The BCRA Unleashed an Investigation into the Agreements Signed with the IMF

The BCRA has submitted documentation related to the last agreement signed by Argentina and the IMF to the Office of the Comptroller General of the Nation (SIGEN) and to the Anti-Corruption Office in order to determine if any damages were caused to the State. The BCRA urged that documentation should “be audited in depth” to assess the “responsibilities of the officials involved in the implementation of the agreement signed by Argentina and the IMF” in 2018, and “determine if public assets have been eroded.”

The documentation provided includes: a report on the proceedings handled by the former Ministry of Economy; the “Foreign Exchange Market, Debt and Build-Up of Foreign Assets 2015-2019” report; and the files EX-2018-00154908- -GDEBCRA-GG#BCRA and EX-2018-00258928- -GDEBCRA-GG#BCRA processed by the BCRA. These files had already been sent to the Standing Joint Committee for Monitoring and Control of Contract Arrangements and Payment of the Nation’s Foreign Debt (Law No. 27,249) at the end of July 2020, and to the Argentine General Audit Office in December 2020.

Investigation is sought on the grounds that the files whereby Macri’s administration signed two agreements with the IMF “would be against the procedures established in various laws for the formation of external public debt and would show that the IMF was in breach of its obligations”. The first agreement was signed with the Fund “in the absence of a legal opinion prior to the signature” of the Letter of Intent and the Memorandums of Economic and Financial Policy and of Technical Understanding. Subsequently, the relevant authorities included, in an attempt to rectify this situation, an opinion that only analyzed if the former Ministry of Economy was entitled to send signed letters to the IMF, according to the role assigned by the IMF’s Articles of Agreement (article V, section I).

The opinion issued after the signature fails to deal with the core issues that should necessarily have been at the heart of legal study prior to the Letter of Intent with the IMF, namely: Was the Executive Branch, and the former Ministry of Economy, in particular, empowered to decide and formalize such public credit operation?

According to the applicable legislation (such as Law No. 11,672 on Permanent Budgetary Regulations, Law No. 19,549 on Administrative Procedure, and Law No. 24,156 on Financial Administration and Control Systems for the National Public Sector) the President of the Nation would not have powers to sign the agreement.

The previous opinion was actually included in the second agreement with the IMF. However, it failed to determine if the parties that decided the agreement’s extension, among other issues, were empowered to do so according to the applicable laws. The documentation provided further includes the Report on “Foreign Exchange Market, Debt and Build-Up of Foreign Assets 2015-2019” prepared by the BCRA in March 2020 at the request of President of the Nation.

The report concludes that “between May 2018 and October 2019— where stricter exchange controls had been imposed—, disbursement reached about USD44.5 billion of the total amount agreed with the IMF. These funds, together with the Central Bank’s international reserves, triggered a capital flight of USD45.1 billion from the private sector…”

Article VI of the IMF's Articles of Agreement approved by Argentina as under Law No. 21,648 reads as follows: “Except as provided in Section 2 of this Article, no country member may use the Fund's general resources to face a large or sustained outflow of capital, and the Fund may request that a country member exercise controls to prevent the Fund’s general resources from being so used. If, after having been requested to do so, the member fails to apply the control measures required, the Fund may declare it ineligible to draw on the general resources”.

Macri’s administration failed to comply with the request, and it was not until October 2019 that they implemented measures to control the leakage that had unfolded a huge outflow of foreign currency.

Based on the documentation submitted, the Office of the Comptroller General of the Nation (SIGEN) and the Anti-Corruption Office shall determine whether breach of contract has occurred, public assets have been eroded, and the officials in charge of implementing the agreement signed by Argentina and the IMF in 2018 are held liable.

March 1, 2021.