It sounds like a paradox, but in the midst of the biggest inflationary jump in 20 years and with an energy crisis in the making, the Minister of Economy, Martin Guzmanseems to have regained some calm in recent days.
It is that, despite the constant rumors about his departure from the cabinet of Alberto Fernandez and against the backdrop of a rain of poison darts falling from all sides, but with greater ferocity since Christianity, the minister seems to enjoy a certain calm, so much so that he spent a good part of the weekend Easter with his team, in a kind of “retreat” from work in Chapadmalal.
The president – with whom he spoke this weekend, as usual, and with whom he will speak again today – confirms this in his functions almost daily and the objectives of the agreement with the IMF, surely the greatest achievement of his administration, will take a few months to scrutinize, beyond the fact that both parties know they are already old.
During the long weekend on the coast, while packing his suitcase for his trip to Washington, where he will participate in the IMF-World Bank Spring Meeting (preparation for the Joint Annual Meeting of the two organizations, which takes place in October ), Guzmán continued with his program of income distribution and the charging of “unexpected rent”, which drew criticism in the countryside and other sectors, to pay a kind of social assistance, in the manner of the IFE.
In addition, he took a step forward on a key issue, the holding of the Public Hearing on tariffs, convened by the Secretary for Energy, Dario Martinez. In short, Guzmán is determined to strictly enforce what he said in a TV interview: “we will negotiate with people who are aligned with this economic course.”
Guzmán is determined to strictly enforce what he said in a television interview: “we will manage with people who are aligned with this economic course
Amid this tense calm, Guzmán will travel to the Fund and World Bank meeting in Washington tonight, which takes on added relevance because of the context: even though it will be a plenary session of ministers and heads of central banks, not heads of state, he skims over the American idea of removing Russia from the G20 table for the invasion of Ukraine, or at least discussing new sanctions. Expulsion doesn’t seem possible, due to the presence of China and other countries, but the mere thought adds expectation to the reunion.
Guzmán will travel with two of his officials Raul Rigo (treasury) and Ramiro Tosi (Financing), and other advisers. He will also attend, later in the week, Gustavo Belize, secretary for strategic affairs of the presidency, with a focus on external financing and meetings at the World Bank and the IDB – the organization he has sought to chair without success, at least so far –, between others. Although his presence has been confirmed, the President of the Central Bank, Miguel Pesce, decided to get off the plane in the last few hours and turn on the Zoom. This Fund meeting has a hybrid format and many of the meetings can be followed virtually. However, it is not yet confirmed if there will be a bilateral between Guzmán and the Bulgarian economist who commands the IMF, although technical meetings with part of the entourage and the second lines of the organization are excluded. , as it happens every week.
In economics, they expect the first two revisions of a deal with the Fund that seems to be born to be violated, and much more after the Russian invasion, will be overcome
“Martin prefers to be. It is important because he will see Georgieva and because it is a trip without major risks. It’s the first time he’s been there and everything is already arranged… there. Here, of course, there are the two local issues that occupy him: energy and inflation”, they say in their entourage and specify that they have always been their center of interest, not only now.
In Economics, they expect the first two revisions of a deal with the Fund that seems born to be breached, and more after the Russian invasion, to be overcome. Calculator in hand, they ensure that “It will be fine” what is stipulated in terms of deficit reduction and reserve accumulation, at least for the first half of 2022… without the impact of the war and with the contribution made by the agency. Therefore, there are no major concerns regarding the September review. They also claim that “everything is fine” with an early break from Argentina: the country did not have an approved budget for April 15, last Friday, as had been agreed. In government, they consider it an accepted delay, not an infraction, and they talk of an expanded facilities program that will be of “permanent recalibration.”
A few days ago, Robert Feletti, Secretary of Commerce, blamed the inflation on Guzmán and warned that “it’s going to get ugly.” The minister responded by saying that Fernández would negotiate with those aligned with the economic program. Since then, rumors of replacements within the firm have intensified. The truth is that, beyond his trip to Brazil and the call for public hearings, from the Economy, there have been no other energetic announcements. Nor related to controlling inflation. Besides Feletti, another “encouraged” by Guzmán is a new civil servant, the Secretary of Agriculture, who only took office last January. Guzmán acknowledged that the establishment of a mechanism for the “redistribution of unexpected income” is being studied and Matthias Lestani He went through it saying that “the agricultural sector could not capitalize on the concept of windfall income”. Today, Lestani’s boss also defended the pitch.
Fund numbers and green credit
The IMF last week approved the creation of a new facility to help vulnerable low- and middle-income countries deal with longer-term challenges such as climate change and pandemics. This is the Resilience and Sustainability Trust, it will come into effect in May and will be around $45,000 million. Argentina would receive “barely” 1,300 million dollars.
The idea is very similar to one of the flags of Martin Guzman. Amid much criticism and with very limited room for action, the minister faced formal negotiations with the IMF, in mid-2021, with two objectives: the reduction of surcharges on loans – for which the government said to pay an additional up to $1 trillion a year – and the inclusion in the new scheme of a clause to “jump” to a new scheme if the Fund created it outside of the alternatives known today , Be ready or extended installations. For many, it was pyrotechnics to leave part of the coalition alone. None of this happened: the surcharges were not removed and there were no addenda to the new program. Moreover, in the letter of intent of the agreement, Guzmán asked Georgieva, almost as a favor, to consider Argentina for this possible new scheme.
The Minister believes that what has been approved bears the imprint of his claim, the methodology for which he has lobbied other countries, such as Mexico, but that this is only a first step, limited in money and scope. “It has great rates and it’s for 20 years, but that’s not what Argentina needs because it’s little funding. Maybe at some point a program can be designed with this tone”, they hope in Economy and recall that there will be no disbursements by the country for four and a half years. “It’s time to come back to the charge with this lobby,” they said.
In the middle of a “summer” of this kind, the boss of the Treasury Palace will travel to Washington to participate in the Spring Assembly of the Monetary Fund and the World Bank, as well as the meetings of the G20
Meanwhile, the IMF says the world will see less growth, even below the 4.4% predicted earlier this year. On Tuesday, as part of the demonstration in Washington, he will present his new economic forecasts, in a belligerent context of rising food and energy prices. Georgieva has already announced that it will cut the growth outlook for 143 economies that account for 86% of global economic output, but stressed that most countries will maintain positive growth.
This weekend, the minister returned from the coast and communicated with the president, as he has done almost daily since taking office. They discussed the action plan in Washington and other aspects of local strategy that Guzmán will be monitoring from DC.
“Martín is quite calm, still in the quagmire,” summarizes the Treasury. But you have to fly and spend a week out of the country. That seems like a lot for how quickly events are unfolding in Argentina.