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The IMF praised the "normalization of the relationship with the creditors
Clarin
September 05, 2008

The organization said it was pleased and pointed out their intention to send a mission

By Ana Baron in Washington

THE spokesman for the IMF, Masood Ahmed praised the payment of the debt which Argentina has with the Paris Club, but Fund officials and Wall Street analysts consulted by Clarin continue to be skeptical. We welcome the normalization of relations between Argentina and its creditors. Our dialogue with the authorities is on-going and we hope to carry out the Article IV in the next few months", Masood said briefly during the press conference given every fortnight at the organization. This was a statement which was more formal than anything else, and which did not serve to mask that they are always cautious when talking about Argentina.

An IMF official said that "if the Paris Club payment is not accompanied by something else, it could even be counterproductive. It could indicate that they are trying to not to have make the changes necessary to attract new investments. It is true that with the Paris Club payment, they will get some financing for some projects. But to get investments in the energy sector, they need a regulatory framework and inflation needs to be moderately under control." "This gives them greater freedom in terms of the Fund but puts Argentina at the mercy of the markets", said another official. "Their financing needs for next year remain the same. And now they have less reserves".

They also made it clear that the independence of the Central Bank is non-existent. For the creditors, this is the shining proof that the reserves belong to Treasury. Then there will be no way to stop the embargoes. Neither of the two officials is particularly optimistic over the chance that the Fund will be able to send a mission to Buenos Aires to carry out its annual review of the economic situation as it does in every country according to Article IV of its Charter. "I don't believe that they want a mission to come here if they can't correct the INDEC and start tackling the business of inflation seriously".

In Wall Street, the operators consulted by this correspondent over the payment of the Paris Club debt had two reactions. On the one hand there are those who believe that the payment of the debt is a positive sign which would indicate that the Government wants to reinsert itself in the international markets. "I see it as positive sign. The Government is waking up and realizing that Argentina can0't live cut off from the rest of the world" said Shari Shahid from Constellation Capital Management. "I think that now it must continue with the measures and focus on the problem of the bondholders that were left out of the debt swap. Given that the market is so weak right now I believe they could come to a very satisfactory agreement."

On the other side of the street are those who say that the Government is trying with this payment to avoid making changes in economic policy that would help Argentina reach a more sustainable economic situation. "I fear that the objective of all of this has actually been to do nothing. And as time goes by, the problems are getting worse. Inflation is without a doubt the most serious, said one of the analysts who asked not to be identified.

"The INDEC situations is serious, but more serious still is that they are not doing anything about inflation" said another. " The international context is changing, the commodity prices are falling. This leaves Argentina highly vulnerable."