Argentine Economy Minister Jorge Remes Lenicov predicts the country will sign an agreement with the International Monetary Fund that could unlock at least $9 billion in desperately needed aid in early May.
In a development to back up that statement, Argentine officials said Tuesday they have signed an agreement with the IMF that spells out how to halt provincial governments from issuing bonds to employees and suppliers in lieu of cash, a must for any IMF aid.
An aid accord will be signed "in the first 15 days of May," Remes said. "We are close to coming to an agreement with the IMF, but we have to continue working over our deficit goals."
Remes has been known in the past to note just how close Argentina has been to agreements that never came to fruition. It is often joked that he is expected to have the phrase "muy cerca" or "very close" engraved on his cufflinks sometime soon, as many times as he has uttered the phrase. But with the country's rather dire social and economic situation coming to a head, and with an IMF team coming off the heels of two weeks of tense though constructive discussions, an accord looks to be near.
If Lenicov, who leaves for Washington on Wednesday where he will meet with the IMF and Treasury Secretary Paul O'Neill, is correct with his $9 billion figure, it would be more than many economists predict.
Additionally, there are mixed reports in the local Argentine press over how much additional aid may be headed toward the country. One paper reported $1 billion in fresh aid, another placed the number at $4 billion. And, the IMF's role -- if it takes one at all -- in helping the country secure international lending to prop up some of its failing private companies is unknown.
The IMF cut aid to the country in December and has since told officials that they must discipline the free-spending provinces and tie provincial and federal economic policies more closely. Also, provincial budget deficits must be slashed by 60 percent as compared to the year before, and the country must bring a general air of economic transparency to a murky environment.
But the country's policies remain dark. Lockdowns on citizens' banking accounts are still in place and no decision is seen on saving the failing banking industry, And there is the peso that has lost 66 percent since being floated in January weighing on the minds of President Eduardo Duhalde and his economic team.
Interior Minister Rodolfo Gabrielli said Tuesday that he and Anoop Singh, who is leading the IMF talks with the country, agreed that the provinces will sign agreements with the federal government in May that will do away with the issuance of bonds by June.
Gabrielli also noted that federal and provincial officials are working closely together to come up with budget agreements by May that meets most needs.
In other developments, Duhalde on Tuesday freed up domestic electricity and gas companies in Argentina to increase tariffs during the next six months, the coldest part of the year. Utilities have been warning government officials that if they could not raise rates, blackouts would likely follow as they wouldn't have the cash to buy the fuel needed to meet higher demands during winter.
But the utilities owned by foreign companies, such as Spain's Endesa, which are profiting from the plummet in the peso, won't be allowed to increase prices until at least June.
Duhalde slapped a 20 percent tax on oil company's exports to help with the country's economic turnaround, but it has resulted in sharp increases in the cost of fuel, thus placing utilities in the tight spot between regulated pricing and high, government-induced costs.
