MercoPress. South Atlantic News Agency

Once Argentina “has done its homework”, IMF liquidity support comes overnight

IMF Chief Economist Blanchard message was clear and straight

If Argentina compiles with its homework and has good relations with international financial organizations, “credit is granted overnight” said Olivier Blanchard, the International Monetary Fund Economic Counselor and Director of the IMF Research Department during his visit to Buenos Aires for a two day conference on monetary policies.

Although very cautious about specifics on Argentina, Blanchard said that the special Flexible Credit Line, which the IMF instated a few months ago to help with the global recovery, has been a successful tool for several countries to obtain liquidity, among which he mentioned Mexico, Poland and Colombia.

During the conference organized by the Argentine Central Bank, Blanchard suggested Argentina should apply to the FCL, arguing that it was more practical to have contingency credit lines than “accumulating international reserves”, a statement later disputed by Argentine economists.

However the IMF chief economist also pointed out that access to FCL is limited to those countries that have a sustained economic solidity and program, good relations with international credit organizations and with its investors.

According to analysts present at the conference the message was clear: if Argentina wishes to have access to the liquidity window it must reach an agreement with the holdouts from the 2002 sovereign default and later bonds’ restructuring; an understanding with the Club of Paris (country to country loans) and open its book for the IMF experts to audit and elaborate a diagnosis.

Something which so far the Kirchner couple administrations have refused to accept particularly regarding the IMF, since Argentina repaid all pending loans in 2006 and adopted the position that the IMF programs of the past were greatly to blame for the country’s sufferings, exclusion, poverty and overall “social debt”.

Anyhow Blanchard described the latest contacts between IMF officials and the current minister of Economy, Amado Boudu are a “positive signal” and a very important step which “we welcome”.

Once Argentina has solved its pending debts with investors, has a good relation with international credit organizations and a sound economic program, “and the request is approved by the IMF board”, access to FCL is “granted overnight”.

And what happens if a country takes a contingent loan and then defaults or tries to restructure? Blanchard was asked.

“We would try to help with a program to honor payments, but the idea behind FCL is to grant short term liquidity to countries with a good credit rating”.

Under FCL, Mexico has been given 47 billion US dollars, Poland, 21 billion and Colombia, 11 billion.