Economy
Argentina's Minister of Finance blamed bondholders and the IMF for the crisis and said it was not "realistic" to lower the deficit this year
Martin Guzmán spoke before Congress, promising not to be intimidated by the investment funds and accepted that the bondholders "will be frustrated" by his offer. Cambiemos called for a broader economic plan.

Martín Guzmán spoke for more than an hour at the Chamber of Deputies about the negotiations he is carrying out to restructure the foreign debt and, although he did not give any certainties about the offers he will present at the end of March, he was encouraged for the first time to recognize that there will be no surplus and therefore the capacity to pay will be limited.

"This year it is not realistic, it is not sustainable that there will be a reduction in the fiscal deficit," he admitted and suggested that with a greater effort he will be able to balance the accounts by the time President Alberto Fernández completes his term. "We define future fiscal and trade paths. The situation is tough. If nothing is done, if inertia is left, only in 2026 could the economy reach a fiscal surplus," he said.

"But an attainable and more realistic scenario, which implies hard work, would be to reach a fiscal balance in the year 2023 and converge a few years later to a primary fiscal surplus (prior to debt payment) of between 0.6 and 0.8% of the product," he said.

Guzmán explained that these objectives are only possible if tax policy is not focused "on keeping supply from rising and not producing more, because that weakens tax revenues. If this is achieved, economic growth of 2% could be achieved, exports would settle down and in 2022 we would reach fiscal balance," he said.

An achievable and more realistic scenario, which implies hard work, would be to reach fiscal balance in 2023 and converge a few years later to a primary fiscal surplus (before debt payment) of between 0.6 and 0.8% of GDP.

Through a document distributed after the session, the Juntos por el Cambio party was alarmed with these forecasts. "We received almost 5 points of deficit in relation to GDP and left the government with 0.4 percent of primary fiscal deficit. We hope that the government will not make a mistake by increasing the deficit again", they stated in the text. The government refuted these figures, asserting that in order to lower spending former President Macri did not implement million-dollar items.

The president of the Chamber of Deputies, Sergio Massa, celebrated that it was the first presentation by a minister in the chamber in 25 years, with an assembly similar to the presentations of the heads of cabinet and with an attendance framework similar to that of the opening of ordinary sessions on March 1. The box next to the main stage was reserved for cabinet officials, and Ministers Matias Kulfas (Production), Mario Meoni (Transportation), Daniel Arroyo (Social Development) and Claudio Moroni (Labor) and Deputy Chief of Staff Cecilia Todesca were present.

Economy Minister Matías Kulfas greets Guzmán.

The stands were opened to political and economic leaders. Mayors such as Mario Secco (Ensenada) and Mariano Cascallares (Almirante Brown) attended the event, businessmen were represented by Daniel Funes de la Rioja, Cristiano Rattazzi and banker Jorge Brito and the CGT by Hugo Moyano (Truckers), Héctor Daer (Health), Carlos Acuña (Service Stations), Andrés Rodríguez (UPCN) and José Luis Lingeri (Health Works).

The rural sector had its box on the first floor, close to the new directors of the Central Bank, the ambassador in the United States, Jorge Argüello and many guests from business organizations who listened to the minister without a word of protest.

Guzmán was very critical of the debt that former President Macri caused: "The debt grew from 52% to 82% of the GDP without increasing the country's productive capacity," he described. But he admitted that since 2012 there is no increase in exports and if this trend is not changed it will not be easy to get out of the recession.

Guzmán only proposed "a horizon" for the economic plan, which would consist of "aiming at a productive structure with a degree of diversification. The cake has to grow and there must be macroeconomic stability, with the accounts in order and a reliable currency," he said.

He was very critical of Macri's heavy reliance on debt since 2016, when he generated "expectations" in the credit markets after paying off the vulture funds. "The debt grew from 52% to 82% of GDP without any increase in the country's productive capacity," he described. But he admitted that since 2012 there has been no increase in the amount of exports, and if that trend is not changed it will not be easy to get out of the recession.

Businessmen Ratazzi, Brito and Funes de Rioja.

He made it clear that his first measures were only palliative. "The economic emergency law is not fiscal austerity, but orderly expansion of demand, which we completed with a 40-percentage point drop in the interest rate, to solve a comprehensive economic problem. We will continue with an agreement on prices and salaries. It has to do with that: with coordination. With a path forward," he said.

The different blocks had approached him with questions the day before, but he only answered some of them and promised to answer the rest in writing. He ignored most of the 24 questions from Juntos por el Cambio, including one which asked for his opinion on Cristina Kirchner's request for a debt relief from the IMF.

Although he did not give details of the negotiation with the IMF, Guzmán agreed with Vice President Cristina Kirchner in holding Macri responsible for the debt crisis facing the country. "He requested the largest loan in history and did not use it to create productive capacity, but to pay off more debt in an unsustainable situation and for capital outflow. It is a crisis in which all parties have responsibility: Argentina, the bondholders, for the fees they charged to cover themselves, and the IMF," he said.

The previous government did not comply with the objectives of the agreement, but it did comply with the premises requested by the IMF, which was a monetary contraction. Today, installed capacity is below 60 percent. Inflation has not abated, and the cost of credit has gone through the roof.

The minister insisted that fiscal austerity is not the way to generate capacity to pay the maturities and took the agreement signed by Macri and Christine Lagarde as an example. "The previous government did not meet the objectives of the agreement, but it did meet the premises requested by the Fund, which were a monetary contraction. Today the installed capacity is below 60 percent. Inflation has not abated and the cost of credit has gone through the roof," he said indignantly.

Left-wing congressmen Del Pla and Del Caño.

Guzmán confirmed that the negotiation with the private bondholders is the most complex and accepted a warning from Cambiemos - the opposition party - about the possibility that they will reject the first offer because of a strategic issue, as was the case with Governor Axel Kicillof in Buenos Aires Province. "It is not a simple matter and there is going to be frustration on the part of the bondholders," he anticipated.

He stressed again and again the need for a proposal to the creditors that is "sustainable", that is, that can be fulfilled in time. "There is a firm will to pay, but there is no capacity to pay. And to be able to do so, Argentina has to grow, and the burden of debt has to be lifted. The priority is a sustainable solution that allows growth," he explained.

The only applause from the Peronists came when he attributed the failure of the FY20 peso debt tenders to the performance of interest-bearing funds in the debt restructuring under New York law. "We are not going to allow foreign investment funds to set the tone for the country's economic policy," he said.

"FY20 does not represent the entire debt situation in pesos, which has market conditions of total sustainability. What happened these days was because of an attitude of the foreign debt holders. The main thing is that we are not going to allow foreign investment funds to set the tone for the country's economic policy," he said, earning a standing ovation.

"There is a lot of money at stake and there are people who play very hard. Others are playing cooperatively. It's a process in which we're all going to have to define which side we're on. We have already defined it: we are on the side of the people. It is time to set conditions for a 'Never again' to the cycles of indebtedness that generate distress. Let's look for an Argentina of opportunities", he concluded his presentation.

The first to use the three minutes reserved for the opposition was Jorge Sarghini, from the federal block. "We do not see the path of growth that you say," he said. The left insisted on asking that the debt with the IMF not be paid if it was taken illegitimately and José Luis Ramón, leader of the government's allies, resumed his obsession with UVA credits.

[Penniless Peronism]

Guzmán said his goodbyes and the representatives of Cambiemos spoke later, at a press conference, and through a document prepared almost in real time to Guzmán's presentation, where they claimed to be "left with a poor taste".

"We agree with the Minister of Economy that Argentines have to say 'Never Again' to the cycles of over-indebtedness, but we from the Interbloque also say that we need a 'Never Again' to the cycles of high fiscal deficit," remarked Negri.

"The Kirchnerist government issued more than $100 billion, a number greater than the debt left by our administration. Cambiemos issued 70 billion dollars, of which 40 billion were used to pay interest on the debt that had come from Kirchnerism, 10 billion were used to pay the holdouts and the rest to finance the fiscal deficit we inherited," they stated in the text.

Cristian Ritondo, head of the PRO bloc, defended the agreement with the IMF because "it disbursed 44.149 million dollars and the bulk, 37.149 million, was used to pay the debt services". Macrista Luciano Laspina backed him: "The minister should have explained why the debt is unpayable, give reasons. Argentina has a debt to GDP ratio similar to Latin American countries".

We have not grown since Kirchnerism demolished the foundations of growth. That is why we hope they will send the Budget, this is not incompatible with laying the foundations for a successful negotiation. We believe that if they make the economic program explicit, they will have more luck.

"We have not grown since Kirchnerism demolished the basis of growth. That is why we hope that they will send the Budget, this is not incompatible with laying the foundations for a successful negotiation. We believe that if they make the economic program explicit, they will have more luck," he added.

Guzman in the session and the representatives of Cambiemos coincided in asking for the immediate constitution of a bicameral assembly that follows up on debt services. It would begin to function in March, when offers are made to external creditors, according to the timetable drawn up by the minister.