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Government returns to take charge of the Paris Club debt
Ambito Financiero
July 16, 2010

Kirchners give Amado Boudou the green light to begin negotiating, but always without the IMF

July 16, 2010

By Carlos Burgue o

The Kirchners ended yesterday by giving the green light to Amado Boudou to begin formally negotiating in the coming days with the Paris Club to normalize approximately US$6.5 billion that Argentina owes to the group of countries making up that block, and that represents as of now the only remaining balance that the country has in default since the crisis of 2001. Nestor Kirchner yesterday during an event in Ezeiza, and before she traveled to China, Cristina de Kirchner also spoke with the Economy Minister to endorse this new process, but with the same order as always: that the negotiations be directly with the creditor states and that the International Monetary Fund (IMF) not intervene as the oversight organization of the operation.

This last order is not new. It's seen as what the Kirchners always argued in this process, that until now hasn't been productive precisely due to the insistence of the creditor states to maintain it under the eye of the organization that is led by Dominique Strauss-Kahn. However, the Kirchners don't accept this imposition due to ideological motives, as since while they've been in government, periodic missions of the IMF to the country are a thing of the past, unacceptable for the Argentina of today. In political terms, the last thing that they have in mind in this government is to pass through 2011, an electoral year in which the Kirchners are playing for their future, with an IMF technical mission circulating through official buildings which control the local public accounts, and receiving visits from economists and opposition political leaders in the hotels where they'll be staying, and with photos of these occasions circulating in the media.

Inside the government they also recognize that while the country's numbers are quite positive, the IMF could concentrate on the way that INDEC measures inflation.

Before this panorama, the possibility of the presence of the Fund's men in Argentina remains vetoed. The order then for Boudou was to move ahead in the negotiations, even accelerate them, but make it clear that the IMF cannot be part of the event.

The Kirchners are equally optimistic on the possibility of the creditors accepting a negotiation with Argentina without the financial organization as overseer. The official theory speaks of states like the Europeans having to look favorably on the alternative if Argentina pays its debts and ends the default. The ex-president's opinion even speaks of beginning the negotiations with Spain, a country that is owed some US$1.1 billion due to the loan that Jos Mar a Aznar made at the time to Fernando de la R a so that the country not fall into default and not devaluate. Netor Kirchner himself in person spoke at the time about the issue with Jos Luis Rodr guez Zapatero, and advanced, in the days of Felisa Miceli, an installment plan. However, the membership of Spain in the Paris Club made it impossible to close a deal between the two countries outside of the organization's auspices. Kirchner supposes that the Zapatero government now should be interested in the money being returned, due to the need for funds that the Spanish state has in times of Iberian austerity. Following the Olivos thesis, then Zapatero could convince the government of France, Germany, Great Britain, Holland and Italy, other European creditors, of the virtues of negotiating with the country to pay off the debt without the intervention of the Fund. The negotiations should be more difficult with Japan, also a creditor state that practically has had no financial dialogue with Argentina since the 2001 default and that has no intention of talking to our envoys. Japan's interlocutors will have to be technical staff from the Fund. The government is more optimistic with respect to the United States. Indeed many are imagining Barack Obama as one of those pushing for an accord with the Paris Club without the IMF.

In the government they recognize that the importance of an accord with the international financial entity is fundamental for attacking one of the weakest flanks of the current economic model: the lack of investment, especially in the national industrial productive structure. Many European companies have made it clear to official envoys every time they can that they need this agreement to be able to go back to count on subsidized lines of credit.

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