2023-04-16 22:27:16
With its international reserves melting, Argentina is desperately looking for resources to keep pedaling the economy until at least the October elections.
The most recent injection of resources will come from Saudi Arabia, whose Development Fund created to finance projects in emerging economies decided to release a line of financing for the country. There will be US$ 500 million for infrastructure projects, including the Néstor Kirchner gas pipeline.
The lack of confidence in Alberto Fernández’s government pushes the parallel dollar to new records, reaching 400 pesos. The currency devaluation in turn feeds inflation, which hit 7.7% in March.
Accumulated in 12 months, the rate is 104.3%, the highest since 1991. Price increases have already surpassed those of Venezuela, placing Argentina as the country with the highest inflation on the continent.
“The number we saw today represents the worst moment of the impact of the war on international prices and the worst drought in the country’s history,” said the spokeswoman for the Presidency, Gabriela Cerruti, pretending that the problem is entirely exogenous.
It will be difficult to convince the population punished by high prices and a retraction in economic activity.
Sergio Massa, the superminister of the Economy, is in Washington for the spring meetings of the IMF and the World Bank and is looking for alternatives to recover his country’s cash.
The deal with the Saudis was sealed in a meeting with Sultan Abdulrahman Al-Marshad, the fund’s CEO. No details were offered on the terms and guarantees of the Saudi loan, but it was a rare gesture in recent months.
Since its most recent default on private investor debt in 2020, Argentina has found its doors closed when it goes public.
In addition to Saudi money, Massa has so far managed to receive a contribution of US$ 600 million from the IDB, in resources that should be allocated to the health area. Another US$ 950 million should come from the World Bank for programs in education mainly. These are resources with a specific destination, which will do little to reinforce net reserves in hard currency.
Officially, reserves are at US$ 38 billion. Net reserves, however, represent a fraction of this value and the government offers few details regarding it, which only increases investor insecurity.
Local analysts estimate the net worth to be around US$6 billion. A good fraction of the declared balance is actually swaps made with Chinese institutions.
The Argentines are not complying with the terms of the agreement renegotiated with the IMF last year. Inflation, for example, should retreat to 60% by the end of 2023. Now the scenario has become even more difficult because of the historic drought that punished the grain harvest.
The Central Bank of Argentina keeps the basic interest rate below galloping inflation. Without financial investment options to ensure the protection of their savings, Argentines buy dollars.
The quotation of blueas Argentines call the free dollar in the parallel market, is practically twice the official exchange rate: 400 pesos once morest 220.
The situation of international reserves is not worse only because the government decided to create a special exchange rate for some exporters and derivative contracts, the “soy dollar”, quoted at 300 pesos – 37% above the controlled exchange rate –, and thus encourage operations international sale.
Despite the unfulfilled targets, the IMF has been releasing the installments of the US$ 44 billion program approved last year. Massa tries to renegotiate, once once more, the conditions for maintaining access to resources. He returned from Washington with the promise of receiving a new relief in the demands to be met – this time, due to the impact of the drought on agricultural production.
Two weeks ago, Alberto Fernández was with Joe Biden at the White House and asked that the IMF continue to support the Argentines.
The multilateral institution has been lenient so far. But the Brazilian president, Luiz Inácio Lula da Silva, said, during the inauguration ceremony of Dilma Rousseff as president of the Banco dos Brics, that “no government can work with a knife at the throat because he owes”.
Still according to Lula, “it is not up to a bank to suffocate the economies of countries as the International Monetary Fund is doing with Argentina”.
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Giuliano Guandalini
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