Argentina’s $45 billion loan to the International Monetary Fund cannot be repaid under new negotiation terms, according to powerful Vice President Cristina Fernandez de Kirchner, lowering the chances of a deal with the country’s biggest creditor. At an event in Buenos Aires, Fernandez de Kirchner said, “We can’t pay because we don’t have the money to pay,” adding that the terms and conditions are “unacceptable.” Fernandez de Kirchner’s remarks follow a meeting in Washington on Tuesday between Economy Minister Martin Guzman and IMF Managing Director Kristalina Georgieva, which both sides characterized as “very nice.”
The aggressive stance taken by Fernandez de Kirchner, who fought creditors during her eight years in office from 2007 to 2015, may help bury the already fading hopes of an agreement being struck before the October midterm elections. President Alberto Fernandez is the leader of a strong Peronist party, and Fernandez de Kirchner is a member of a more conservative yet influential left-wing faction. According to Benjamin Gedan, director of the Argentina Project at the Wilson Center in Washington, “key players in the government’s alliance would like to be perpetually at odds with the Fund.” “This mentality is counterproductive and makes it more difficult for the economy minister to discuss a new programme.”
Argentin President Cristina Fernandez’s spokespeople and the Economy Ministry did not respond to requests for comment. Argentina’s Foreign Ministry also declared on Wednesday that the country is officially withdrawing from the Lima Group of western hemisphere nations pursuing a negotiated transfer of power from Nicolas Maduro’s regime in Venezuela. Moves to weaken Maduro’s government “haven’t resulted in much,” according to the ministry, and the presence of his Venezuelan opposition in the bloc has resulted in seats that Argentina can’t join.
On Wednesday, Argentine dollar bonds due in 2030 dropped 0.9 cents to 34.15 cents on the dollar. Following Fernandez de Kirchner’s remarks, the bonds fell slightly. Argentina restructured its loans with bondholders last year and is now working with the Washington-based lender to reschedule payments. The expense of insuring Argentina’s debt against defaults has soared to its highest level since the nation exited default last year. According to ICE Data Services, the upfront cost of credit-default swaps connected to the country increased 1 percentage point to 39 percentage points. That suggests that insuring $10 million in Argentina bonds will cost $3.9 million up front.
A spokeswoman for the International Monetary Fund (IMF) declined to comment on Fernandez de Kirchner’s remarks. Axel Kicillof, the governor of Buenos Aires Province, and her son Maximo, a congressman, flanked Fernandez de Kirchner during her speech. She encouraged the opposition to assist in securing better deals with the bank, since they were in charge of taking on the debt under former President Mauricio Macri. “We are not arguing that you cannot settle your debt,” Fernandez de Kirchner clarified. “Our political party was the first one to pay any of the other governments’ debts. The governing party and the opposition should work together to get us a longer term and a lower interest rate on a mortgage that some have taken on.”
Guzman’s trip to Washington this week came after negotiations broke down last September with no tangible change, and after he met with investors in New York last Friday. While IMF negotiators would like to strike an agreement with Argentina as soon as possible to bring the country back on track to prosperity, the Fund understands that it cannot force Argentina’s hand, according to people familiar with the talks. Officials in Buenos Aires have been tamping down hopes for a settlement, with President Fernandez recently claiming that he does not want to hurry the negotiations. He has yet to give the IMF or even top leaders of his coalition a comprehensive economic agenda, which is a crucial step in moving the negotiations forward.
