Economy Politics

Fernández’s first trip abroad focuses on Israel and IMF

30th January 2020

By Natalio Cosoy

Fernández’s first trip abroad focuses on Israel and IMF

In an international push to gather support for Argentina’s debt renegotiation, President Alberto Fernández will visit four European countries between Friday and Wednesday. The tour comes days after Fernández’s took part in Israel of the “World Holocaust Forum” –his first foreign trip as president–, where he also looked for backing in his quest to deal with Argentina’s debt maladies.

Choosing Israel as the first foreign trip sent a signal to the United States, Israel’s main ally, and key stakeholder in Argentina’s quest to sort out its debt problems.

Argentina faces payments of <a href="https://gettheessential.com/economy/2019/10/03/argentinas-uphill-bond-maturity-schedule-default-debt-payments-2019-2020-2021-2022-2023">more than USD 40 billion in 2020</a>, and it is looking to restructure its debt against the clock as its readily-available Central Bank reserves amount to less than a third of that sum. It also owes an additional USD 44 billion to the <a href="https://gettheessential.com/economy/2019/12/05/how-do-imf-internal-politics-play-into-debt-re-negotiation">International Monetary Fund</a> (IMF), with repayment of that loan beginning during the final years of the Fernández administration, which is looking to restructure that debt as well.</p> <h2><strong>Talks with Netanyahu<br /> </strong></h2> <p>The trip to Israel was also a way of sending a message that Fernández&#8217;s Peronist government should not be seen as anti-Western or anti-globalism, and that it is not seeking conflict with its leaders. Among other gestures, Fernández did not drop Argentina’s designation of Hezbollah as a terrorist organization (originated under Mauricio Macri’s administration), a decision Israel’s Prime Minister Benjamin Netanyahu thanked him for.</p> <p>Overall, it was a good chance for Fernández to share at least some brief time with key international leaders. He rubbed shoulders with US Vice President Mike Pence, France&#8217;s President Emmanuel Macron and Germany&#8217;s President Frank-Walter Steinmeier.</p> <p>Fernández also met in private with Netanyahu, and had meetings with Israeli President Reuven Revlin as well as opposition leader Benny Gantz.</p> <p>Foreign Minister Felipe Solá later <a href="https://ar.radiocut.fm/audiocut/sola-sobre-encuentro-entre-fernandez-y-netanyahu-1/">said</a> that during that meeting Netanyahu pledged full commitment to arguing in favor Argentina&#8217;s case with the IMF and the US. Solá told Radio 10: &#8220;Netanyahu was writing down president Fernández&#8217;s requests,” and added that Netanyahu said he would talk to the IMF&#8217;s managing director Kristalina Georgieva and US president Donald Trump on Argentina&#8217;s behalf.</p> <p>Possibly the only failure of the trip to Israel was the suspension, due to scheduling reasons, of a brief bilateral meeting with Russia&#8217;s Vladimir Putin, but it was only going to be a short exchange.</p> <h2><strong>Dealing with the creditors</strong></h2> <p>While Fernández is focused on meeting heads of state, his Economy Minister, Martín Guzmán, is negotiating with Argentina&#8217;s creditors</p> <p>On Tuesday, he met Julie Kozack, Deputy Director of the IMF’s Western Hemisphere Department, and Luis Cubeddu, IMF’s Mission Chief for Argentina, in New York. IMF Chief Spokesperson Gerry Rice said the meeting was &#8220;very productive,” and that “both parties reiterated their readiness to continue their discussions in the coming weeks.”</p> <p>Rice announced that an IMF technical mission will visit Buenos Aires in February –the first one since Fernández took power. The mission will &#8220;continue to exchange views on macroeconomic plans and debt sustainability,&#8221; said Rice.</p> <p>Meanwhile, on February 5th, Guzmán will meet Georgieva in the Vatican. They will both be taking part in the workshop New Forms of Solidarity Towards Fraternal Inclusion, Integration and Innovation, organised by The Pontifical Academy of Social Sciences.</p> <p>Guzmán&#8217;s mentor, Nobel Prize in Economics laureate Joseph Stiglitz, will also take part, as well as Argentina&#8217;s Secretary of Strategic Affairs, Gustavo Béliz. According to the event&#8217;s booklet, Guzmán will speak about debt sustainability. “What public debt configuration is compatible with the country’s development? What should be the conditions to grow in a sustainable manner in unequal countries?&#8221; the booklet says.</p> <p>That is exactly the argument Argentina has been presenting to the IMF and its private creditors: that any restructuring of the debt should be sustainable. It is not clear how willing creditors are to agree to a cut in interest rates or capital, or to change the timeframe of the payments. Stiglitz said in a <a href="https://www.bbc.com/mundo/noticias-america-latina-51277086">recent interview with BBC News Mundo</a> that it would be preferable to aim at a reduction in interest rates.</p> <p>Will the IMF become more open to Argentina&#8217;s potential offer?</p> <p>Part of getting the organization’s support lies in Fernández&#8217;s travels.</p> <h2><strong>Next stop: The Vatican</strong></h2> <p>Fernández will continue his &#8216;tour-de-debt&#8217; in Europe. His next stop will be precisely where Guzmán will be five days later: The Vatican, where he will be meeting Pope Francis.</p> <p>Francis has been <a href="https://gettheessential.com/politics/2020/01/09/pope-francis-alberto-fernandez-cristina-nestor-kirchner-peronism-argentina-mauricio-macri?mc_cid=2f4c11b4b8&amp;mc_eid=f8408e3cc5">close to Peronism</a> as of late, despite some clashes during the Kirchnerite decade. Barring abortion, which Fernández would seek to legalize and Francis opposes, <a href="https://gettheessential.com/politics/2020/01/23/pope-francis-peronism-alberto-fernandez-fabiola-yanez-cristina-kirchner-peronism-vatican-sergio-massa-abortion">Argentina&#8217;s head of state and the Pope</a> are close on many aspects, their relationship with the poor in particular.</p> <p>It was suggested that Fernández would also seek the Pope&#8217;s support in the context of Argentina&#8217;s debt renegotiation effort, although sources at the Argentine Foreign Ministry deny this. Still, <a href="https://www.cronista.com/economiapolitica/Tras-reunion-productiva-con-el-FMI-Guzman-agendo-cumbre-con-Kristalina-Georgieva-20200128-0031.html">Guzmán’s meeting with the IMF head at the Vatican</a> next week will make speculation inevitable.</p> <p>Likely topics in the Fernández-Pope Francis encounter could include their shared interest in fighting poverty and Fernández’s plan to combat hunger. (On Thursday, the President will meet David Muldrow Beasley, Executive Director of the UN&#8217;s World Food Program; and on Saturday with the UN Food and Agriculture Organization&#8217;s Director-General, Qu Dongyu). Foreign issues such as the situations in Venezuela and Iran could also be on the table.</p> <h2><strong>Counting the votes</strong></h2> <p>The trip to the Vatican will be followed by visits to Italy, Germany, Spain and France, meeting their heads of state and focusing on economic issues.</p> <p>Fernández will mainly be seeking all these countries’ support in the IMF, as any agreement reached on a technical level would have to be approved by the organization’s Executive Board, where Germany has close to 6% of the vote, France over 4%, Italy more than 3% and Spain around 1.5%.</p> <p>And of those countries, only Germany and France have appointed individual directors to the Board of 24 (Spain and Italy share them with other countries).</p> <p>Nevertheless, even if he got the commitment of every one of them, it would not suffice. It is crucial to get the backing of the US, that <a href="https://gettheessential.com/economy/2019/12/05/how-do-imf-internal-politics-play-into-debt-re-negotiation">holds close to 17% of Board&#8217;s vote</a>.</p> <p>With that it mind, besides everything the government has already done to try to smooth the relationship with the US, Fernández has recently named Argentina&#8217;s new ambassador to that country.</p> <p>The man in question is Jorge Argüello, a very experienced diplomat, former ambassador to the US and Portugal and former representative of Argentina in the United Nations.</p> <p>Fernández gave him special powers, as he will also be in charge of coordinating Argentina&#8217;s representatives to the UN, the IMF, the Organization of American States and the World Bank. He will also be Argentina&#8217;s sherpa in this year&#8217;s G20, organised by Saudi Arabia, one of the other countries which names its own director to the IMF&#8217;s Board.</p> <h2><strong>Local moves</strong></h2> <p>Meanwhile, in Buenos Aires Congress passed this Wednesday a bill giving government powers to renegotiate the debt, one that is expected to be confirmed by the Senate next week.</p> <p>As the debt renegotiation drama starts to gather pace, it is expected that Foreign Minister Felipe Solá visits his Brazilian counterpart, Ernesto Araújo, on February 12th and 13th, to discuss the future of Mercosur and the relationship of Argentina with its main commercial partner.</p> <p>They will try to organize a meeting between presidents Fernández and Jair Bolsonaro. Not a minor feat, as they have <a href="https://gettheessential.com/economy/2019/11/07/trump-praises-fernandez-but-clash-with-bolsonaro-intensifies">not shown any signs</a> of liking each other one bit.</p> <p>

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Natalio Cosoy

Natalio Cosoy is the Argentine correspondent for France 24 in Spanish and has worked for the BBC, the Deutsche Welle and the Washington Post.