A few days after concluding the intense Venice agenda at the summit of the G20 finance ministers, Sergio Chodos stresses that the trip has served “to generate a greater degree of consensus and understanding of the challenges that Argentina faces” in the restructuring of the own debt to the International Monetary Fund (IMF).
“The most important thing is to have a deal that is good for Argentina and allows us to escape excessive debt,” the IMF director of the Southern Cone told the IMF. profile in an exclusive interview
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What was the main thing that got the government out of Venice?
The ability to continue explaining. The business trip to Venice revolved around three main axes. One related to discussions at the G20, which focused on environmental issues, global minimum corporate tax rate, reallocation of special drawing rights, post-pandemic world, vaccine distribution and inequality. Then we had more than 10 top priority parallel bilateral meetings, in parallel we had technical meetings with the IMF mission in Venice. What I would call the most characteristic and surprising was the quantity and depth of the bilateral meetings we had. This is important because it helps build a greater degree of consensus and understanding about the challenges Argentina faces.
Rebuilding Argentina’s external financial positioning is gradual, slow and needs to be done on a solid basis. If you read the IMF mission statement [team], there are some interesting signs, not only in areas where progress has been made, but also in identifying Argentina’s structural challenges and external problems. If you look at the former, there was a reference to the multi-causal inflation process in Argentina. If we go back to February last year, when we started renegotiating with private sector creditors, they found Argentina’s debt unsustainable. An important part of that construction had to do with Argentina’s direct dialogue and understanding. In this sense, the results of the bilateral meetings are important.
One of the bilateral meetings was with US Treasury Secretary Janet Yellen. What balance does it draw from that meeting and what does the United States ask for before supporting an agreement within the IMF board?
The meeting was important because it allowed us a direct dialogue at the highest levels and increased our understanding of the challenges Argentina faces, how it got there, where it happened and why. It was actually a great meeting. Furthermore, Martin Guzmanz and Yellen have academic mentors in common: Joseph Stiglitz and Jeffrey Sachs. They [the United States] it didn’t come with a printed terms sheet, it was more like they saw the importance of reaching an agreement and finding a way out of Argentina’s financial challenges. The meeting with Janet Yellen was very relevant and important.
The international financial architecture has changed with the rise of China and its greater global influence. China is also one of Argentina’s bilateral creditors. What is your position on Argentina’s negotiations with the IMF? Does it require a deal as it pushes Argentina into insolvency if bilateral debt is not paid?
There was no meeting with China simply because they participated in a virtual format without Chinese colleagues present for direct dialogue. As far as I am concerned, I would consider China’s seat on the Board of Directors as cooperation in the process with some level of understanding. I have absolutely no indication of urgency or conditioning in the sense you say, almost the opposite based on our records. When we had to extend the swap with the Central Bank, the previous administration had – incomprehensible to my taste – tied the second tranche of the swap with China to the regularity of the agreement with the Fund. This aspect was disconnected during the extension in June last year. It is also not Argentina’s intention to default on its bilateral debt with China, which, moreover, has a very difficult shape compared to that of the member countries of the Paris Club. China’s financial link relies more on spending on investment projects, infrastructure or trade. Obviously, as we can see, the importance of China and its influence on a global level denote a relationship that is different from other periods.
There is a significant level of global tension, especially when a global debt crisis begins to re-emerge as a major problem, and not just the idiosyncrasy of some countries, when there is clearly no new universal ground rules system. In this sense, we live in complicated times. We need to implement them, keeping our priorities clearly in mind and understanding that our focus right now is debt restructuring or setting up a new program with the IMF to pay off the old one.
In April he said that “we should complete something by September,” referring to paying the debt to the IMF that month. Will there be an agreement before September or do you think it is impossible now?
I don’t know if it’s impossible. It seems to me that it has the difficulties inherent in a process that requires a major external consensus building, which must also be approved by Congress and discussed in the IMF board. When you understand a final agreement formally signed by the administrators, it is even more difficult. The process is taking longer in terms of crystallization than it would be to come to a basic agreement, and now we’re not there.
It seems to me that the key thing is to come up with an agreement that is good for Argentina and allows us to escape excessive debt.
If negotiations continue in September, could there be a partial payment to the IMF, as in the case of the Paris Club?
No. If a deadline expires, there will be a payment, but first we need to see where we are in the negotiation. The sooner an agreement is reached, the better, because in this way we avoid paying, but within an overall agreement that clearly sees the future of the next 10-15 years in Argentina as a priority.
Is it better to agree first? Yes. Is it a priority? No. The priority is that the agreement is sustainable so that we can get out of the debt problem without undermining the potential, anticipated and continuing economic recovery that we have had in recent months. With these questions, you need to have a clear idea of your preferences, but also priorities in order to properly organize your strategy.
Labor, pension and tax reforms on the negotiating table with the IMF?
Some very interesting things are discussed including Argentina’s economic history, what worked and what didn’t. There is an openness to discussing things that have more to do with understanding than a one-size-fits-all manual.
That said, the IMF is learning, but it hasn’t turned into something it isn’t. It is still the IMF, not a development finance institution. The future of the balance of payments or capital controls are topics that will always be under discussion. Also the development of national capital markets to migrate from that excessive dependence on external financing.
Is a bipartisan consensus on an agreement with the IMF in Congress feasible or will it fall victim to the grieta divide and elections?
I don’t know if I’m the right person to ask, but I can tell you that the degree of internal cohesion we have affects the negotiation process and the credibility and ability to build a way forward. Obviously some of us are in debt and others are getting out of it. It is also clear that Argentina needs to take a common position on how we will deal with external debt. The laws governing private sector debt restructuring have had a very high level of support in Congress. The degree of internal cohesion will be fundamental, both for future sustainability and for being able to negotiate the process.
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