WASHINGTON.- The United States wants to see a lasting economic plan that puts the economy on track, alleviates the “stocks” piled up in recent years and generates growth. Any program must receive the endorsement of the Treasury Department, and of the other powers of the G7, which control the board of the International Monetary Fund (IMF). Against this background, The Government –and also the Fund– faces a problem: how to anoint credibility to a plan and an eventual agreement that many see as heading for failure even before it is signed.
A State Department official told LA NACION that the government of Joe Biden wants Argentina’s negotiation with the Fund to reach “a stable, sustainable resolution” that stabilizes the economy, sustains the recovery, gives impetus to the sector private and open up a real opportunity for growth, a bar that, at this point in the discussion, seems elusive.
“We believe it is important that whatever economic plan and priorities the government of Argentina establishes, it is exposed in a way that Argentines and the markets can understand how Argentina can grow again, ease some of the temporary restrictions on access to the market that the current administration imposed, and address the sustainability of the debt”, detailed the North American official.
“That’s the kind of strong economic policy framework that can provide options for private job growth, and the foundation for economic recovery that I think we can all support.”
The State Department has said that uncertainty, interventionist policies, inflation and a stagnant economy prevent the country from reaching its full potential, noting that capital controls, trade restrictions and price controls, and the tax burden on companies and “rigid” labor laws hinder investment.
Without denying differences, in the Biden government they see a good relationship with Argentina, with open dialogue. Brian Nichols, the chief diplomat for Latin America, praised Foreign Minister Santiago Cafiero’s visit. The American ambassador, Marc Stanley, has already settled in Buenos Aires. “We are on a very positive path,” summed up the State Department official. For Washington, the “tactical” differences in dealing with abuses in Venezuela, Cuba or Nicaragua are overshadowed by the similarities in basic values. In a world divided between democracies and autocracies, the United States sees Argentina on the same path.
“We always have a good dialogue and open relationship with the Argentine authorities. It is because we share basic democratic principles. There are always political differences and perspectives. We live at opposite ends of our shared hemisphere. But in fundamental values and interests, we have many similarities,” the official said. “There have been clear cases in which, although Argentina has a different tactical approach, Argentina’s commitment to democracy remains unquestioned. Now obviously a 100 percent coincidence of tactics, strategies and policies makes diplomatic life easier, but that’s not how the world works, is it?
The Government seeks to translate that link into political support that leads to a favorable agreement with the Fund, the same strategy that Mauricio Macri followed with Donald Trump. But the lock is not political. The Government and the Fund differ on the speed at which the economy must be accommodated. In Washington a coincidence is gathered: Argentina has to put on the table a credible plan, which goes through the inescapable filter of the Treasury. The problem is precisely coming up with a credible plan, a steep uphill climb. Investors on Wall Street are convinced that a traditional program tailored to the Fund is unviable, and any other similar agreement signed by Argentina will be thrown away and renegotiated in a few months, as Macri did, or Argentina will fail to comply with the commitments it take over, and you’ll end up asking for a waiver to the Fund sooner rather than later. And even if Argentina closes a “light” agreement and complies with it, no one expects it to get the economy back on track. At best, it will serve to avoid a major crisis and buy time, like the macrista program, to which the Fund gave 57,000 million dollars and three years later said it failed because it was “too fragile.” Contradictions sometimes ignore the lessons of time.
Another stumbling block: the Fund has said that the plan must have broad social and political support to be successful, and therefore credible. This condition seems to ignore the crack or the rejection that the word “adjustment” generates in Argentina or, for that matter, in almost any other country. Or that, due to the history between Argentina and the Fund –21 agreements have been signed since 1958–, any program that arrives with the agency’s seal will receive, no matter what it does, a slam from a fraction of Argentine society that she prefers to “live with what is ours”, and is also convinced that this debt is illegitimate. The Fund lends and demands, but does not evangelize.
The last flank is “gradualism”. This strategy, which Macri also applied, seeks to stretch the adjustment to cushion it and gain social support – and, therefore, political support – but it also stretches the pain and delays the results, at the risk of causing the opposite effect. “The main flaw in this policy is not so much the economic recession itself as its prolonged duration. In the best of hypotheses, after several years of high unemployment, inflation decreases after having caused the destruction of the productive apparatus”. The phrase is from the speech of Juan Vital Sourrouille, in June 1985, when announcing the Austral Plan, as compiled by Juan Carlos Torre in the book “Diary of a season on the fifth floor”. That plan, at the time, had strong backing from the Fund and from the United States.
The differences between the Government and the Fund and the delay in the negotiation have entrenched the possibility of a delay in payments from Argentina to the agency, which the Government plays down. In Washington they believe that the damage of this scenario would fall exclusively on the shoulders of Argentina, which already has a credibility problem.
What would a delay with the Fund look like? “I think that the most important thing is that predictability and sustainability in this process are what will best serve the interests of Argentina,” answered the State Department official, “and we certainly hope that they can continue working with the Fund to a stable solution to the challenges that we understand people are facing.”