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Dollar, interest rate and the return of Profits: the issues under discussion between the Government and the IMF towards a new program - Infobae
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Dólar, tasa de interés y el regreso de Ganancias: los temas en discusión entre el Gobierno y el FMI hacia un nuevo programa
Un enviado de la Secretaría del Tesoro de EE.UU. se reunió este miércoles con funcionarios del Banco Central. Las conversaciones técnicas y los plazos de negociación que se debaten entre Buenos Aires y Washington
www.infobae.com
March 14, 2024
An envoy from the US Treasury Secretary met with Central Bank officials this Wednesday. The technical talks and negotiation deadlines being debated between Buenos Aires and Washington
The arrival in Buenos Aires of a United States Treasury official and, next week, of one of the highest officials of the International Monetary Fund , could give, in the coming days, another push to a process that began in silently between the Casa Rosada and Washington: the exploration of concrete possibilities towards a new program, which may include disbursements for the Central Bank and framed in a new set of economic policies.
The first step was taken by the Undersecretary of Finance of the US Department of the Treasury, Brent Neiman , who arrived in Buenos Aires this Wednesday and will remain until Friday. On his first day he had meetings with Central Bank officials , including President Santiago Bausili . It is expected that he also has an agenda with the Ministry of Economy, but not with President Javier Milei .
He is not the first envoy of the department headed by Janet Yellen to Buenos Aires, since weeks ago the Undersecretary of International Affairs of the Treasury Jay Shambaugh (to whom Neiman responds) had already known first-hand the impressions of the economic team about the government's plan. libertarian. “During his visit, Neiman will speak about the macroeconomic stabilization efforts made to date by the Milei administration and the additional reforms proposed ,” the agency indicated from Washington.
The North American Treasury closely follows the development of Milei's economic program. A few weeks ago, after a head-to-head meeting between Yellen and Caputo, for the first time he gave approval and support in general terms and with warnings about the impact of the initial measures on the most vulnerable sectors of the population. A language similar to that used by the Monetary Fund to ask the Executive Branch to protect the purchasing power of pensions and social assistance.
The first meeting between the Argentine Government and Rodrígo Valdés, of the IMF, who will visit Buenos Aires in two weeks (@GitaGopinath)
In two weeks, the director of the IMF's Western Hemisphere Department, Chilean economist Rodrigo Valdés , will arrive in Argentina to participate in a panel organized by the IEFA Latam Forum. Although he will not be part of an official mission of the organization, it is expected that during his time in Buenos Aires he will make contact with officials of the economic team. It would be the second visit by a senior IMF official in a month, following the visit of Gita Gopinath , the organization's deputy director.
Caputo this Tuesday assured that there are preliminary conversations, of a technical nature, between the Executive Branch and the Monetary Fund to clear whether the signing of a new program is viable and under what conditions it could arrive, a process that actually began a few weeks ago. and that Infobae had anticipated .
On that agenda there are topics to iron out differences, on ongoing measures and others that the economic team plans to finalize in the coming months. On some topics there are conflicting positions, because the IMF staff manual does not look favorably on some economic policy measures such as an exchange rate anchor that loses competitiveness or that interest rates are negative against inflation.
The IMF believes that the Central Bank should accelerate the pace at which it devalues the official exchange rate, 2% monthly, to avoid having to make, at some point, a sharp jump in the dollar. The real multilateral exchange rate measured by the BCRA has been losing competitiveness since the devaluation three months ago, but it is still slightly above what it was in December 2015 with the dismantling of the exchange rate.
In the Government, they rule out an exchange rate correction by way of a jump or an acceleration of the crawling peg because it would imply, they assure, “ a higher floor for inflation and we need to lower it as quickly as possible.” Caputo conveyed this idea to businessmen in recent days and also raised it with the technicians of the Monetary Fund.
Regarding the interest rate, possibly the staff has not seen favorably the cut to 80% nominal annual for the reference rate. The IMF, in fact, encourages the interest rate of the pesos to be positive against expected inflation. He had already let us know something like this in his last technical report. “Monetary policy is expected to evolve to support money demand and disinflation, including by establishing a nominal anchor,” he had suggested.
Brent Neiman, US Treasury official, met with Central Bank officials this Wednesday
The idea that the Monetary Fund grants additional dollars to the Central Bank is a close possibility, which could be linked to an exit from the exchange rate . Although they do not risk a figure, they believe that the ideal before a measure of this nature is that the reserve cushion shows, at least, a level of net reserves in positive territory . Milei assured that the distance towards disarmament of exchange controls is USD 15,000 million. The discussion with the IMF will also focus on what the nominal anchor will be for the coming months. The Government is more inclined to use the exchange rate , but for that it will need the Fund's money as reinsurance.
The Casa Rosada will need support on the board of the Monetary Fund and has already begun to make some approach to the most relevant votes on the board. In the coming months the Fund will also undergo its own political campaign . This Wednesday the organization announced the start of the candidatures to elect the next managing director. Kristalina Georgieva 's term ends on September 30 but she has the possibility of re-election, and the European Union supports the continuity of the Bulgarian economist so that she can continue in her position for five more years.
Caputo is now heading towards a second stage of the economic program that he inaugurated in December with emergency measures such as the devaluation of the exchange rate, the unfreezing of prices, the increase in the PAIS tax, the reduction of import commercial debt through the issuance of bonds in dollars by the Central Bank and an immediate adjustment of public spending. In this second stage, the Government – and the IMF – have already identified the path to follow: the elimination of exchange controls . The timing is still under discussion , but there is consensus that for this the BCRA will need a cushion of foreign currency that the Monetary Fund could provide.
In terms of taxes, there is one that the IMF identifies as key to balancing fiscal accounts: the return of the fourth category of Profits , which was eliminated by Congress with the impetus of the then presidential candidate Sergio Massa at the end of 2023. It is a tribute that It is the protagonist of a permanent tug-of-war between the national government and the provincial governors as it is co-participatory. It is still unclear whether this tax will be restored and who will agree to pay the political cost of having some 800,000 people once again subject to the tax.
The debate about timing is more nebulous: the Government is putting a cold shoulder to an alleged rush to close a new program imminently and ensuring that there is time until November , when the last quarterly review of the current Extended Fund Facility (EFF) takes place. . In any case, at the Monetary Fund they opened a door for a faster resolution: the next instance of formal technical negotiation is in April, on the occasion of the eighth review of goal achievement.
