Voice

Argentina's cold war with the International Monetary Fund

The International Monetary Fund released a terse statement yesterday regarding Argentina:

On January 29, 2013, the Executive Board of the International Monetary Fund (IMF) was briefed by staff on economic developments in Argentina, whose Article IV consultation is delayed by 62 months.

Informal sessions to brief the Board based on information available are held approximately every 12 months for members whose Article IV consultations are delayed by more than 18 months.

That dry announcement is actually the latest salvo in a long-running battle between the international lender and one of South America's leading economies. The bad blood dates back to the country's 2001 economic collapse, which many in Argentina believe the Fund's policies exacerbated. Since 2006, Argentina has refused to participate in normal annual reviews of its financial and economic health required by the IMF's Articles of Agreement. That impasse has, in turn, encouraged the Fund to think more systematically about how to deal with members who refuse to participate in its economic surveillance program. Its report noted a worrying trend in compliance:

A few recent cases of severely delayed consultations have underscored the need
to better promote timeliness of consultations. The Fund has relied on a cooperative
approach to consulting with members, setting consultation deadlines as expectations rather than firm obligations. This approach has worked well for most of the membership.
Historically, delays in Article IV consultations have generally been relatively short or, in
cases of extended delays, for reasons beyond members’ control. However, some recent
delays have been unusually long for reasons that are not clearly beyond the members’ control. 

The IMF has an even more specific beef with Argentine officials: the quality of official data on inflation. Last year, the IMF repeatedly made clear its concerns about numbers provided by the government and warned that it might formally sanction the country if it does not address those concerns. Michael Warren of the Associated Press provides the background to the slow-moving confrontation over data:

The IMF has lost patience with these numbers after urging Argentina for years to improve this consumer price index, which lost credibility in 2007 after political appointees replaced career statisticians. The new methodology, which has kept official yearly inflation in the range of 10 per cent ever since, has not been fully explained, even as consumers complain about soaring costs of beef and other staples. IMF experts and Argentine economists have spent months working privately with government officials to recommend very detailed ways to get accurate numbers again, but the government has yet to adopt them.

The IMF is now on the 12th step of a 15-point process for flagging Argentina with what IMF Director Christine Lagarde called “the red card” for countries that don’t follow the rules.

What exactly that red card might entail has been left somewhat vague, but the loss of voting rights and even formal expulsion have been discussed. It's doubtful matters would reach that point. Expulsions from international organizations are rare, even in the face of continued acts of defiance.

The Multilateralist

Turkey turning toward Shanghai?

Turkish prime minister Recep Erdogan made waves recently in discussing his country's preference in multilateral forums. Specifically, he said in an interview last week that hewould prefer that Turkey join the Shanghai Cooperation Organization rather than the European Union. The International Herald Tribune's Andrew Finkel  has the story:

Erdogan threw the diplomatic equivalent of a cream pie during a late-night television interview last Friday. Understandably, he was expressing frustration at stalled negotiations over Turkey’s accession to the European Union. Incomprehensibly, he suggested that Turkey join the Shanghai Cooperation Organization instead.

Turkish columnists are now debating whether Erdogan is serious about wanting to play in a different league or bluffing in an attempt to force Brussels into serious negotiations. Or he is kicking up a cloud of dust to distract the public from weightier issues like Kurdish rights or lower economic growth? He has been known to propose out of the blue policies that appeal to his conservative base — banning abortion, restoring capital punishment — but that he has little intention of seeing into law.

In Today's Zaman, Ihsan Dagi argues that Erdogan's comments weren't mere bluff:

He considers the Shanghai organization as an alternative, in fact a powerful and better alternative to the EU. Besides this, I think it is also seen as a matter of “civilizational belonging.” The Turkish prime minister increasingly emphasizes “our own civilization,” referring to the Islamic one. Detachment from the West/EU is expected to “revive” the civilization Turkey represents and leads. There is certainly a growing self confidence that Turkey can and should remain independent to lead instead of tied up with the EU.

Amanda Paul wonders whether the prime minister understands the company he'd be keeping:

Perhaps the prime minister did not have time to read the SCO's Mission Statement. If he had, then he would have seen that the organization is a very different animal to the EU, not least when it comes to promoting democratic values, something Erdo?an always cites as being important to him. The SCO currently comprises Russia, China, Uzbekistan, Kyrgyzstan and Tajikistan -- a group of undemocratic nations primarily driven by Russia and China, who continue to fight for influence and power in Central Asia, in particular with regard to the region's rich energy resources.

But as Yigal Schleifer points out, Erdogan's stiff-arm to the EU will likely play well with a domestic audience:

The PM is likely also trying to tap into public sentiment. Erdogan's words come at a time when public support for continuing the EU process is at a historic low. A recent survey by the Istanbul-based Centre for Economics and Foreign Policy Studies, for example, found that only 33 percent of those surveyed believed Turkey should continue working towards joining the bloc over the next five years.

Even if Erdogan is serious, there's the question of whether the SCO wants Turkey. Beijing and Moscow haven't said much about his comments, and it's not at all clear they would support the admission of such a powerful new player into what has been their clubhouse.