President Kirchner took the decision on Tuesday, despite his hard line against the IMF and private bondholders. Observers believe it's in both Argentina's interest and the IMF's not to have a big rupture, while opposition congressmen disapprove Government's policy.
After two days of frenetic negotiations, a last minute phone call from IMF interim chairman, Anne Krueger, to Buenos Aires eased tensions and Argentine president Nestor Kirchner ordered Tuesday a $3.1 billion payment to meet due obligations with multilateral lending institutions. Kirchner had threatened to miss the payment unless the IMF agreed to back Argentina's stance on restructuring $99 billion of defaulted bonds.
Technically, Argentina had already kept its word to raise surplus, but a huge pressure from the G-7 led to more demands from the IMF. The Group of Seven industrial nations had put both the IMF and Argentina in an awkward situation when firmly asked the South American country to engage with private creditors as soon as possible. The issue was suggested in last September's deal and the IMF threatened not to agree with Argentina if it did not speed up contacts with private bondholders.
The G7 has proved to be very sensitive to holders' claims, which come, mainly, from Japan, Germany, Italy, USA and the United Kingdom. Therefore, demanded Argentina to step up efforts to restructure payments on debt, prodding the nation to make good on promises made to the International Monetary Fund.
Argentina had also promised to pass a decree appointing the three foreign banks that will trade debt restructuring with creditors. However, the new agreement does not change Argentina's original proposal to pay up to 75% of the defaulted debt, according to local sources.
Kirchner's decision to pay to the IMF took by surprise some observers that literally trusted government’s hard line against foreign creditors. Argentina used a similar tactic in September, when it sent $2.9 billion owed to the fund a day late. Polls in Argentina show Kirchner has a 70 percent approval rating, in part because of the pressure he has put on the IMF, which he blames for the nation's debt default.
“I think that the priority should be to secure economical recovering and to improve country's income distribution”, said center-left congressman, Claudio Lozano, to PRAVDA.Ru “That's our main objective and debt payments must be subordinate to a development strategy”.
Despite Lozano agrees in general with government's line, he disapproves the strategy of payment. “I am concerned about IMF being a privileged creditor, without cuts, and the Argentine workers that fed private mutual funds have to suffer an acquittance”, he says. Nat. Deputy Marta Maffei, in turn, asked for more participation of the Parliament in the negotiations. “Our Constitution entitle us to deal with our internal and foreign debt, however the Government negotiates alone”, she blames.
Kirchner's center-left supporters in the Congress are enthusiastic about Argentina's position. Miguel Bonasso, Nat. Deputy from the Democratic Revolutionary Party, told PRAVDA.Ru that “Kirchner's position has been reinforced by the historical agreement reached in Venezuela by Argentine's and Brazil's leaders to jointly negotiate with international lending institutions”. In effect, such an agreement had been sealed by both Lula and Kirchner, but it was not yet implemented. Brazil supported Argentina, but made clear its position was different.
Center-right Nat. Senator Ricardo Gomez Diez expressed his disagree with Kirchner's delay in stepping up negotiations with foreign creditors. “We have to start negotiations now, as we have already spent two years and three months to do it”, he told PRAVDA.Ru and explained why: “International scenario for our exports –mainly commodities- are excellent and rates are low, so the time is now.”
The IMF is now poised to make its next loan disbursement to the country from a $13.3 billion agreement. Argentina is set to receive $3.1 billion from the IMF this month, money it would use to replenish reserves used to make today's payment.