefit analysis but this is the most sensitive point for Kirchnerism as the key to electoral success. Yet more problems could stem from one of the few points where agreement has been reached – namely the need for positive interest rates outrunning inflation. Bad news for the productive sector, this would also send a quasi-fiscal deficit of some five trillion pesos (Leliq bonds etc.) even further out of control. Another of the few points now agreed, reducing the printing of money by three-quarters (to one percent of Gross Domestic Product from four percent last year), looks drastic, especially since the expectations of loans from multilateral credit organisations other than the IMF seem over-ambitious. 

Flirting with default might be going too far but for these and other reasons Máximo Kirchner and other critics within and beyond the government might be entitled to a certain scepticism as to the rosy picture painted by President Fernández a week ago – no structural reforms, no major devaluation, deficit tolerance, assent to more public works and capital spending, etc. Given that an election year without increased public spending is absolutely unimaginable for Kirchnerism, the deficit reduction now pledged by Economy Minister Martín Guzmán for next year (even if “only” 0.6 percent of GDP) would alone suffice to explain the dissent.

Once bitten, twice shy – having anticipated the end of the week too early last time out, we are not going to draw any conclusions about the presidential Sino-Russian swing while in midstream (with Vice-President Cristina Fernández de Kirchner left in charge here). Thursday’s remarks in Moscow about reducing dependence on the United States and the IMF has predictably sparked critical pushback but we must see what President Fernández brings home with him next Wednesday. Yet whatever solutions he might find, the problems (to which tainted cocaine has now been added) are already there.

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