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Unease grows at the IMF over rejection of an audit
Ambito Financiero
September 06, 2010

By Guillermo Laborda

Alfredo McLaughlin's mission: block sanctions

Officials in Korea for G-20

The Monetary Fund is evaluating a sanction against the country for not complying with Article IV which indicates that its members have their public accounts audited. Official sources confirmed to Ambito Financiero that possibility at a time when they said that "one of the tasks of the new Argentine representative Alfredo McLaughlin will be to freeze a measure of that type." Anyway, the sanctions would not be overly relevant in light of existing precedents.

The last opportunity in which a consultation under Article IV was conducted was on July 28, 2006. There are worse and not casual cases: the Bolivarian Republic of Venezuela surpasses the country, as the last consult that they had was on September 13, 2004. But the government of Hugo Chavez is not part of the G-20. As such, a rumor circulated last week that this select club that is made up of the countries of the G-7 and the most important emerging countries would be sanctioning Argentina even up to its expulsion for not allowing the IMF to audit its accounts. There would be nothing in the short term. Just this weekend a summit was held in South Korea, in the Kim Dae-Jung Convention Center in the city of Gwangju, among officials of finance ministries and central banks of the G-20 countries. For the Economy Ministry, those in attendance were Finance Secretary Hernan Lorenzino and the new chief of advisors to Amado Boudou, Guido Forcieri. In this meeting they decided the points to take up during the presidents' summit in November.

Designation

Argentina entered the Group of 20 at the time of its creation in 1999. It was the Group of Seven (the United States, Great Britain, Germany, France, Italy, Canada and Japan) which designated its members, putting a cap of three on Latin America, for which Brazil, Mexico and Argentina entered. But since 1999 there have been substantial changes. The country had a crisis in 2001, its GDP in dollars fell, and there appeared others in Latin America like Chile who lobbied to be included in the G-20. The quality of economic policies and interlocutors could be better for the G-20. But size always matters. Also, the membership in these clubs is political. For that, eventually Chile was given membership in the BIS (the Bank of International Settlements in Basel).

What was taken into consideration at the start of the G-20 was that the systemically relevant emerging countries would participate, according to what an ex-official who attended the initial meetings told this newspaper. But Argentina, with the default, disappeared from the international capital markets. The EMBI (Emerging Markets Bond Index) which JP Morgan puts together, had a participation of 25% from Argentina before 2001. Today it is 1%, which reflects by certain measure the small significance of the country in systemic terms. Could there be changes in the short term in this sense? It's unlikely, also taking into account the presidential elections in 2011 and that, as such, one should not expect big changes, neither from the international financial community nor from the government itself.

It's also clear that in Washington unhappiness persists over the official position of refusing to submit to the audits, added to which is the classic chapter of the default with the countries of the Paris Club. The annual joint assembly of the IMF and World Bank from October 8th to the 10th in Washington will allow a taking of the temperature. For sure, Amado Boudou will go there (and whoever is designated to lead the BCRA).

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