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IMF official says Argentina’s leaders divided over debt talks, economic policy

(Recasts, adds comments from Sergio Chodos)

By Rodrigo Campos

NEW YORK, April 8 (Reuters) – Argentina’s ruling coalition appears divided over talks with the International Monetary Fund and economic policy, a senior Fund official said on Thursday, the frankest comments yet on the negotiations over a new deal to roll over $45 billion in debt.

Alejandro Werner, the IMF’s head for the Western Hemisphere, said there was significant uncertainty about Argentina’s economic policy path to make its debt sustainable, a key part of striking any new deal.

“There’s always at least two legs to any restructuring. One is how you change the terms of your debt contracts, the other one is how you change your policies to make the new debt sustainable. And I think that second leg is where we have a lot of uncertainty,” Werner said.

The South American country, a major grains exporter, is seeking to replace a deal struck with the Fund in 2018 and push back payments it cannot meet amid a lengthy recession that has been sharpened by the COVID-19 pandemic.

Talks over a deal, once targeted for the first half of this year, have stalled amid signs of push-back from certain factions of Argentina’s government. Many investors now expect an agreement will only be reached after mid-term elections in October.

“There seems to be significant differences of opinion within President (Alberto) Fernandez’s political allies on which direction they should go, both policy wise, and also vis-à-vis the negotiations with the Fund,” Werner said.

Argentina defaulted last year before restructuring some $110 billion in foreign currency debt with private creditors. Its sovereign bonds are mired in distressed territory, trading near 30 cents on the dollar amid the uncertain economic outlook.

Speaking at a virtual event hosted by S&P Global, Werner said the Fund would be ready when the government wanted to move forward.

“We’re working to be ready whenever the government actually wants to finalize (a deal) and to accelerate it,” he said.

“I think we’re in a position to do it, but it’s true that it is obvious that the negotiations have dragged on more than maybe what we thought.”

Both sides have previously said talks remain “constructive” though have given few details about progress.

Argentina’s economy ministry declined to comment.

Late last month, Economy Minister Martin Guzman said “important steps” had been taken to advance negotiations days after powerful Vice President Cristina Fernandez said the country lacked cash to pay back the Fund.

Sergio Chodos, who represents Argentina at the IMF, told local radio station 530 on Thursday that the debt deal talks circle around the fiscal plan, exports, and reserves, adding the country had to negotiate firmly so the final deal was something it could pay back.

Some creditors have complained about the slow progress of talks, the political debate surrounding the deal, and lack of a clear economic policy from the government.

Werner, citing the upcoming October vote and a “supportive” external environment which includes high global grains prices, said it appeared the government saw it “better to undertake this political negotiation after the elections.”

Argentina is battling a second wave of COVID-19 infections with record cases in recent days, though the government is keen to avoid blanket lockdowns to protect a nascent economic recovery needed to bolster its reserves. (Reporting by Rodrigo Campos; additional reporting by Eliana Raszewski in Buenos Aires; Editing by Adam Jourdan and Rosalba O’Brien)

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