MercoPress. South Atlantic News Agency

Subtle recommendations for Argentina-IMF negotiations

Argentina should not consider proposing a cut in its debt with the International Monetary Fund as it did with private bond holders, if it has plans for a serious negotiation with multilateral credit organizations cautioned Sebastian Edwards, former chief economist of the World Bank.

During a seminar in Washington sponsored by Deutsche Bank in the United States Chamber of Commerce, Mr. Edwards emphasized that the "proposal is not serious and will be opposed by the Group of Seven".

During the recent creation of the "Buenos Aires consensus", to counteract the "Washington consensus" which dominated financial and monetary policies in the eighties and nineties in Latinamerica, Economy Nobel prize winner Joseph Stiglitz was one of the main architects behind the proposal.

"Pruning debt with multilateral credit organizations is one of the options under consideration by president Kirchner's administration", revealed a source close to the Argentine cabinet.

Furthermore it is believed Mr. Stiglitz is preparing a paper with such a stance, which would be used by Argentine negotiators in the event of such course of action.

The debt swap of Argentine defaulted sovereign bonds with private creditors was done on the basis of a 75% cut which was accepted by 76% of bondholders.

"Argentina would then belong to a very small, non prestigious club, made up mainly of African countries", warned Mr. Edwards who teaches at the University of California and is an advisor to Federal Reserve chairman Alan Greenspan.

"This can be suggested as part of the previous callisthenics and pyrotechnics leading to the talks but once negotiations begin, it's absurd and won't be accepted", he emphasized.

Mr. Edwards also anticipated that United States will be forced to a significant current account deficit adjustment in a couple of years' time which will make the economy loose 3 to 5% growth.

"This is inevitable and will have a great impact in Latinamerica and specifically in Argentina with an increase in interest rates and a fall in the price of commodities".

Economist Edwards insisted that the "deficit has no precedent and is unsustainable; a big and nasty adjustment will take place, sooner than expected".