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E.O. 12958: DECL: 08/26/2029
TAGS: EAGR ECON EFIN ENIV ETRD KSUM PREL AR
SUBJECT: ARGENTINE MINISTER OF ECONOMY SAYS GOA IS READY TO
ENGAGE IMF, ACCESS INTERNATIONAL CREDIT MARKETS
Classified By: Classified By: CDA Tom Kelly for reasons 1.4 (b) and (d)
1. (C) Summary: CDA met August 24 with Minister of Economy
and Public Finances Amado Boudou and discussed the upcoming
G-20 Summit in Pittsburgh, Argentina's re-engagement with the
IMF, an agreement with Paris Club debtors and bond holdouts,
as well as Argentina's fiscal and economic outlook. Not
surprisingly, Boudou was generally upbeat about Argentina's
current economic situation and prospects in the coming year.
While Argentina wants to regain access to the international
credit markets and hopes to have an agreement with the IMF
and its Paris Club creditors by year's end, Boudou stressed
that Argentina is under no fiscal pressure to do so but
rather is doing so in order to help lower borrowing costs for
Argentine producers and stimulate employment. End Summary.
2. (C) CDA, accompanied by EconCouns, opened the meeting by
asking Boudou (who was alone) Argentina's perspective on the
upcoming G-20 Summit. Boudou noted that he will be attending
the meeting next week of G-20 finance ministers in London in
preparation for the September 24-25 G-20 Summit in
Pittsburgh. He said that Argentina is going into the meeting
with a fairly strong financial and fiscal position. The
level of public debt is low; the Government has easily met
its relatively low debt servicing obligations, and will
continue to do so through 2010; and the GoA's fiscal and bank
liquidity situation is ""very good."" Boudou said that the
government's strategy now is to lower the opportunity and
borrowing costs for private sector producers through lower
interest rates which can be achieved if Argentina has access
to international credit markets.
3. (C) CDA asked if reaching an accommodation with the IMF is
part of the GOA strategy. Boudou said that the GOA wants to
normalize relations with the IMF, including a possible
Article IV review by year-end, so long as the review does not
include IMF prescriptions/conditionality. Boudou said that
the GOA also wants to re-engage with EXIM and other foreign
export credit agencies, recognizing this will require working
with the U.S. and other official creditors to clear
Argentina's Paris Club arrears through either
(IMF-sanctioned) rescheduling or other means which Argentina
hopes to achieve by the end of the year. Boudou confirmed
recent press reports that the GOA is also discussing ways to
reach a settlement with the private bond holdouts.
4. (C) Boudou stressed that, while Argentina very much
welcomes new foreign investment and access to foreign capital
that will boost Argentine employment, the GOA is under little
fiscal or economic pressure to do so. While 2009 will be a
bad year, with zero economic growth, Boudou said the GoA
forecasts growth between 3-4 percent in 2010, giving
Argentina positive growth in seven out of the last eight
years. CDA asked if reports of fiscal problems in the
provincial budgets were true. Boudou said the situation in
some of the provinces has deteriorated, blaming them for
building up their payrolls unsustainably. He contrasted this
with the GoA's ""more responsible"" countercyclical approach,
which he claimed had boosted aggregate demand during this
recessive period through increased public investment rather
than via current expenditures. He said the GOA would not
authorize provincial governments to issue bonds as a way out
of the mess, noting that he intended to turn down such a
request by Cordoba, the country's second-most-populous
province. (Officially, that request is pending.)
5. (C) On the issue of inflation, Boudou said that there has
been an overemphasis on data in Buenos Aires that indicates
continued upward pressure on prices for higher value goods.
Boudou said that GoA data shows that, as is historically
true, prices remain stable in most of the provinces outside
Buenos Aires, as well as for lower value goods generally,
meaning that rising inflation has not adversely impacted
Argentines at the lower end of the wage scale. Boudou also
noted that the Argentine Central Bank (BCRA) has a monetary
plan in place to ensure price stability.
6. (C) Comment: Now a month in office, Boudou seemed much
more loquacious and confident than his predecessor, Carlos
Fernandez, and more comfortable in his skin than Martin
Lousteau, Cristina Fernandez de Kirchner's first Economic
Minister. He came across as a poised, confident interlocutor
who is eager to engage on resolving the legacy issues that
stand in the way of Argentina returning to the international
credit and capital markets. He'll need those skills and more
as he attempts to sell economic policies that are broadly
seen as negligent and irresponsible. Boudou's optimism
contrasts sharply with new reports that the GoA's fiscal
situation continues to decline along with an economy now
firmly in recession, and highlighted by Lousteau in an August
24 television interview in which he described the GoA as in
denial over the deteriorating fiscal/financial situation.
7. (C) Boudou must perform a delicate balancing act to
achieve the rapprochement with capital markets that he
professes to want. He needs to constructively engage key
foreign interlocutors, including the Fund, the Paris Club,
and the hold-outs, without losing the confidence of his de
facto boss, Nestor Kirchner. Given that dilemma, his rosy
presentation of Argentina's fiscal and economic situation was
not surprising, nor was his assertion, in classic Kirchner
style, that Argentina is ready to deal, but only on its terms
and without pre-conditions. But Boudou's charm offensive
with international capital markets is clearly on. The GoA
press line was that the meeting with the CDA was part of the
GoA's newly launched campaign to rejoin international capital
markets, and this campaign will likely be its theme at
upcoming G-20 meetings. Boudou is also meeting this week
with IMF Director Western Hemisphere Director (and former
Chilean Finance Minister) Nicolas Eyzaguirre on the margins
of a Council of Americas meeting in Buenos Aires which the
GoA is publicly promoting. End Comment
KELLY
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