Argentina may be forced to consider going back to the IMF for
funding in the medium term, sources in political circles in
Buenos Aires say.
Many observers believe that, while a new debt default may not
be imminent, the intensity and the length of the global
financial crisis may nonetheless force the Argentine
In the end they will get closer to the Fund, especially
if there are some changes in the conditionalities, Miguel
Kiguel, a former Argentine finance secretary, told Emerging
There will not be a default this year, said Kiguel.
But if [the authorities] do not do anything to improve
relations either with private investors or with the IMF within
the next five years, there will be a problem. Economic
conditions are deteriorating rapidly.
Current debt obligations include a $2.5 billion Boden 12 bond
amortization in August, and $1.9 billion in GDP warrants in
Nicolas Eyzaguirre, director of the IMFs Western
Hemisphere Department, refused to be drawn on whether Argentina
would need IMF funding, but warned that irresponsible policies
could cost the country dearly.
Whether they will have enough financing or not will
depend on what policy measures they implement today. Its
a fact theyve been hit hard especially in
manufacturing and commodities, he said. They will
have to adjust to less income.
Argentina would not be eligible for the flexible credit line
announced last week by the Fund, due to its economic policy
record, and there would be other preconditions.
Kiguel noted that a programme with international financial
institutions would be unthinkable as long as Argentina
does not change the way it manipulates the statistics.
Official inflation figures have been contested by independent
economists in recent years , but the government is now also
being widely accused of tampering with unemployment and growth
Argentina posted a 7% growth last year, following 8% average
annual growth over the five previous years. But economic
activity has been decelerating sharply since the last quarter
of last year.
Recent attempts to pay back a $6 billion debt to the Paris Club
normalize relations with bond holders that rejected the terms
of the 2005 debt restructuring have failed, after the
government decided to nationalize the pension fund industry in
order to finance public spending. Still, some government
officials are ready to adopt a more conciliatory tone with the
international financial community.
I know [many] people in Argentina would like to do this,
including some people in the government, said Frederick
Jaspersen, Latin America economist at the Institute of
International Finance (IIF).
There are certainly people in the Central Bank that would
like to see this normalized. The deterioration in the global
financial situation has made it more difficult for Argentina to
settle up, but it needs to do so. It is an example of a country
that needs to think seriously about complimenting efforts to
regain access [to international capital markets].
A spokesman for Martin Redrado, governor of Argentinas
Central bank, has declined to comment.