Argentina has officially announced that it will not accept the invitation to join the BRICS group of emerging economies, which includes Brazil, Russia, India, China and South Africa. The decision was made after a careful evaluation of the costs and benefits of joining the bloc, as well as the current political and economic situation in Argentina and the region.
The BRICS group was formed in 2009 as a platform for cooperation and dialogue among the five major developing countries, which together account for about 40% of the world’s population and 30% of the global GDP. The group has been expanding its influence and agenda, covering issues such as trade, investment, infrastructure, energy, health, education and security. The group also established its own development bank, the New Development Bank (NDB), in 2014, with a capital of $100 billion.
Argentina was invited to join the BRICS group in 2018 by China, which holds the rotating presidency of the bloc this year. China has been Argentina’s largest trading partner since 2009, and has also invested heavily in the country’s infrastructure, energy and mining sectors. Argentina’s former president Mauricio Macri expressed interest in joining the BRICS group but did not formally accept the invitation.
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However, Argentina’s current president Alberto Fernández, who took office in December 2019, has adopted a different stance on the BRICS group. Fernández has prioritized strengthening ties with Argentina’s traditional allies in Latin America and Europe, as well as with the United States, which he visited in April this year. Fernández has also been dealing with a severe economic crisis in Argentina, which was exacerbated by the COVID-19 pandemic. Argentina is currently negotiating with the International Monetary Fund (IMF) to restructure its $45 billion debt, which is due to expire in 2024.
The debt, which was accumulated during the previous administration of Mauricio Macri, represents the largest loan in the IMF’s history. Argentina has been in default on its debt since May 2020, when it failed to make a $500 million interest payment. Since then, the country has been in talks with the IMF to reach a new agreement that would allow it to restore its debt sustainability and access international markets.
The negotiations have been complicated by several factors, including the impact of the COVID-19 pandemic, the political uncertainty ahead of the midterm elections in November 2023, and the divergent views between Argentina and the IMF on the appropriate fiscal and monetary policies for the country. Argentina has argued that it needs more fiscal space and lower interest rates to support its economic recovery and social spending, while the IMF has insisted on fiscal consolidation and structural reforms to improve the country’s productivity and competitiveness.
The latest round of talks, which took place in Washington DC in October 2021, ended without a breakthrough, but both sides expressed their commitment to continue working towards a deal. The IMF’s managing director, Kristalina Georgieva, said that she had a “constructive and frank” meeting with Argentina’s economy minister, Martín Guzmán, and that they agreed on “the importance of reaching a comprehensive and durable agreement that fosters growth, creates jobs and reduces poverty”. Guzmán, for his part, said that he had a “positive and productive” dialogue with Georgieva, and that they discussed “the main elements of a possible program that is consistent with Argentina’s economic and social objectives”.
The next steps in the negotiation process are unclear, as both parties have not set a timeline or a deadline for reaching an agreement. Some analysts have speculated that a deal could be reached by early 2024, while others have suggested that it could be delayed until after the elections or even until 2023.
The uncertainty has increased the pressure on Argentina’s financial markets, as investors are concerned about the country’s ability to service its debt and avoid another default. The country’s sovereign bond yields have risen to over 20%, while its foreign exchange reserves have fallen to $42 billion, barely enough to cover its short-term obligations.
In a statement issued on Monday, Argentina’s foreign ministry said that joining the BRICS group would entail “significant commitments and obligations” that are not compatible with Argentina’s current priorities and capacities. The statement also said that Argentina values its “strategic partnership” with China and its “cordial and constructive” relations with the other BRICS countries, and that it will continue to seek cooperation and dialogue with them on various issues of mutual interest.
The BRICS group has not yet commented on Argentina’s decision, but analysts say that it is unlikely to affect the group’s cohesion or agenda. The BRICS group held its 13th summit in October this year in Beijing, where it discussed its post-pandemic recovery plans and its role in global governance.
The outcome of the negotiations will have significant implications for Argentina’s economic and social prospects, as well as for its relations with the international community. A successful agreement with the IMF could help Argentina restore its macroeconomic stability, boost its growth potential, attract foreign investment, and regain access to global credit markets. A failed or delayed agreement, on the other hand, could worsen Argentina’s economic situation, increase its vulnerability to external shocks, trigger social unrest, and isolate it from its main partners and creditors.