Summary of S. Karene Witcher’s “Argentina Faces New Showdown over Its Debts” by Ryan Steed

 

Argentina’s loans

            Witcher states that Argentina will have a $43 billion debt at the end of the month.  At this point, loans are the only thing that will save Argentina and they are begging to be cut a special deal.  In an attempt to seek an International Monetary Fund austerity program, Argentina has sent a letter before the IMF outlining conditions to which they will agree.  Witcher, for the most part, believes Argentina will not receive this $1.5 billion bail-out.  Why has an agreement not been met yet?  Witcher points to other historical examples of Argentina’s inability to reach deadlines.  They had been expected to already be in agreement with the IMF earlier, but plans had been disrupted.  The month before, the US Treasury convinced four other Latin American countries to lend $300 million each in return for a promise that Argentina would soon join the IMF.  Still, their deadline to join has been extended numerous times.

 

Banker’s worries

            US banks cannot afford such disturbances being created by Argentina in the financial market.  Many are hoping some sort of resolution will be made to settle the economy down.  “The financial markets…already are jittery about U.S. bank loans to Latin America. A crisis over Argentina would only shake the markets further.”  After finding out that Argentina may be able to pay off its interest through a $125 million loan, US banks were dismayed to discover these loans may have IMF ties – join in order to receive the loan.  This move would have negative consequences as the “bankers said that if they do tie the bank financing to an IMF pact, Argentina wouldn't be able to pay its back interest.”  Money would, of course, be diverted to the IMF and away from collectors.

 

Is Argentina helping?

            Witcher argues that an IMF-Argentina agreement is looking more and more difficult.  Raul Alfonsin’s Radical Party recently forged an agreement with the opposing Peronist Party basically “making it more difficult for Argentina to agree to IMF conditions without the Peronists’ approval.”  Another disappointing sign is the problems surrounding Argentina’s “letter of intent” to the IMF just recently.  The letter essentially “[outlines] the conditions under which [Argentina] will agree to an IMF austerity program in order to get $1.5 billion in emergency loans.”  Although the letter was officially passed by the Argentinean cabinet, it is unlikely, according to Witcher, the IMF will accept those conditions.