La Nacion

by Florencia Donovan

October 18, 2012

The organization will not be taken up this year by the board; the program goes to 2015; it was US$3 billion

The international community’s patience with Argentina is beginning to run out. Not only has the International Monetary Fund (IMF), warned that the country has until December to present reliable statistics, but that now the World Bank decided not to take up the strategy plan this year on its board that would permit the Argentine government to request new credits for the next three years. At a time of scarce currency, that would be US$3 billion less than the government could expect between now and 2015.

Strictly speaking, with the countries that it assists, the World Bank negotiates every four years, generally always when a presidential term ends, a country partnership strategy, which serves as a framework for all the programs that are financed over the period.

Argentina’s strategy expired last July and since then both the local technical staff of the World Bank as well as the Argentine government has been postponing the date for taking up a new one, for fear of not getting the approval of the organization’s board. After all, after the nationalization of YPF, Spain has been voting against new disbursements for the country on the boards of international organizations, while the United States has adopted the same position, with the exception of those lines destined to assist populations at risk.

But until a few days ago all of the tabs were put down for the last meeting of the year of the board of the World Bank on November 29. However, according to what various sources who follow the issue confirmed to LA NACION, directly 10 days ago it was decided to postpone the handling of the Argentine case, which has no certain date.

Consulted on the issue, however, those in the Economy Ministry wouldn’t comment. But in the World Bank, they said that “the efforts with the government on the cooperation strategy and the projects that would be included continue moving forward technically, as their focus is on the social realm.”

An explosive combination

The news from the World Bank, sources said, came to the Argentine government at the same time the director general of the IMF, Christine Lagarde, warned that the country could get a “red card” if it didn’t solve, by December, the problem of its statistics. And it was what made various technical staff from the Economy Ministry to decide to not travel last week to the city of Tokyo, in Japan, for the annual meeting of the IMF and World Bank.

"The decision of the World Bank is linked to the one by the IMF and the serial non-compliance of Argentina: it includes the unpaid debt with the Paris Club, the statistics problem, the holdouts and the non-compliance with ICSID decisions,” said a source at Economy to LA NACION. Also, the source said, the Argentine state would have an unpaid debt with a fund of the World Bank that offers guarantees to companies at times of world crisis (MIGA). “In 2001, there was a company that turned to this fund, the country has to return the money and it’s not returning it. It’s an irrelevant amount in terms of numbers, but it means a lot more for the bank in terms of reputation,” the source said.

The currency trap, which impedes local companies to get dollars to pay their obligations, also complicates relations with multilateral organizations, as many local companies are in debt with the International Finance Corporation (CFI), the arm of the World Bank that finances the private sector.

On the political level, however, at Economy they think that the presidential elections in the United States (on November 6) are not helping either. Not only because Argentina is losing relevance in the midst of an election campaign, but that also, in the midst of political transition, the line that the new U.S. government will follow is not defined.

Argentina today has 39 projects with the World Bank in course, for a total of US$7.095 billion, of which US$3.8543 billion remains to be disbursed. Without a new strategy, the country could only execute the funds already approved, but not submit to discussion of any new program.

The World Bank finances public initiatives on education, health and infrastructure at a very low cost. For fresh funds in dollars the World Bank collects 4% annual interest, against the 11% that investors demand to buy bonds in dollars from Argentina. Not for nothing, in the recent history of the World Bank there are not many countries known to have chosen to be in Argentina’s situation.

A series of disagreements

Argentina’s relations with the international community is deteriorating rapidly:
No vote
At the end of 2011, the United States began to vote against approving new credits for Argentina on the boards of international organizations.

Spain gets tougher
The Spanish government joined the American strategy in retaliation for the nationalization of YPF. It even warned that its intention was to convince other developed countries to do the same.

The IMF took out the red card
The director general of the IMF, Christine Lagarde, warned at the start of this month that the IMF would take out the red card on Argentina if it doesn’t present reliable statistics by December.

The World Bank, aligned
The World Bank, for its part, decided to postpone the handling of a new country strategy with Argentina, thereby not permitting the receipt of fresh funds.