Argentina officials work overtime to secure IMF aid

BUENOS AIRES, Argentina, Reuters

Argentine negotiators worked overtime on Sunday to secure new loans from the International Monetary Fund to shield Latin America’s No. 3 economy from a liquidity crisis that threatens its solvency.

Marathon talks with the Washington-based lender on Friday and Saturday nearly finalized the technical details needed to allow Argentina to access an agreed disbursement of US$1.2 billion of IMF money in August, about one month early.

The negotiations were to wrap up on Saturday but fears Argentina might default on its US$128 billion debt and dropping bank deposits have added urgency to expectations the government would ask the IMF for up to US$9 billion in additional aid.

Total bank deposits fell to US$76.3 billion by Aug. 8 from US$81.5 billion at the end of June.

Argentine Finance Secretary Daniel Marx told reporters on Saturday his attention had shifted to new “possible assistance from the IMF” that may take “several weeks” to arrange.

The Argentine office at the IMF in Washington said Marx may brief the press after 6:00 p.m. EDT (2200 GMT) on Sunday. The negotiators were locked in meetings all day with the IMF.

“It’s unjustified to create expectations that on Friday, on Saturday, on Sunday or on Monday there will be announcements,” President Fernando de la Rua told reporters at his residence.

Still, Economy Minister Domingo Cavallo said on Wednesday night his negotiators “will not return empty handed.”

Marx and his team are expected to win a US$6 billion to US$7 billion credit line to guarantee central bank reserves along with US$2 billion in backing from private banks and another US$1 billion between the World Bank and Inter-American Development Bank, said Rafael Ber of Argentine Research consultancy.

But to convince the IMF to release more aid, Argentina must prove it is rooting out the problem by stopping overspending and erasing its chronic budget deficit.

“The zero-deficit plan continues to be the key variable in the talks, given the need to implement it immediately in a way that is socially viable and with political support,” Ber said.

Argentine bonds and stocks rallied through the week as an expectant nation pinned its hopes on fresh international aid.

Country risk, or the premium offered above safe-haven U.S. Treasuries, receded 160 basis points to 1,397 points from 1,557 points, but still kept credit out of the reach of many people.