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        {"code":"26268","sect":"El Salvador","sect_slug":"el-salvador","hits":"1753","link":"https:\/\/elfaro.net\/en\/202207\/el_salvador\/26268","link_edit":"","name":"El Salvador Government Still Floats Possibility of IMF Deal","slug":"el-salvador-government-still-floats-possibility-of-imf-deal","info":"Bukele\u2019s government told Wall Street investors in March that it hasn&#039;t totally ruled out a deal with the IMF to avoid default, offering backup plans B and C. All scenarios involve massive credits from regional development banks and, somehow, squeezing more tax revenue despite an aching global economy nearing recession. Only one of them included the expected but controversial pension nationalization.","mtag":"Newsletter","noun":{"html":"\u003Cspan class='tint-text--dark' data_href='\/user\/profile\/rgressier'\u003E Roman Gressier\u003C\/span\u003E y \u003Cspan class='tint-text--dark' data_href='\/user\/profile\/jlsanz'\u003E Jos\u00e9 Luis Sanz\u003C\/span\u003E","data":{"roman-gressier":{"sort":"rgressier","slug":"roman-gressier","path":"roman_gressier","name":"Roman Gressier","edge":"0","init":"0"},"jose-luis-sanz":{"sort":"jlsanz","slug":"jose-luis-sanz","path":"jose_luis_sanz","name":"Jos\u00e9 Luis Sanz","edge":"1","init":"0"}}},"view":"1753","pict":{"cms-image-000037725-jpg":{"feat":"1","sort":"37725","name":"cms-image-000037725.JPG","link":"https:\/\/elfaro.net\/images\/cms-image-000037725.JPG","path":"https:\/\/elfaro.net\/images\/cms-image-000037725.JPG","back":"","slug":"cms-image-000037725-jpg","text":"&lt;p&gt;Treasury Minister Alejandro Zelaya asked the legislature on May 11 to approve 11 requests for loans totaling $1,530 million. Photo: V\u00edctor Pe\u00f1a\/El Faro&lt;\/p&gt;","capt":"\u003Cp\u003ETreasury Minister Alejandro Zelaya asked the legislature on May 11 to approve 11 requests for loans totaling $1,530 million. Photo: V\u00edctor Pe\u00f1a\/El Faro\u003C\/p\u003E"}},"pict_main__sort":37725,"date":{"live":"2022\/07\/14"},"data_post_dateLive_YY":"2022","data_post_dateLive_MM":"07","data_post_dateLive_DD":"14","text":"\u003Cp dir=\"ltr\"\u003E\u003Ca href=\"\/suscribe\/en\/\"\u003E\u003Cem\u003ESubscribe to our newsletter\u003C\/em\u003E\u003C\/a\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EOn Wednesday Bloomberg News placed El Salvador at the top of a list of nations to follow Sri Lanka and Russia in a \u201c\u003Ca href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-07-07\/why-developing-countries-are-facing-a-debt-default-crisis\"\u003E\u003Cspan style=\"text-decoration: underline;\"\u003Ehistoric cascade of defaults\u003C\/span\u003E\u003C\/a\u003E.\u201d Recent tweets from President Nayib Bukele, it appears, fell on deaf ears.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u201cThey say we\u2019re heading to default,\u201d \u003Ca href=\"https:\/\/twitter.com\/Richardagers1\/status\/1545215188365762560?s=20&t=77x90CAI1jAD2EoyIVh9Bg\"\u003E\u003Cspan style=\"text-decoration: underline;\"\u003Ehe tweeted\u003C\/span\u003E\u003C\/a\u003E on July 7 in response to an article from the New York Times critical of his bitcoin project. \u201cWill they publish an apology once we pay everything on time?\u201d\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EA source on Wall Street told El Faro English on Monday that the bonds continued to fall even after the tweet: \u201cThey \u003Cstrong\u003E[traders] don\u2019t even believe the president anymore\u003C\/strong\u003E.\u201d\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EBukele faces a dual challenge: recovering international credibility and finding cash now. In recent weeks he received a life raft in the form of $220 million from the Central American Bank for Economic Integration (CABEI) to offset a popular fuel subsidy, and 100 more from the World Bank to reimburse pandemic purchases. The money will \u003Ca href=\"\/en\/202207\/el_salvador\/26267\/Bukele-Finds-Multimillion-dollar-Lifeline-in-World-Bank-and-CABEI.htm\"\u003E\u003Cspan style=\"text-decoration: underline;\"\u003Ecarry the government to the new year\u003C\/span\u003E\u003C\/a\u003E, but it\u2019s not enough to avoid default through Christmas 2023.\u00a0\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EIt may come as a surprise \u2014judging by Bukele\u2019s \u003Ca href=\"\/es\/202112\/el_salvador\/25900\/Cr%C3%B3nica-de-los-tropiezos-pol%C3%ADticos-en-la-negociaci%C3%B3n-con-el-FMI.htm\"\u003E\u003Cspan style=\"text-decoration: underline;\"\u003Esparring with the IMF\u003C\/span\u003E\u003C\/a\u003E\u2014 that his government said in a March presentation to members of the U.S. financial industry that it hasn\u2019t given up on an IMF lifeline worth $1.3 billion.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EIf signed, the Salvadoran Treasury Ministry says the Inter-American Development Bank and World Bank each committed to chipping in another $200 million. The IMF could offer an additional $400 million. That\u2018s almost half of the $4.9 billion it will need through next year. Quite the boost.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EPerhaps it was just a wink, given the slim odds of a deal since \u003Ca href=\"\/es\/202112\/el_salvador\/25900\/Cr%C3%B3nica-de-los-tropiezos-pol%C3%ADticos-en-la-negociaci%C3%B3n-con-el-FMI.htm\"\u003E\u003Cspan style=\"text-decoration: underline;\"\u003Etalks fell apart last year\u003C\/span\u003E\u003C\/a\u003E and the IMF criticism of Bukele\u2019s authoritarianism, opacity, and devotion to bitcoin. \u201cThe government isn\u2019t ready to practice transparency and anti-corruption,\u201d an analyst from Bukele\u2019s own Economic Cabinet anonymously admitted to Alvarado.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThe Fund, he added, would \u003Cstrong\u003E\u201cwait until they\u2019re drowning and calling for help\u003C\/strong\u003E, and then impose its conditions.\u201d\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u003Cstrong\u003EWhere\u2019s Satoshi?\u003C\/strong\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThe real trouble starts in January, when $800 million in Eurobonds come due. It will also need to balance a steeper budget, including paying $500 million eight months later.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EIn the presentation document \u003Ca href=\"\/es\/202207\/el_salvador\/26262\/Los-planes-de-Gobierno-para-evitar-la-crisis-fiscal-reforma-de-pensiones-cr%C3%A9ditos-y-vender-m%C3%A1s-deuda-estatal.htm\"\u003E\u003Cspan style=\"text-decoration: underline;\"\u003Erevealed by El Faro\u2019s Jimmy Alvarado\u003C\/span\u003E\u003C\/a\u003E, the Treasury Ministry told investors that its top priority will be to offload its shortest-term debt, the kind that comes due every year, to make room to immediately acquire more.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u201cIt\u2019s like paying off a credit card to then max it out again,\u201d analogizes Alvarado.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u00a0\u003Cbr\/\u003E    \u003Cfigure class=\"pict pict_land pict_move_posc 0 cs_img cs_img--curr rule--ss_c\" data-shot=\"pict\" data-hint=\"pict\"\u003E \u003Cdiv class=\"pict__pobj text-overflow\"\u003E\u003Cimg src=https:\/\/elfaro.net\/get_img?ImageWidth=3000&ImageHeight=2000&ImageId=37725 class=\"pobj\" style=\"max-width: 100%\" rel=\"resizable\" alt=\"Treasury Minister Alejandro Zelaya asked the legislature on May 11 to approve 11 requests for loans totaling $1,530 million. Photo: V\u00edctor Pe\u00f1a\/El Faro\" \/\u003E\u003C\/div\u003E \u003Cfigcaption class=\"pict__text cs_img_caption folk_content typo_buttons line--ss_s0c line--ss_s0c--auto block full-width text-overflow rule--ss_l relative\"\u003E \u003Cdiv class=\"__content block-inline full-width align-top tint-text--idle relative\"\u003E Treasury Minister Alejandro Zelaya asked the legislature on May 11 to approve 11 requests for loans totaling $1,530 million. Photo: V\u00edctor Pe\u00f1a\/El Faro \u003Cdiv class=\"photographer text_italic rule--ss_l tint-text--idle\"\u003E \u003C\/div\u003E \u003C\/div\u003E \u003C\/figcaption\u003E \u003C\/figure\u003E\u003Cbr\/\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EPlan B includes almost $900 million in new bonds and a \u003Cstrong\u003Enationalization of pensions that the markets have been expecting \u003C\/strong\u003Efor months. Financial analyst Ricardo Castaneda says that by removing pensions from its debt ledger the government would artificially improve its credit ratings. It\u2019s unclear, though, if a move touching people\u2019s private retirement funds would dent the president\u2019s popularity.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAs Plan C, according to the document, the government is weighing easing financial regulations to force private banks to use a larger percentage of their financial reserves to buy more state bonds, injecting both cash and risk in the financial system. This plan would also require a hodge-podge of loans from creditors.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EIn all three scenarios, the administration told investors it would ask the Caracas-based Development Bank of Latin America (CAF) for $500 million. A source close to CAF told El Faro English that its new representative in El Salvador will be tasked with overseeing all of Central America, enabling the bank\u2019s expansion in the region.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAlso in March, the Bukele administration promised investors that it would cut back public spending, mainly by \u003Cstrong\u003Edramatically reducing funding to municipalities\u003C\/strong\u003E. Note: 2023 is a pre-election year, making it difficult to believe that the government would make cuts to public works, subsidies, or the publicity budget.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThey also promised to simultaneously generate $380 million in extra tax revenue including by closing exemptions and \u003Cstrong\u003Ecreating or increasing tolls on the wealthy, gun permits, and tobacco\u003C\/strong\u003E. But that goal could prove challenging: As Castaneda \u003Ca href=\"https:\/\/twitter.com\/Recasta\/status\/1547027388994916352?s=20&t=qRYR_Mxxvvl6c8OCN1PZiA\"\u003Epointed out\u003C\/a\u003E on Tuesday, tax collection in El Salvador is falling right now amid high inflation. In June it hit its lowest point this year.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EIt\u2019s revealing that none of the government 's safety valves involve \u003Ca href=\"\/en\/202205\/el_salvador\/26169\/Finance-Could-Be-Bukele's-Achilles-Heel.htm\"\u003E\u003Cspan style=\"text-decoration: underline;\"\u003Ebitcoin bonds\u003C\/span\u003E\u003C\/a\u003E, despite the fact that for months Bukele argued they were a revolutionary solution above and beyond the international financial system.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAccording to the March presentation, the world\u2019s first government to adopt the cryptocurrency is even considering saving its skin by borrowing directly from El Salvador\u2019s central bank, a libertarian curse word.\u003C\/p\u003E"}

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