Argentine candidate Alberto Fernandez takes aim at IMF deal: 'loans are financing capital flight'

[sandensea]

Last edited Mon Sep 23, 2019, 08:30 PM - Edit history (1)

Alberto Fernández, the main challenger to incumbent President Mauricio Macri in Argentina's elections this October, said today that if elected he would seek to "rework" Macri's bailout deal with the International Monetary Fund (IMF), calling it "harmful."

Fernández, whose center-left Front for All (with running mate and former President Cristina Kirchner) is leading in most polls, met with IMF executives Alejandro Werner and Trevor Alleyne today to discuss his "deep concern" over the $56.3 billion bailout negotiated by Macri in 2018.

"I conveyed to the IMF our willingness to rework the agreements without demanding more from our people," Fernández said. "We seek to stabilize the economy in order to grow as a necessary condition to paying our debts."

Centrist candidate Roberto Lavagna, currently polling in third place, reiterated Fernández's concerns to Werner and Alleyne this afternoon.

International Macri Fund

Fernández has accused the IMF of "financing Macri's campaign by indebting Argentina."

The bailout is the largest in IMF history and makes up 61% of its loan portfolio - leading local critics to refer to the IMF as the "International Macri Fund."

Fernández noted moreover that of the $39 billion disbursed so far, $30 billion were used to finance speculative capital flight.

"Article VI of the IMF states that 'no member may use the general resources of the Fund to face capital flight'," he pointed out.

"The objectives that were set at the time of granting the loan have been absolutely distorted."

From bubble to bailout

Macri turned to the IMF - who had supported his policies - when a $60 billion carry-trade debt bubble known locally as the "financial bicycle" collapsed in April 2018.

The crisis cut off Argentina's access to foreign credit markets, and forced the central bank to raise interest rates. The ensuing recession - the second since Macri took office in 2015 - has led to a 5.8% fall in GDP, a 24.6% collapse in fixed investment, and 261,000 registered job losses.

Inflation has meanwhile risen to 57.4% - the highest since 1991.

At: https://money.usnews.com/investing/news/articles/2019-06-27/argentine-presidential-candidate-alberto-fernandez-takes-aim-at-imf-deal

Argentine opposition leader Alberto Fernández (right) with IMF Western Hemisphere head Alejandro Werner and IMF Argentina division head Trevor Alleyne (left) during their meeting in Buenos Aires earlier today.

Fernández believes the IMF has been financing Macri's campaign at Trump's behest, leaving Argentines to foot the bill.

Of $39 billion borrowed from the IMF so far, moreover, 77% have been used to finance speculative capital flight - in direct violation of the IMF's own rules.

[Judi Lynn]

1. Love the rearrangement of the words to "International Macri Fund."

Surely does look as if Macri has arranged it so the people are funding his campaign, and paying for it from wildly reduced circumstances.

The inflation rate is the highest in a period of time approaching 30 years. It's a horror show.

It almost makes one throw up in his/her mouth realizing he's been the President since 2015. Seems the nightmare started only yesterday. Every day has been such a catastrophe!

I don't think it sank in until finally grasping it tonight, reading your article: "The crisis cut off Argentina's access to foreign credit markets."

One really has to wonder just how many people are involved in this crime, anyway. It would be wonderful if the lid could be ripped off and people could find out exactly who's involved, and then, how to get rid of them.

Poor winner of the next election. There is so much work to do for him, if it's Alberto Fernández. It will take a heroic effort every day to get even minimal improvement back into the economy. Might be a good time for the appearance in Buenos Aires by representatives from a higher dimension.

October is getting closer and closer. Guess it's going to get rougher from now forward. Hope Fernández and Fernández have formidable security with them every day.

Thank you for the information, sandensea.

[sandensea]

2. Argentina will have to meet $150 bn in foreign debt payments over the next 4 years thanks to Macri

The IMF, predictably, told Fernández and Lavagna (the number one and three in the polls, respectively) that they will not consider any restructuring.

That, of course, is Cheeto talking.

He (or rather, Mnuchin) knows that without restructuring or at least a rescheduling of the payments, Argentina will be able to meet the obligations only until the end of 2021.

After that, without more flexible terms, there'll be a default whether anyone likes it or not.

Fernández (like Lavagna) has made it clear he does not want a default - but that, if the IMF leaves no other choice, he'd rather default on the IMF than on the bondholders.

It would only be fair, given the brazen bad faith with which they lent Macri the $56 billion. The IMF's own policy board urged against a bailout of this size, since these loans are unpayable given the country's limits and its many other obligations.

But they did it anyway on Cheeto's orders. Just because they had a few threesomes together in the 80s (excuse my French!).

The IMF, then, should ask Macri and his friends for the money. That's where much of it ended up.