Cabinet Chief Marcos Peña speaking at the Casa Rosada, May 9, 2018. (Télam)

With Treasury Minister Nicolás Dujovne in Washington kicking off negotiations with the International Monetary Fund (IMF) while the peso closed at a new record low and the Central Bank remained active in the futures market, Cabinet Chief Marcos Peña has reiterated that the administration intends to maintain its “gradualism” approach.

He was reticent to provide details about the ongoing talks with the IMF, limiting himself to saying that it is likely to take weeks and that it will “help to reduce vulnerabilities” to external shocks. The financial support that the government has sought from the IMF – which Peña declined to provide an estimate of the size and conditions that would come attached to it – was described by the Cabinet Chief as helping the government continue on “the only viable path” of a gradual reduction of deficits while also spurring economic growth and providing support to vulnerable sectors.

After the press conference concluded, reports came in indicating that the government was discussing the terms of a Stand-By Arrangement (SBA) with the IMF. The IMF itself did not confirm that information.

Arguing that Argentina – which has had a fraught relation with the IMF – never left the Fund and that Director General Christine Lagarde recently praised the Macri administration’s economic policies recently in Buenos Aires, Peña cautioned against “false rumors” about any conditions that the IMF could request in exchange for the financial support.

“A month ago, Lagarde was here and was clearly supportive of this government’s economic effort and Macri’s decisions as president. It’s not true that history always repeats itself and that we are condemned to repeating events from the past. This government has incorporated the lessons from errors that have caused crises in the past,” said Peña. The Cabinet Chief as such such ruled out any kind of a repeat of the catastrophic crisis of 2001-2002, which was preceded by IMF support for Argentina.

“We have an external vulnerability, we’ve always said so. There are various reasons that have come together so that now we have greater demands from those who lend us money for this path of gradualism,” said Peña during a lengthy press conference.

Peña ruled out any changes to the Cabinet and said that the government had not consulted with economist Domingo Cavallo. Faced with questions about the potential impact of the depreciation of the peso on inflation and purchasing power of salaries, Peña noted that many of the collective wage bargaining negotiations have built-in review clauses in case of higher-than-expected inflation.

Dujovne traveled to Washington, DC last night following the announcement by President Mauricio Macri that negotiations had were to begin as the government seeks to contain a run on the peso. The Casa Rosada has decided to start discussions with the IMF after earlier moves by the Central Bank (BCRA) – raising interest rates, selling dollars on the foreign exchange market – as well as promises by Dujovne himself to reduce the fiscal deficit failed to stem the demand for greenbacks.

A day after the extreme volatility seen yesterday, the peso reached a new low against the dollar today after losing another 1 percent of its value. The peso closed on 23.13 against the dollar, according to the weighted average published by the BCRA. The peso has reached 23.50 in trading in the past before rallying before the close.

The dollar also gained 1 percent against the Brazilian real in trading today.

Much like yesterday, Ambito has reported that the BCRA once again acted in the dollar futures market to contain the peso from further depreciation.