Alberto Fernández, Argentina’s leading presidential candidate, has blamed a $57bn IMF bailout for financing capital flight, fuelling fears that he would implement capital controls if he becomes the country’s next president in October.
The price of Argentina’s 100-year “century” bond fell nearly $1 to $45.99 on Tuesday, after Mr Fernández said the IMF and Argentina’s current government were equally to blame for the country’s economic problems. The comments came as IMF officials meet local authorities in Buenos Aires this week to discuss whether to disburse the next tranche of the loan for $5.4bn in September.
In a harshly worded statement issued on Monday night after meeting with IMF officials, Mr Fernández said the “dogmatic” positions taken by both the government and the IMF had failed to cure any of Argentina’s problems, “and in some cases all it has done is to make them worse”, pointing to the steep increase in public debt.
“Those that have generated this crisis, the government and the IMF, are responsible for putting an end to and reversing the social catastrophe that an ever greater portion of Argentine society is suffering,” the statement read.
The statement pointed out that since the IMF disbursed $44.5bn in the wake of Argentina’s currency crisis last year — about 80 per cent of the total bailout amount — some $36.6bn has left the country in the form of capital flight by both local and foreign investors.
“What [Fernández] is saying is that some form of capital controls is coming,” said Walter Stoeppelwerth, the chief investment officer at Portfolio Personal Inversiones in Buenos Aires, on the assumption that Mr Fernández will win the upcoming elections in October.
“One thing he’s not going to do is screw over the IMF, but if things continue to go in this direction, private bondholders are going to take it on the chin,” he added, suggesting a deal similar to Greece in 2012 when “the people who take the pain are private bondholders”.
Argentina’s markets and assets were badly spooked earlier this month after Mr Fernández scored a decisive victory in a primary vote, all but erasing the chances that Mauricio Macri — whose government negotiated the bailout with the IMF — would win re-election.
Meanwhile, none of the IMF programme’s main objectives — stimulating economic growth, generating employment to combat poverty and reducing inflation and the debt burden — have been met, Mr Fernández said.
“The statement has a political motive,” said Daniel Marx, a former finance secretary. “[Fernández is saying that] it’s not fair for the IMF to support one administration, and when a new one comes along then say it has run out of money. He is setting the stage for the next negotiation.”
Miguel Kiguel, another former finance secretary, argued that Argentina had met the conditions required by the IMF for it to approve the next $5.4bn tranche of its programme, and that the country’s debt sustainability had not changed enough in the three months since the IMF’s last review of Argentina to suspend its next payment.
“If they don’t disburse the money, it would be a bad sign, and a sign of weakness for the transition. People will get nervous and sell more dollars, and it will be more difficult to refinance debt. Even so, Argentina has enough foreign exchange reserves for Macri to get to the end of his term on December 10 without the disbursement,” he said.