(Bloomberg) -- The International Monetary Fund moved its top negotiator with Argentina to the sidelines in talks with the South American after he drew the ire of President Javier Milei.
“To best support the ongoing constructive engagement” with Milei’s government, Western Hemisphere Director Rodrigo Valdes has “fully delegated program negotiations” to two colleagues, IMF Chief Spokesperson Julie Kozack said Thursday at a press briefing.
Talks about the future of Argentina’s $44 billion program with the Fund will now be led by Luis Cubeddu, deputy director for the Western Hemisphere, and Ashvin Ahuja, the Argentina mission chief “whose work is directly overseen by fund management,” Kozack said.
Milei, whose government is seeking fresh funding in an eventual new program, has long had a fractious relationship with Valdes. Last month, the Argentine president called the IMF official “truly irresponsible” for allowing the previous government to build up a stock of central bank put options. The libertarian had previously criticized the IMF official’s time as finance minister in Chile from 2015 to 2017, suggesting in a June radio interview that his economic ideology was too left leaning.
Thursday’s move marks a change in the IMF’s stance since July, when Kozack said Valdes enjoyed the full confidence of Managing Director Kristalina Georgieva.
IMF officials have been removed from Argentina negotiations in the past, but Valdes — who was personally appointed by Georgieva — took up his post over a year ago when the current program review was already well underway. In 2020, one of Valdes’s predecessors, Alejandro Werner, stepped back from talks after clashing with Economy Minister Martin Guzman. Werner retired shortly after his criticism became public.
Although Milei and his team announced they want a new IMF program, talks on a new deal haven’t materialized as both sides disagree over Argentina’s currency strategy and certain spending cuts. While the president’s harsh austerity campaign has begun to rein in spiraling inflation, it’s also crushed consumer demand and sent the economy into its sixth recession in a decade.
Unsustainable transport and utility subsidies have been lifted, driving up the cost of living for families already struggling to make ends meet amid mounting job losses. And more than 2,000 public works projects have also been halted to save money, including some near completion like government-run daycare centers.
This week, Milei’s veto of legislation that would have increased social security spending prevailed after government lobbying efforts chipped away at the measure’s support — a development that won praise from the Washington-based lender.
“We agree with the government’s objectives of strengthening the overall sustainability of the pension system, while also protecting the real value of pensions, especially for lower-income retirees,” Kozack said.
(Updates with additional context beginning in 6th paragraph.)
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