Argentina Has The IMF Right Where It Wants It

If it wants to see its $44 billion again some day, it’s gonna have to play nice on the austerity front.

That Argentina is going to have to (once again) restructure its debt is now obvious to everyone, including to those who have been wrong about everything related to that country. The comprehensive defeat of a president by the very same people who oversaw Argentina’s last descent into economic disaster is as clarifying of that fact as is possible. And in order to get that, incoming president Alberto Fernández and incoming vice president (and former president) Cristina Kirchner are going to need the IMF’s help. They do not sound scared.

“Investors won’t be ready to accept any kind of restructuring if the IMF isn’t present,” said Stuart Culverhouse, head of sovereign and fixed-income research at Tellimner, a London financial bank. “Without policy discipline, no one would trust the government….”

At a recent meeting with IMF staff, Mr. Fernández adopted the hostile tactics of former President Cristina Kirchner, who was Mr. Fernández’s vice-presidential running-mate.

“What I want them to understand in the IMF is that they are guilty of this situation,” he said in an interview in late August.

That is the confidence of a man who was chief of staff to a president who confidently threatened to default twice—just two years after the default that brought him to power—and whose vice president actually did to stick it to a hedge fund manager and judge she didn’t like. It’s also the confidence of a man who may be the first Argentine in history to have the IMF over a barrel.

The stakes are high for the IMF. Mr. Porzecanski estimates that the $44 billion already disbursed to Argentina account for almost half of the IMF’s total outstanding loans.

“As the saying goes: if you owe $50,000 to your bank, you have a problem. If you owe $1 million, your bank has a problem,” Mr. Porzecanski said.

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