Arab Today, arab today argentinaimf relations thawing after a 10year break
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Argentina-IMF relations thawing after a 10-year break

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Arab Today, arab today Argentina-IMF relations thawing after a 10-year break

Argentine President Mauricio Macri's (top C)
Washington - AFP

Argentina's reformist government has opened the way to resuming relations with the International Monetary Fund, after a decade of icy relations that saw the country censured by the crisis lender.

President Mauricio Macri's tentative deal Monday to repay bondholders long branded as vultures by Buenos Aires has signalled a new approach to economic management to global capital markets.

Resuming friendly relations with the IMF would confirm the country's return from the cold and help restore its former image as a South American economic leader.

And with its finances still strained, it could also reopen Argentina's access to IMF valuable technical and funding support.

Relations were frozen in 2006 when the country, still recovering from its default on nearly $100 billion in debt five years earlier, stopped cooperating with the Washington institution.

It also halted the annual "Article IV" economic reviews the IMF conducts with all members.

Over time relations worsened as the country supplied data on economic growth and inflation that was far from meeting IMF standards and allegedly masked real problems.

Fast-forward to Macri, who took office in December vowing to break with the policies of his predecessors which isolated the country internationally and, Macri says, left the economy very weak.

Macri has begun to reform economic statistics, admitting growth is slow and inflation high. And he has told the IMF he wants to resume Article IV assessments later this year.

"Reengagement with the IMF is crucial because it removes the longstanding view of Argentina being a completely opaque country that doesn't publish any kind of credible economic information whatsoever," said Monica de Bolle, a former IMF economist now at the Peterson Institute for International Economics in Washington.

A return to the good graces of the IMF would also encourage the return of foreign investors, said Ernesto Calvi, director of the Brookings Institution's Global-CERES Economic and Social Policy in Latin America Initiative.

"Knowing that the Fund will be there if needed is a strong reassurance for investors, especially at a time when they're already pretty scared about emerging markets," he told AFP.

- Red card -

The rapprochement is hardly a given. Some people in Argentina still hold the IMF responsable for its 2001 crisis.

The former IMF managing director Dominique Strauss-Kahn conceded in 2007 that there are reasons Argentinians labelled the Fund a "devil".

That resentment smoldered throughout the eight years of the populist presidency of Cristina Kirchner, Macri's predecessor.

The relationship hit bottom at the beginning of 2013 when the IMF dealt the country what it called a "red card," taking the unprecedented step of censuring it for failing to supply accurate economic data.

Since taking office, Macri has moved to shake things up. He replaced the head of statistics. On January 13 the new government admitted inflation was about 30 percent last year, more than double what Kirchner's government reported.

With such reforms, Macri has said, "We want to become a normal country again."

The IMF has taken notice. Managing Director Christine Lagarde said last month that the government's reforms, especially those toward transparency, "are very encouraging."

On Buenos Aires' request, this week the IMF released assessments of the country's economy undertaken informally over 2013-2015, which highlighted some key weaknesses.

Now facing the same pressures as other emerging market countries, such actions are "the only option they have, given the dire economic situation Argentina finds itself today," said Mark Jones, a Latin American expert at the Baker Institute for Public Policy.

But a rapprochement also serves the IMF, allowing it to widen its economic surveillance of Latin America and also improve its own image, sometimes seen as "intransigent and inhumane", as Lagarde put it last year.

"It will take some time to change, but if the Fund comes to Argentina with a technical assistance kind of approach, to help out the country, it would be a big PR move for the institution," said de Bolle.

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