Alberto Fernández, Argentina’s main presidential candidate, has accused a $57 billion IMF bailout of funding capital flight, fueling fears he would implement capital controls if he becomes the country’s next president in October.
The price of Argentina’s 100-year “century” bond fell to 45.99 cents to the dollar on Tuesday, after Fernández said the IMF and Argentina’s current government were also responsible for the economic problems of the country. The comments came as IMF officials met with local authorities in Buenos Aires this week to discuss whether to disburse the next tranche of the $5.4 billion loan in September.
In a harshly worded statement late Monday after meeting with IMF officials, Fernández said the “dogmatic” positions taken by the government and the IMF had failed to solve any of Argentina’s problems, “and in some cases, all he has done is to make them worse,” pointing to the sharp increase in public debt.
“Those who generated this crisis, the government and the IMF, are responsible for ending and reversing the social catastrophe from which an ever larger part of Argentine society is suffering,” the statement said.
The statement points out that since the IMF disbursed $44.5 billion in the wake of Argentina’s currency crisis last year – around 80% of the total amount of the bailout – some $36.6 billion has left the country in the form of capital flight by local and foreign investors. .
“What [Fernández] says is that some form of capital controls is coming,” said Walter Stoeppelwerth, chief investment officer at Portfolio Personal Inversiones in Buenos Aires, assuming Mr. Fernández will win the next election in October.
“One thing he’s not going to do is screw up the IMF, but if things keep going that way private bondholders are going to take him on the chin,” he added, suggesting a similar agreement to Greece in 2012 when “the ones who suffer are private bondholders”.
Argentinian markets and assets were severely spooked earlier this month after Mr Fernández won a decisive victory in a primary vote, virtually wiping out the odds that Mauricio Macri – whose government negotiated the bailout with the IMF – be re-elected.
Meanwhile, none of the main objectives of the IMF program – boosting economic growth, creating jobs to fight poverty and reducing inflation and the debt burden – have been achieved, Fernández said.
“The statement has a political motive,” said Daniel Marx, a former finance secretary. “[Fernández is saying that] it is not right for the IMF to support an administration, and when a new one arrives, it says that it has no more money. It prepares the ground for the next negotiation.
Miguel Kiguel, another former finance secretary, argued that Argentina had met the conditions required by the IMF for it to approve the next $5.4 billion tranche of its program, and that the viability of the the country’s debt had not changed enough in the three months since the IMF’s last report. Argentina’s consideration to suspend its next payment.
“If they don’t disburse the money, it would be a bad sign and a sign of weakness for the transition. People will get nervous and sell more dollars, and it will be harder to refinance the debt. Even so, Argentina has enough foreign exchange reserves for Macri to come to the end of his term on December 10 without disbursement,” he said.