Argentina, at risk of deepening its economic crisis after Paraguay’s response to a diplomatic impasse


The head of Economy and Finance, Carlos Fernández Valdovinos, explained that the neighboring country needs Paraguay’s “no objection” to access disbursements from a program with the IMF. In the next review our country will no longer provide its support.

Furthermore, given the problem in the Paraguay-Paraguay Waterway, our country was forced to take other measures that included resorting to the Waterway Court and the Mercosur Court.

The relationship between Paraguay and Argentina is not at its best. The neighboring country refuses to suspend toll collection on the Paraguay-Paraná waterway and does not comply with the payment plan to Yacyretá for the transfer of energy that it had promised. Faced with this scenario, the National Government announces new measures that it will carry out. 

The Minister of Economy and Finance, Carlos Fernández Valdovinos, explained that given the lack of goodwill to solve these two issues, the Economic Portfolio will inform the various multilateral credit organizations regarding these events. 

He announced that he will not give his “no objection” to the International Monetary Fund (IMF) for the upcoming reviews that Argentina has with this organization, whose requirement to disburse is that the aforementioned nation does not have bilateral debts. 

The minister told MarketData that at this moment the neighboring country has a debt of around USD 150 million, of which approximately USD 50 million corresponds to Yacyretá-Paraguayan side, and USD 90 million to the National Treasury. 

“There are many expenses within the budget that are financed with that debt. We understand the economic problem of Argentina, we are willing to have a payment plan, the problem is that there is no will to come sit down and have a payment plan, in such a way as to give predictability to the income of our Treasury and to the income from Yacyretá,” he explained. 

He assured that in this context and taking into account the last retention of a barge bound for our country, they were forced to take these series of measures that include resorting to the waterway court and the Mercosur court, and informing the different agencies multilateral agreements on arrears.

“This debt accumulated with the Treasury constitutes a delay with us and a bilateral delay, therefore, this program requires no objection to disbursements from the International Monetary Fund to Argentina,” he mentioned. 

The Secretary of State recalled that in a show of good will, in the last review in August, at the request of the neighboring country, Paraguay offered its no objection, since it had committed to paying off Yacyretá’s debt, “we gave it the no objection, USD 7,500 million was disbursed to Argentina and they came, but they did not comply,” he lamented. 

Valdovimos commented that this decision would deepen the economic crisis that Argentina is experiencing, “but unfortunately there are situations in which one really has to take a stand and this is one of them, the fact of not taking a stand leads us to take all these measures and in the case of the Ministry of Economy, make this announcement publicly, that we are not going to be giving the non-objection, “he said. 

The minister also expressed that Paraguay’s idea is to withdraw most of the energy from Yacyretá. 

“The fact of starting to withdraw more of the energy from Yacyretá, which I think is going to be very important because that is basically going to mean that we sell less to Argentina that is not paying us, so if we are going to sell at a price zero, it’s better for us to use it,” he said, adding that there are no plans to reduce the rate.

Source: Market Data