Buenos Aires Herald 
Vice President Cristina Fernández de Kirchner and Alejandro Werner, the International Monetary Fund’s (IMF) former Western Hemisphere Department Head, have called each other “crazy” after the former executive lashed out at Kirchner’s proposal for Argentina to repay its debt only when running a trade surplus.
On Tuesday, Werner – who was key to the negotiations between the Fund and Argentina’s erstwhile President Mauricio Macri when he took a record US$57 billion credit line in 2018 – told Clarín newspaper that Kirchner’s proposals for repaying the debt when the country is running a trade surplus were “crazy”.
Kirchner made the proposal in a speech in the city of La Plata last week, during which she excoriated the country’s deal with the lender as “inflationary” and said that its policies “have not worked anywhere in the world”.
The 2018 deal, the largest in the lender’s history, was originally for US$50 billion and later increased to US$57 billion, although the agreement was put on hold after President Alberto Fernández took office in 2019 and announced he would stop drawing on the funds. Argentina received disbursements for US$44 billion by mid-2019. It continued to pay its obligations without receiving money between 2019 and early 2022, when it signed a new agreement to repay the funds Macri received in 2018 and 2019..
The deal renegotiated in 2022 includes economic guidelines that Argentina must comply with in order to receive disbursements every three months, which are then used to pay for the 2018 agreement.
After a drought left key commodity crops such as soybeans and corn withering in the fields and decimated the nation’s dollar income, the Argentine government is aiming for a ground-up renegotiation of all aspects of its program with the IMF.
Kirchner took to Twitter to respond to Werner’s comments on Tuesday. “Hello Mr. Werner!,” she said. “What was crazy was to give a political loan of US$45 billion to the government of Mauricio Macri to win the elections,” she said.
“Pegging the payment of a debt to a macroeconomic variable is neither “far-fetched” nor “extraordinarily simplistic””, CFK said. “On the contrary, it is what Néstor Kirchner did when he successfully restructured the debt that others had defaulted on in 2001 and tied the coupon payment to our country’s GDP growth.”
Werner has returned fire in the Argentine media. In an interview with radio Urbana Play this morning, he said that agreeing to let countries pay their debts only if they have a trade surplus was a “bad incentive structure” because governments can choose to spend the money instead. He pointed out that it is common for countries to run deficits financed with debt, but Argentina has limited access to capital markets at present.
He also took aim at the arguments, often voiced by President Fernández and other top officials, that this government has had its hands tied because of the triple whammy of the pandemic, costs associated with the Ukraine war, and this year’s record drought.
“It is probable that, perhaps, if a government with sensible economic policy had arrived in power in 2020, managing the pandemic well financially, it could have reopened its capital accounts,” he said, suggesting that the Fernández administration could have softened the blow of the current drought by saving more during strong harvests in 2021 and 2022.
Dollar scarcity has been one of the Argentine government’s main talking points with the IMF since last year. Since the talks ended in February 2022, the goals of the current agreement were negotiated without taking into account the impact of the war in Ukraine on the Argentine accounts, which the government contended should lead to a target review. The Economy Ministry estimated that the increase in energy and freight prices generated a negative impact of US$5 billion on Argentina’s trade balance. The IMF Board approved a relaxation of reserves targets in March.
After accusing Fernández of “begging for dollars” internationally, he said “What stops [Argentina’s debt] from being sustainable is that it doesn’t have public policies that allow investors to look to the future and say, ‘this is a country that will comply with what it says and pay me back.’”, adding: “The erroneous diagnosis of this government was to think that just by restructuring the debt, it would solve their problems and they wouldn’t have to do anything else.”
As a member of the negotiating team, Alejandro Werner played a central role in the IMF granting Argentina the loan in 2018. The failure of the first Stand By agreement signed in June led to a series of peso devaluations that pushed the country and the IMF to sign a second Stand By in September of that year. The main problem was, as Macri wrote in his book Primer Tiempo (First Half), the IMF’s opposition to the Central Bank’s intervention in the currency market to stop runs on the peso.
