Harsh report from IMF could turn into sanctions

La Nacion

Friday, September 14, 2012
By Silvia Pisani

WASHINGTON.- Two recent video conferences that put in evidence the short circuits between the parties, a document written “in strong terms” towards Argentina that is already in the hands of the 24 board members of the International Monetary Fund (IMF), and an oral report that will be given in person by Director General Christine Lagarde.

Those three elements will be decisive for the IMF to decide, on Monday, the eventuality of voting on a “motion to censure” against the country and to initiate a mechanism of sanctions for its, until now, failed promise to improve the quality of its statistics on inflation and growth.  The other alternative is to give a new deadline.

"We are waiting until Monday to know what is happening.  It wouldn’t be appropriate for me to anticipate it,” said the organization’s spokesman, Jerry Rice, yesterday when asked by LA NACION about the eventuality that, on that day, sanctions would be effectively decided against the country.  His caution marks a contrast with what happened in January when, in the face of a similar review, the same official anticipated that the Fund would not apply “sanctions”.

This time, Rice didn’t rule out the possibility nor close any door to waiting until the directors meet and vote.  Added to this matrix is the feature, on this occasion, that Lagarde will personally lead the deliberation, a task that in other occasions was delegated to her then-number two, John Lipton of England.

It will be a decisive instance to know if Argentina is subject to a “motion of censure” of the organization, something rarely used.  According to how it was explained to LA NACION, what that would mean in the immediate would be a “yellow light” on the country’s financial behavior.  More long term, it could be the first step of a long process that ends in greater sanctions.  However, Argentine sources familiar with the matter at hand are frankly “optimistic” that the country will pass the test on Monday.

"We have been working in that direction and I believe there will be understanding,” said one of these sources to LA NACION.  His bet was that on Monday the country could get a new “postponement” to honor its commitments.  If so, it would be the third time in two years.

On the other hand, and according to what could be known from official sources, there is an “impatience” within the organization over the “reiterated non-compliance” by Argentina in addressing its promised improvements to the statistics.  That is reflected in a document that was already distributed to the  24 members of the board that will have to vote on the matter on Monday.

Rice, for his part, confirmed that there is “interaction”
among Argentine officials and IMF technical staff before the meeting, in which the board will have to evaluate the “progress” on “statistical improvements” promised by the Argentine government.  But he went no further.  Two sources confirmed to LA NACION that this “interaction” included two video conferences among Argentine officials and IMF technical staff which put in evidence “informational short circuits”.  Those contacts had “noisy” moments, according to what was learned.  In them, staff from the IMF department of statistics participated, as did those from the Western Hemisphere area.

However, Argentine officials had their own interpretation and said that those contacts brought “a new spirit of commitment” from the government of Cristina Kirchner.

"The process that is being brought forward is characterized by the interaction with the authorities and by the due diligence in reviewing the quality of the statistics and its relation to international standards, taking the country’s obligations (to the Fund) into account,” Rice said yesterday.

At the same time, the IMF last January “regretted” the “absence of progress” in the adaptation of the consumer price index (CPI-GBA) that INDEC puts out and gave the government 180 days to improve the quality of that information.  That deadline passed in July.

Monday’s meeting will be the last one on Argentina that will be attended by Alfredo McLaughlin as the country’s representative.  Expected is the arrival of Sergio Chodos, current director at the Central Bank, as his replacement.  The change in Argentina’s representation will be another argument put forth for a new requested grace period..

It will also be the first meeting in which Chile’s Nicolás Eyzaguirre does not attend, as he resigned as director of the Latin America section of the Fund.  For Argentine diplomats it’s a ‘relief’: he was considered extremely “hardline” on our country’s proposals.  He has been replaced on an interim basis by Saul Lizondo of Argentina, who has a long period of experience in the department.

The organization would reproach the country over the absence of “precise” statistical information on cost of living and economic growth, something the country has skimped on since 2007.

One Response for "Harsh report from IMF could turn into sanctions"

  1. [...] spruce up its statistics, but at time of writing had yet to issue a promised statement until today. Sanctions may be unlikely (and would have little effect) but, equally, giving Argentina another deadline [...]