Argentina IMF review draws closer

06/10/2009 | Thierry Ogier

Relations advance as parties meet in Istanbul

Argentina on Tuesday took a step towards resuming “normal” relationships with the IMF at the start of the annual meetings in Istanbul.

Argentine officials have already held a series of talks with their IMF counterparts in the Turkish capital in an effort to normalize relations. These have been severed for three years after Argentina paid back its debt to the IMF and subsequently refused to be submitted to its annual Article IV review.

Argentina’s finance minister Amado Boudou is now expected to meet with the IMF’s managing director Dominique Strauss-Kahn, after acknowledging for the first time that the Fund had changed, when he spoke about “the new IMF”.

Martin Redrado, Argentina’s central bank governor, spoke with Strauss-Kahn Tuesday and received “a commitment that the Article 4 consultation will have to proceed on strictly technical terms without any kind of political analysis”, according to a spokesman from an Argentinean spokesman.

Officials from Argentina have usually been prone on denouncing the Fund’s intrusive methods in domestic affairs. “They have a different vision than ours, and this is why they have just had to deal with the worst crisis since 1930”, Boudou earlier told Argentinean journalists.

On the other hand, IMF technicians say they lack the basic elements to gauge the impact of the global crisis on the Argentinean economy, as local statistics are still not considered reliable.

A basic agreement on bilateral procedure would be the prelude to normalizing relations with the Fund, which has been one the declared goals of the government of Christina Fernandez de Kirchner, following a bruising electoral defeat last June and deteriorating financial conditions.

This would pave the way for a $6.7 billion debt settlement with the Paris Club, which is already pending.

A technical mission will have to be allowed to go to Argentina before a resumption of normal relations by the end of the year can be envisaged. An Argentinean central bank spokesman said the talks had been “very positive”.

Strauss-Kahn “expressed his commitment that the review will not get politicized and will be strictly technical and focused on assessing the macroeconomic situation of the country,” the spokesman said.

Nicolas Eyzaguirre, the Fund’s western hemisphere director, who met with Boudou on Tuesday, had previously made its position clear: “It is about policies, not politics...We do not want to be intrusive nor interfere. But we have to be transparent.”

In addition, Redrado has defended a system of “collective insurance” for countries that face reserve shortages. Those countries would have to pay a fee for this insurance, but if needed, “the availability should be immediate and without conditions”, according to the central bank spokesman.

However, Strauss-Kahn has said that there was no consensus among important countries to put this into practice, according to Argentinean sources.

Redrado addresses the severity of recurrent economic crises in Argentina and ensuing volatility in an article in Emerging Markets. “Although Latin American countries have experienced lower economic growth rates and higher macroeconomic volatility than other regions, the problem of our country is on a different scale”, he writes.

“Over the past 30 years, the average growth in Latin America was less than half of Asia’s, with volatility at nearly twice Asian levels. In that period, Argentina’s growth was three times lower than that of emerging Asia, and volatility eight times greater.”

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