MercoPress. South Atlantic News Agency

Argentina preparing the ground for IMF talks

Just a few days away from the beginning of negotiations on a new stand by agreement Argentine officials demanded this week “coherence and predictability” from the International Monetary Fund.

Economy minister Roberto Lavagna and Finance Secretary Guillermo Nielsen made the statements during a conference on the recent re-structuring of the Argentine defaulted sovereign debt which managed to attract 76% of bond holders.

Both officials defended Argentina's strategy in the bond swap adding that if the country manages to maintain fiscal solidity and investment remains robust, the overall debt challenge can be faced and even lowered.

"I tend to describe the IMF as a conglomerate of departments which faced with limit situations, they begin arguing among themselves about faithfulness to ideological clichés that are generally inversely proportional to their knowledge of the terrain where these policies are being implemented", said Mr. Nielsen addressing an auditorium which included representatives from first line banks in Argentina, UBS, Merrill Lynch, Barclay's, Frances and Nación. Mr. Lavagna and Mr. Nielsen focused their criticism on the IMF role during the debt restructuring process which questioned Argentina's strategy.

"We now have before us the task of rebuilding the international image of the country; we all well know that not so long ago we rapidly passed from being an example case to an ungovernable case", underlined Mr. Lavagna.

"As the domestic crisis expanded and sovereign debt did not cease to increase, the IMF and World Bank boards voted and voted new loans for Argentina. We were a good and happy piggy box to make good business, even when these were concentrated and untenable in the mid term", added Mr. Lavagna who highlighted that "now that the country has began to grow, to lower its public debt with a great fiscal effort, there are those who are angry and appeal to different instruments to put pressure on us".

Mr. Nielsen recalled IMF abrupt change of policy at the end of 2001. Until then countries with problems received massive rescue packages which in the case of Argentina "only helped to oil and confirm the flight of capital".

Then suddenly the IMF adopted a policy of ignoring highly indebted countries, such was the situation when Argentina was negotiating its debt, "with no transition period between one scenario and the other".

Mr. Nielsen underlined that the good faith which was demanded from Argentina during the restructuring process should have also been demanded from creditors, and insisted in greater "transparency" in the dealings between the IMF and its main shareholders from the Group of Seven, G-7, as well as in the decision making process.

Without giving names the Argentine official praised some G-7 members, apparently United States and United Kingdom, and attacked others, presumably Italy and Japan.

Argentina is scheduled to begin negotiations with the IMF in mid July with its objectives set on a "strong fiscal policy, containment of expenditure, promoting investment and lowering net debt".

Argentina is also considering floating new bonds in the coming months to help finance strong repayments in the second half of the year which total 7,6 billion US dollars.

However one of the banks that helped with the restructuring of the Argentine debt, UBS from Switzerland, admits that if an agreement is not reached with the IMF, "it could complicate the financial scenario, but it would not be a reason for panicking".

"The government still has alternative resources to finance its coming commitments", says UBS in a recent report.

The 7,6 billion US dollars repayments, which are concentrate in August and December can be faced with 2,6 billion from the budget surplus; 1,7 billion from government corporations; 1,1 billion in new bonds and another billion from local private banks and the rest biting into the Central Bank reserves, indicates UBS.

Bank representatives present at the conference added that if Argentina manages a level of investment equivalent to 24% of GDP, the economy can expand sustainably at 4,5%, and in this scenario the re-scheduled Argentine bonds linked to growth are a "good and reliable" investment.

The Argentine press points out that no IMF representatives or from the defaulted bond holders who did not accept the swap (24%) were not present at the conference.