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Imf director faces issues in argentina Original Source Link: (May no longer be active)
http://www.miami.com/mld/miamiherald/news/world/americas/8148688.htmhttp://www.miami.com/mld/miamiherald/news/world/americas/8148688.htm
Posted on Wed, Mar. 10, 2004
LATIN AMERICA ADVISOR
IMF director faces issues in Argentina
Beginning today, The Herald will publish the Inter-American Dialogue's Latin America Advisor twice a week, on Wednesday and Saturday. The Inter-American Dialogue is a Washington, D.C.-based policy center that promotes debate on hemispheric problems and advances opportunities for regional economic and political cooperation.
• Questions: Anne Krueger became acting managing director of the International Monetary Fund last week after Horst Kohler resigned to run for president in Germany. How will the change in leadership affect the IMF's relationship with Argentina? Will Krueger, as expected, take a harder line with the government of President Néstor Kirchner? What are your predictions for a second review this month of Argentina's loan agreement with the IMF?
• Answer (from guest commentator Suhas Ketkar): While Krueger has a well-deserved reputation as a hard-liner and has pressed Argentina to move ahead on debt-restructuring negotiations, our reading is that the Kohler departure would actually enhance the chances of Argentina securing IMF approval in the second round because of the likely desire for not breaking new ground under an interim chief. Default to the IMF is, after all, a rare event that cuts off the defaulting country from access to all official finance.
To preserve acting Managing Director Krueger's credibility and integrity, a G-7 government rather than the IMF could signal the IMF's approval of the second review.
Although positive for the short term, Kohler's departure could become much more problematic for Argentina in the next review in June, however, because it would allow hard-liners within the IMF to win over whosoever is appointed the new IMF managing director.
• A: (from guest commentator Ian Vasquez): Anne Krueger's assumption as acting head of the IMF will not change the fact that the IMF is primarily a political institution, not an economic one.
Last fall, the IMF approved a new loan to Argentina in the absence of policy progress and after the country had defaulted on IMF debt. That occurred because of pressure from the U.S. Treasury Department, despite objections from IMF staff and management.
Dr. Krueger can be expected to be a tougher negotiator, but we can also expect the G-7, and the United States in particular, to still make the big decisions affecting fund lending.
• A (from guest commentator Federico Thomsen): Undoubtedly, a more outspoken critic of Argentina's economic policies is now, temporarily, at the helm of the IMF. However, this will affect the IMF's relationship with Argentina much less than the Argentine public has been led to believe.
One hopes that Argentina's leaders have learned by now that the views of the G-7 governments matter much more than the opinion of any IMF official when important fund policies need to be decided.
Suhas Ketkar is senior economist and head of emerging market analysis at the Royal Bank of Scotland.
Ian Vasquez is director of the Project on Global Economic Liberty at the Cato Institute.
Federico Thomsen is head of E.F. Thomsen economic consultancy.
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