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Argentina dampens hopes of quick deal with IMF



Argentina’s economy minister played down the prospects of an early deal with the IMF to repay a controversial $44bn loan, as the country’s year-old leftist government tries to build a domestic consensus on how to end its economic crisis

After successfully restructuring $65bn of foreign debt with private creditors in August, the government’s attention has turned to talks with the IMF, which began this month. Markets hope this will lead to a new programme that could help to reverse a crisis of confidence that has stoked fears of an imminent devaluation of the peso.

“We are fine. We have the instruments to maintain [exchange rate stability],” insisted Martín Guzmán, economy minister, in an interview with the Financial Times. He argued that there was no need for Argentina to seek further help from China, after the central bank renewed a currency swap deal with the Asian country for $19bn in August for another three years, to bolster alarmingly low foreign exchange reserves.

“The most important aspect is to get [the new programme] right. We want to move at a solid pace but require common understanding and legitimacy. We are not going to rush this,” added the 38-year-old economist.

A deal by March or April “would certainly be acceptable”, he said. “That doesn’t mean it won’t come before that, but there are no guarantees.”

The negotiations with the IMF come as Argentina seeks a way out of a three-year long recession. That downturn began after a currency crisis in 2018 that prompted the fund to come to the rescue with a record-breaking $57bn programme — making Argentina the institution’s biggest debtor by far. The recession was made worse by the coronavirus crisis, which prompted the government of President Alberto Fernández to implement one of the longest and strictest lockdowns in the world.

Mr Guzmán spoke from his offices opposite the presidential palace in Buenos Aires over the din of tens of thousands of rowdy Argentines who had gathered to pay their respects to Diego Maradona, the legendary footballer who died on Wednesday. The economy minister played down calls from independent economists for Argentina to seek further cheap financing from the fund.

“We have to be very careful when borrowing in foreign currency,” he said, warning that exports had been weak over the past seven years, a key factor in the sustainability of Argentina’s debt.

But some say the alternatives are worse: unable to borrow on the international capital markets, Argentina is forced instead to resort to covering the bulk of its expenditure through new money printed by the central bank, which pushed the monthly inflation rate up to 3.8 per cent in October. 

Nevertheless, Mr Guzmán said that it would be “beneficial” to secure more funding from other multilateral institutions such as the World Bank and the Inter-American Development Bank, especially to finance public infrastructure projects. 

As Argentina prepares to embark on its 22nd programme with the IMF over the past six decades, Mr Guzmán insisted that austerity — the linchpin of most of those programmes — was not the answer to the economy’s woes. 

“The 2018 programme was based on that same tenet and it didn’t work. The evidence is overwhelming that fiscal adjustments in recessions don’t work — and it’s not what we’re doing,” he said.

Mr Guzmán insisted that restoring order to Argentina’s fiscal accounts did not mean reducing spending. In fact, Argentina was increasing spending in real terms in high-impact areas, he said.

Similarly, Mr Guzmán pledged that a devaluation was not on the cards, although he admitted that the gap between the official and parallel exchange rates was a problem. “It will take time [to fix], as we can’t remove capital controls [yet],” he said, pointing to the need to accumulate foreign exchange reserves first. 

“When you look at the trade numbers, the official exchange rate is at the right level . . . the situation with the [parallel exchange rate] is to do with financial flows that have nothing to do with the real economy,” he said, adding that “the IMF understands that a devaluation would have destabilising consequences at an economic and social level”.

Mr Guzmán also rejected accusations by some analysts of inconsistencies in economic policy, which they say are caused by contrasting priorities among the ruling coalition that ranges from pragmatic centrists to more ideologically driven members on the hard left. 

Recent overtures to the private sector by Mr Guzmán — based on an understanding that sustained economic growth requires private investment — conflict with anti-business moves from other players in the coalition, notably the country’s Congress. Critics point to a law aimed at preventing shortages, a wealth tax going through Congress and a scathing letter sent to the IMF by a group of senators loyal to Cristina Fernández de Kirchner, the powerful vice-president.

“It all goes in the same direction,” insisted Mr Guzmán.

“In a crisis in the context of a pandemic, the state plays an important role to protect the most vulnerable and co-ordinate actions to maintain stability — but that is a role that will no longer be necessary in an economy that has restored macroeconomic stability,” he said.

Achieving sustained economic growth in the longer term once the economy has been stabilised is perhaps Argentina’s greatest challenge, however. Mr Guzmán highlights the importance of developing domestic capital markets in order to allow greater saving. That would in turn allow greater investment by the private sector, which he hopes will become “a fundamental engine for the economy”.

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Emerging Markets

A harrowing brush with Covid as India is ravaged




As a foreign correspondent, my job is to tell India’s stories, not be part of them. But when I started feeling feverish while writing an article about Covid-19 vaccine policy last month, I had a gut feeling that the Sars-Cov-2 virus had found me.

I hoped it was exhaustion that I’d sleep off but the next day, still feverish, I was urged to take a Covid test. A leading diagnostic lab chain, which earlier had run an efficient home-testing service, had stopped answering its phones and responding to online requests. But a doctor friend persuaded one of the lab’s phlebotomists to collect my sample. Two days later, the results confirmed I was part of the ferocious coronavirus wave battering India and pushing its healthcare system to breaking point.

Over the following days, my physical symptoms remained mild. But it was still harrowing to be sick from a notoriously unpredictable virus knowing that drugs, hospital beds and oxygen were scarce. I suffered constant anxiety knowing I’d struggle to get medical help if I took a turn for the worse.

I quickly discovered that I’d been so focused on avoiding infection that I had no clue what to do once sick. A friend connected me to a Kolkata-based infectious disease specialist, who felt I was at low risk for severe illness. I’d had the first dose of a Covid vaccine 10 days before my fever started. But the doctor urged me to treat the illness aggressively from the start, given the chaos at hospitals.

He prescribed the antiviral drug, favipiravir, now undergoing clinical trials in the UK as a potential Covid-19 therapy but already approved in India for emergency use. Many of his patients had taken it, he said, and none suffered severely, including people in their 90s.

Normally, I’m reluctant to medicate. I knew favipiravir’s effectiveness as a coronavirus treatment wasn’t yet scientifically validated. But with hospitals turning away ailing patients, the logic of taking an experimental drug made sense. The challenge, I discovered, was to get hold of it.

I called five pharmacies, but all had run out of stock. A friend called six more to no avail. I panicked — the doctor wanted me to start the drug fast and Delhi was hours from the start of a weekend curfew. Then a friend, who’d heard I was Covid-19 positive, called.

“I’m looking for this drug,” I told her. “Any idea where I can get it?” She said she’d check. It turned out that people with foresight had prepared small emergency drug stashes. Her friend had such a stash and was willing to share it.

I was elated to get the pills to start treatment that night. But it wasn’t enough for the prescribed course. Days later I spent hours calling pharmacies in an unsuccessful hunt for more, before finally begging an industry friend to help.

My difficulties pale in comparison with the desperation, anger and grief beyond my sickroom. My Twitter feed was filled with pleas for hospital beds, oxygen cylinders, the antiviral remdesivir, plasma or a place in an intensive care unit. Top hospitals begged on Twitter for refills of dwindling oxygen supplies. Friends and many professional contacts were fighting for their lives. Doctor friends were weeping with impotent rage.

There was much grim news of death. A former Indian ambassador died after hours waiting in a hospital parking lot for admission; inpatients whose oxygen ran out; a top politician’s 34-year-old son, young journalists. Crematoriums struggled with an unprecedented flow of bodies.

I decided I had to tune out of the unfolding crisis, to ensure my physical recovery and to protect my mental health. I stopped checking Twitter. Newspapers piled up, unread.

Once I felt better and tuned back, I saw Narendra Modi’s government had cynically expanded eligibility for vaccination to all over the age of 18, despite an acute shortage of jabs.

And with thousands dying daily, often for want of medical help, the health minister was callously citing dubious official data to claim India’s Covid fatality rate was lower than richer countries — hardly consolation to grief-stricken families.

Today, I’ve recovered from my encounter with the virus. It will take far longer to get over the trauma of watching this calamity engulf the place I call home.

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Indian foreign minister self-isolates after Covid cases detected in G7 delegation




India’s foreign minister on Wednesday said that he was self-isolating after two members of the country’s delegation to the G7 meetings in London tested positive for coronavirus.

The face-to-face meetings in the UK capital began on Monday and are scheduled to end on Wednesday. Representatives from G7 countries such as Canada, Germany and France are attending alongside Australia and India as the UK seeks to strengthen its ties within the Indo-Pacific region.

Subrahmanyam Jaishankar, India’s external affairs minister, confirmed on Twitter that he was informed on Tuesday evening that he had been exposed to a possible Covid-19 case.

“As a measure of abundant caution and also out of consideration for others, I decided to conduct my engagements in the virtual mode,” he added. It is understood that the rest of the Indian delegation will self- isolate for the remainder of the G7 meetings.

Jaishankar held a socially distanced meeting with UK home secretary Priti Patel on Tuesday, where two agreed on a “migration and mobility deal” which will provide a “bespoke route” for young professionals from India looking to live and work in the UK. He met Antony Blinken, the US secretary of state, earlier this week.

“We deeply regret that foreign minister Jaishankar will be unable to attend the meeting today in person,” a senior UK diplomat said. “(He) will now attend virtually, but this is exactly why we have put in place strict Covid protocols and daily testing.”

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Blinken rejects claims of ‘cold war’ between US and China




America’s top diplomat Antony Blinken has rejected claims the US is entering a cold war with China during a visit to London to discuss with G7 counterparts how best to respond to the challenges posed by Beijing.

In an interview with Financial Times editor Roula Khalaf for The Global Boardroom, Blinken said he resisted “putting labels on most relationships including this one, because it’s complex”.

“This is not about initiating a cold war, this is all about doing our part to make sure that democracy is strong, resilient, and meeting the needs of its people,” he said, referring to Washington’s intention to hold a “democracy summit” later in the year.

Joe Biden, US president, has promised to “win” the 21st century in what he has portrayed as a “battle” between democracies and autocracies and has pointed to Chinese activities that the US says are damaging the international order.

Relations between the US and China deteriorated under the Trump administration and the countries remain at loggerheads over security, human rights, intellectual property, and rules governing trade and commerce.

“We’re not asking countries to choose [between the US and China],” Blinken added in remarks at the FT Live event on Tuesday, which were broadcast after G7 countries opened their meeting with a session on China.

Ahead of the event, a US state department official said the G7 session on Tuesday morning was intended to be a forum to discuss how to work closely with allies and partners to address shared challenges from a position of strength.

Antony Blinken, US secretary of state, far right, is meeting with G7 leaders in London to discuss how best to respond to the challenges posed by Beijing © Stefan Rousseau/Pool/Getty

Blinken said the US recognised that countries have complicated relationships, including with China, and that the US did not believe other countries’ economic relationships with Beijing “need to be cut off or ended”. However, he said the US wanted to foster and protect basic rules governing commerce, the environment, intellectual property and technology.

Biden has surprised many foreign policy experts by taking an approach to China that has more in common than not with the harsh stance taken by former president Donald Trump. One big difference has been a significant effort to work with US allies and partners to create more leverage to deal with Beijing.

His approach has been welcomed by allies in Asia, such as Japan and Australia. But there is concern in the EU about the bloc being caught between the US and China, particularly in Germany.

Angela Merkel, German chancellor, has said the EU and the US do not agree on everything and that it was “absolutely clear” that their interests were “not identical” when it came to China.

The G7 comprises the US, Canada, UK, France, Germany, Italy and Japan, and this year the UK has also invited Australia, India, South Korea, Brunei and South Africa to attend as guests.

Biden recently convened the first leader-level meeting of the Quad — a group that includes the US, Japan, India and Australia — as part of this effort to work with allies to counter Beijing.

Evan Medeiros, professor of Asian studies at Georgetown University, said the Biden team’s engagement with the G7 formed part of its effort to assemble coalitions to tackle the China challenge.

He said the administration was pursuing the right strategy by saying the US did not want a cold war and did not want countries to pick sides, but he added: “The reality is everybody is going to have to make choices when it comes to China.”

But Bonnie Glaser, Asia programme director at the German Marshall Fund of the US, highlighted concerns among some that Washington’s stance was “too aggressive and too confrontational”.

“I definitely have the impression that the Germans and some other Europeans are really quite unhappy about the US approach to China,” she said.

In March, the US, EU, UK and Canada co-ordinated the imposition of sanctions on Chinese officials over the country’s treatment of Uyghur Muslims in the western Xinjiang region, triggering retaliatory sanctions from Beijing.

Biden administration officials including Blinken frame the future of the US relationship with China as “competitive, collaborative and adversarial”, depending on the issue in question.

Washington wants to co-operate with Beijing on foreign policy issues including Iran, North Korea and climate change while also defending US interests in the military, technological and economic spheres and pushing back on human rights abuses in Hong Kong and Xinjiang.

Blinken said that “a democratic recession around the world” had occurred over the past 15 years, but admitted the US had its own challenges “visible for the world to see” when it comes to democracy, in a thinly veiled reference to the disputed presidential election and January 6 Capitol attacks.

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