Argentina pays IMF salary with yuan and CAF bridge loan

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Economy Minister and presidential candidate, Sergio Massa, said that with this method, ‘Argentina will not use a single dollar of its reserves’. Sergio Massa assumes a ‘superministery’ in Argentina, in charge of managing the economy Agustin Marcarian/Reuters Argentina announced that it will pay, this Monday (31) a maturity of US$ 2.7 billion (about R$ 12.7 billion at current exchange rate) to the International Monetary Fund (IMF) with yuan. The operation takes place through a currency swap with China and a bridge loan with CAF, awaiting a loan of US$ 7.5 billion dollars (approximately 36 billion reais at current exchange rates). The Minister of Economy and presidential candidate, Sergio Massa, said that with this method, “Argentina will not use a single dollar of its reserves”, in a message recorded and shared on social networks. Argentina’s international reserves include, in addition to dollars, a part in gold and also other instruments such as yuan from the swap with China. This is the second time that the country has used the Chinese currency to pay the IMF. Debt with the fund On Friday, the International Monetary Fund reached an agreement with the Argentine government on the fifth and sixth revisions of the agreement worth US$ 44 billion (around R$ 208 billion), in 2018, which will allow the new loan, but only in the second half of August, after approval by the IMF board of directors. This Monday’s payment will be made with US$ 1 billion (approximately R$ 4.7 billion) from a bridge loan with the Development Bank of Latin America and the remainder, from the second stage of a currency swap with China , said the minister. In June, Argentina renewed a swap agreement with China for 130 billion yuan (approximately R$90 billion), over a three-year period and with an increase in the freely available amounts up to the equivalent of US$10 billion ( approximately BRL 47 billion at the current exchange rate). This agreement signed in 2009 and renewed by different governments is used to pay for imports from China. In June, it was also used to fulfill maturities with the IMF, canceled with that currency and with the DEG (Special Working Rights, the reserves that countries have at the IMF). On Tuesday, another payment to the Fund for US$ 800 million in interest (approximately R$ 3.8 billion) is due, but Argentina can postpone it until the end of August without falling into default, as it has already done with those of June and July. ‘Protect reserves’ Massa thanked CAF and the Chinese government for “accompanying the country in this decision to protect Argentina’s reserves to make the temporary payment to the Fund until disbursements” by the organization. “In this way we protect the reserves in a year in which the debt inheritance problem with the fund was added to the worst drought in history, which cost us more than US$ 20 billion (R$ 94.2 billion) in exports this year and more than US$ 5 billion (R$ 23.6 billion) in revenue for the national public sector,” he said. Since 2019, an exchange control system has been in force in Argentina, and several types of exchange work in parallel with the official one. With the new revision, the country committed to reinforce its reserves during the rest of 2023, so that net reserves stand at around US$1 billion by the end of the year, in a context of currency shortages. America and strong demand for the dollar by the private sector. Historically, Argentines have bet on the dollar to prevent the devaluation of their currency. On Friday (28), the Central Bank informed that Argentina has international reserves of US$ 25.646 billion (R$ 121 billion), although analysts estimate that net reserves are well below, even negative. “Our challenge is to continue taking care of reserves, maintaining the level of activity and imports of intermediate and final goods are vital for the functioning and production of the economy”, said Massa. Amid economic tension, Argentina will hold general primary elections on August 13 to define presidential candidates for the October 22 general elections. Annual inflation is 115% and the poverty rate is 40%.

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