Withholding funds

Claver-Carone faces off against Fernández over Argentina loans.

In October 2020, Mauricio Claver-Carone, a former advisor to Donald Trump, was the first US national to be named president of the Inter-American Development Bank (“IDB”). His appointment faced the bitter opposition from Alberto Fernández, the current president of Argentina, as Claver-Carone had admitted to supporting the grant of a USD 57 billion loan to Argentina while at the International Monetary Fund (“IMF”) and when Mauricio Macri was president of Argentina.

“President Alberto Fernández wanted to place Gustavo Beliz in that position,” explained an international political and financial analyst in Argentina, “but Claver-Carone ended up imposing himself with the support of Trump. Fernández could never forgive Claver-Carone for assisting Macri’s re-election campaign by granting the USD 57 billion loan.”

Last month, Claver-Carone published a letter in the Wall Street Journal criticising Argentina’s financial record. He also claimed that the IDB could only grant loans with the certainty that they would have a positive development impact. The letter was the straw that broke the camel’s back of the power struggles within Argentina’s executive and led to the resignation of the Ministry of Economy Martín Guzmán. The appointment of Sergio Massa, former president of the Chamber of Deputies, was welcomed by Claver-Carone who said he was looking forward to working with Massa.

Claver-Carone’s reinforced his stance by withholding USD 500 million from Argentina due to technical issues which implicitly called for more fiscal discipline from the country. The political analyst felt that this was justified, “The IDB maintains that, although the loans had already been approved, Argentina’s financial and economic situation deserved a deeper analysis, and that there are also issues more related to transparency and integrity.”

“The IDB maintains that, although the loans had already been approved, Argentina’s financial and economic situation deserved a deeper analysis, and that there are also issues more related to transparency and integrity.”

International political and financial analyst, Argentina

A macroeconomic analysis affirmed, “Everyone knew that it was going to be hard for Argentina to meet the commitments made in the deal with the IMF. The Argentinian government knew it and for sure the IMF negotiators knew it too.”

In response, Massa announced a battery of measures in line with IDB’s request to reduce the fiscal deficit and capture foreign exchange through export incentives and international loans. In response, the IDB approved a conditional line of credit for up to USD 300 million to improve municipal solid waste management in the country.

With the Argentinean economy heavily exposed to commodity shocks, Massa said that he would bring forward additional fiscal discipline measures and a plan to achieve a trade surplus and social stability. A macroeconomic analyst explained his moves, “Massa’s priority is to rebuild the reserves of the Central Bank, to enable more substantive policies that allow the curbing of inflation, a reduction of the exchange rate gap and a decrease in spending. These funds will help but are unlikely to deliver a meaningful fiscal impact.”

“Massa’s priority is to rebuild the reserves of the Central Bank, to enable more substantive policies that allow the curbing of inflation, a reduction of the exchange rate gap and a decrease in spending.”

Macroeconomic analyst, Argentina 

Massa maintains that Argentina, with some hard work, will be able to capitalise on some recent positive economic events such as an economy which grew 6% in the first quarter of 2022 and shrinking unemployment numbers. A turnaround looks like a tall order but it’s not impossible!

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