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Facing the Paris Club debt logjam
Clarin
August 29, 2008

The United States expressed, in an informal way, its annoyance for the delay in our country starting to move toward paying the debt with the countries of the G-7.

by Marcelo Bonelli

In an informal but forceful way, the United States communicated its annoyance over the lateness that Argentina has shown in agreeing with the Paris Club.

In this way it was put to Cristina Kirchner that Washington will help her government, but only if she gives clear signals that she plans to have an adult and harmonious relationship with the White House.

The message was communicated by Thomas Shannon, but the more trusting and direct discussion was with Susan Segal, the influential head of the Council of the Americas

The U.S. businesswoman used the excellent dialogue she maintains with the President, and also the advantage of not being on the staff of a Republican administration that is ending its term in December, to transmit the fears that the U.S. establishment will continue to have while the political insignia changes at the White House.

It was done in a quiet meeting, where they shared tea on Wednesday. First, both agreed on one issue: Segal will open the doors for Cristina in Manhattan, for the President to speak at the headquarters of the Council of the Americas. It will be in mid-September and before all of Wall Street.

Segal took advantage of the meeting to describe the doubts that exist in the international financial centers against Argentina. She asked about how governability was going after the political showdown with the farm sector and asked for details about an issue: the doubts generated abroad about the consistency of the economic model. The President and Segal agreed to maintain the discussed matters private. The confidentiality allowed for the raising of the conflict with the Paris Club.

For the Council of the Americas the tardiness in approaching the issue is not justified nor is the aversion to the IMF. The same was said in private by Earl Wayne. The ambassador confided to various multinational corporate heads about the content of the messages left at the Casa Rosada.

Thomas Shannon did it publicly during the meeting and at the private lunch that he held with bankers and multinational executives on Wednesday. He used diplomatic but forceful language: "We prefer action and not ideology." And he added: "The leaders ought to acknowledge their errors because this facilitates success."

Thus the U.S. emissaries showed their intention to share Argentina's position to avoide the holding of a previous agreement with the IMF to handle the debt in default with the G-7 nations. But they made some issues clear:

That the lateness in dealing with the Paris Club problem distanced Argentina ever more from the G-7 and international private financing.

That they must enact corrections in the economic model to bring back macroeconomic balance.

That it's inadmissible that Argentina not accept the annual IMF monitoring done for all member countries of the organization. It's treated as a review under Article IV of the institutional rules. The absence of this international audit raises uncertainty in Washington over the fortunes of the Argentine economy.

The reaction in Buenos Aires was a bit exaggerated. The Cabinet Chief's office sent out a series of statements about concrete preparations to negotiate with the Paris Club. For now there is nothing and the hot European summer is impeding any serious official initiative. Sergio Massa also let go information that he was working on a proposal for the bondholders in default. It was just a plan from Barclays Bank.

Both issues generated great turbulence in the Cabinet. Carlos Fern ndez dismissed, privately, the existence of both projects. Finally the Cabinet Chief came out to deny them before the business community.

The foreign issue generated turbulence among the ministers. This week the Finance Secretary asked the head of Hacienda to replace the IMF delegate from Argentina.

Hern n Lorenzino accused H ctor Torres of leaking information from the Fund against Argentina and acting more like an IMF official than as the Argentine delegate in Washington. Torres, who resisted the fight, asked for political protection from the Cabinet Chief.

Martin Redrado got the blowback from this fight. But the Central Bank is not intervening in the dispute. Redrado concentrated on a series of communications with Madrid.

They were discreet, and in them Redrado described Argentina's annoyance with the catastrophic report from the Bank of Spain.

He spoke with the head of the Spanish entity and also with Subgovernor Jose Vinals, who next week will visit the BCRA. Redrado and Miguel Fernandez Ordo ez shared a weekend retreat at Jackson Hole.

Ordonez and Vinals blamed the report on two economists and set aside the relevance of the conclusions. It was confected on the basis of the opinions of risk consultants on Wall Street.

The controversial paper included some warnings about the fundamentals, but exaggerated in comparing Argentina to Cuba and Iraq.

For the President, the publication of the document wasn't a mistake, but an Iberian slap over the renationalization of Aerol neas Argentinas.

At the yard at Olivos they blame Gerardo Diaz Ferr n for the release of the paper. He's the head of the powerful Spanish Confederation of Business Organizations and the owner of Marsans.

The fight began and the Spaniards pushed up the price: they want 200 million dollars to walk away from Aerol neas Argentinas.