Argentina’s economy minister and presidential candidate, Sergio Massa, in Washington. WILL OLIVER (EFE)
Two months before the general election, the Argentine government will receive an economic lifeline. The Board of Directors of the International Monetary Fund this Wednesday approved the agreed $7.5 billion disbursement that will bolster the Argentine Republic’s central bank’s meager reserves. The funds come at a critical juncture for prevailing Peronism: episodes of looting over the past few days have revived fears that Argentina could fall from the abyss again.
The IMF authorized the disbursement after approving the fifth and sixth revisions of the agreement signed with the South American country to refinance the debt it has borne since 2018 and which it has not been able to repay within the established deadlines. In a statement, the IMF conceded that Argentina had missed its reserve-building and budget-deficit-reducing targets due to “unprecedented drought and policy divergence”. Nonetheless, he voted in favor of the new stimulus package to “ensure stability and strengthen sustainability in the medium term”.
In the medium term, there will be an election date of October 22nd and possibly November 19th. On that second day, if neither of them wins by more than 45% of the vote, or 40% by ten points behind second, the second round would take place between the two presidential candidates with the most votes. Should the results of the August 13 primary be repeated, the final battle would be between Javier Milei, a candidate from the far-right party La Libertad Avanza, who received 30% of the vote, and Patricia Bullrich, representative of the conservative coalition Together for the Change , which was less than two points away. However, the 27% of votes supporting the ruling Peronism and the unknown represented by the 31% of voters who abstained left all options open.
The government expected the IMF’s Executive Board to approve the deal, agreed by its technical team in July after months of tough negotiations. The entry of foreign currencies represents a temporary relief. “This disbursement guarantees Argentina a stability framework until the end of November,” announced Economy Minister and presidential candidate for Peronism, Sergio Massa, at a press appearance. When the name of the president-elect is revealed, the international organization must approve the seventh revision of the agreement, on which the disbursement of another $2.7 billion depends.
With no central bank reserves, Argentina knocked on numerous doors to meet the final maturities of its debt. It received a $1 billion loan from the CAF (Inter-American Development Bank) and another $770 million loan from Qatar, which will be repaid if it receives a cash injection from the IMF. China provided the remaining funds thanks to a coin exchange.
Meeting with candidates
Massa traveled to Washington to meet with IMF chief Kristalina Georgieva. Last week, the international organization held virtual meetings with the Bullrich and Milei teams to learn about their economic proposals. The two opposition rivals expect to lift government-imposed foreign exchange restrictions that have fragmented the market into multiple prices ranging from 365 pesos per dollar according to the official value to 735 pesos per dollar at which it is exchanged the parallel market or blue. In the middle is the exchange rate of the so-called financial dollar, with which private individuals and companies procure foreign currencies through stock exchange transactions.
The economy minister reported that the IMF had authorized the government to intervene in the foreign exchange market in order to maintain the value of financial dollars, thus providing “a situation of control of one of the uneasiness variables”. In addition, he expects to announce measures on Friday aimed at softening the blow caused by the general price surge following the peso’s 18 percent devaluation on Monday after the primary.
Alberto Fernández faces the final stint of his presidency with great local popularity and the country is on the brink of a new fire. “I ask all Argentines to ensure calm and social peace,” he said this Wednesday, referring to the looting that is keeping the country in suspense and for which almost a hundred people have been arrested. Massa added that affected traders will be compensated financially and the work of judges and prosecutors who handle robbery cases in various provinces will be monitored to ensure they apply the full weight of the law. “What can’t happen to us is that these criminals enter through one door of the police station and go through the other,” said the Peronist candidate in a campaign tone.
The winner of the election will take office as President of Argentina on December 10, 40 years after the restoration of democracy. It will welcome a country with the highest inflation in three decades – expected to be around 140% by the end of the year – and more than 40% of the population with incomes below the poverty line.
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