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Debt, inflation and Moreno, in the middle of a disarticulated dance
Clarin
August 30, 2008

by Alcadio O a

For a moment, the government seemed inclined to take up the pending accounts with the bondholders that didn't enter the swap and the default with the Paris Club. But only for a moment, as the Cabinet Chief denied everything. The only information came from official sources. And the subsequent denial; it seemed to follow orders from a higher source to those that jammed the spinning of the previous rumors.

Another dissonant sound these days. The Central Bank president spoke of a "necessary reduction in inflation" which that lowering it and macroeconomic sustainability alone can guarantee "action that is joint and coordinated on fiscal, salarial, revenue, jurisdictional and monetary policy." And almost simultaneously, Sergio Massa asked himself, or is asking: "Why does an anti-inflationary plan have to exist?"

Massa is the same Massa that, after just stepping into government, said that it's necessary to recover the INDEC's credibility: suffice to say like never before he returned to speak on the issue. And Martin Redrado is the same Redrado that some time ago thought it essential to coordinate policies, like part of a plan to face the inflationary process: without much luck, according to what is seen.

The back and forth with the bondholders and the Paris Club and the short-circuits over an inflation that exists but doesn't exist, can only be possible in a place of inarticulate moves. Where some officials march in one direction, which then proves to be inappropriate or someone decided that it wasn't. Where they don't agree on how to deal with evident problems, nor over the very existence of the difficulties.

It's at least clear that they got from a foreign bank a proposal to deal with the bondholders, and that the offer would be presented as an initiative of others and not from Argentina. Something that seemingly arrived when N stor Kirchner was President. At that time, Kirchner rejected it. And, now, the order was to not negotiate anything and rapidly abort any leaks.

With the 6.5 billion dollars that are owed to the Paris Club there is a will to make arrangements on both parts. But the government is not ready to accept that the IMF gets put in the middle, nor does it have the intention to make a big cash payment as asked by the members of the organization dominated by the G-7 powers. On the other hand, nor does there exist interest in giving Argentina exceptional treatment that is not given to other countries or see themselves facing a split decision. In the end, everything sufficiently bogged down so that expectations are low that anything will see the light.

Another noise is that of "Moreno is not going now, he's staying." And the reforms at the INDEC. If there isn't a problem, why speak so much of this inside the government? Even pro-government legislators were running to kick out the Trade Secretary, believe he was on his way out and with the idea of not becoming prey to the opposition: they were told to immediately shut up and were never heard from again.

Massa himself came to tell economists about the leadership of INDEC. The operation ended up being frustrated, as such because those invited in didn't get sufficient guarantees and rejected the offers, because they underestimated from the start or because they were under orders to halt the moves. What is clear is that nothing new has come of it.

"There are no reasons to think that the country could again enter into default and a will to pay can be seen by the government. But economic imbalances exist without a doubt and time is not changing that." And this opinion, from analysts that could be considered independent, could be added to other inevitable perceptions: dispersion of forces inside and outside the government, fights among officials and substantial erosion of the Kirchner shield.

Nothing more to this context is the possibility that the extra 33 billion pesos that will be spent in this year's Budget come, in the end, through a Decree of Necessity and Urgency. That the President is breaking her promise to not use the DNU is only explained if the idea is to avoid a debate in Congress. Predictably, a loud racket over the use of public funds, with its own costs and yields for the opposition.

On the same front, it seems that the way is closed for the pro-government block in the Senate to accept changes in the bill for the nationalization of Aerolineas (Argentinas). It would go back to the House of Deputies, and there it would again be hit by criticism about what the government did and allowed to happen during these past years and the inconsistencies of the exit. According to those who watch it, the greater the independence of Congress, the more loss for the Kirchner core, or vice versa.

They see other battles. Among them, eventually one over the extension of the Emergency Law, which has in it the unequal distribution of the Check Tax: today, in favor of the Nation and against the provinces. Another good opportunity to measure their own strengths and weaknesses.

It's an elegant many to suggest that the government ought to pay all its debts.