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Western Hemisphere > Argentina

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Cover IMF Working Papers
Extreme Weather Events, Agricultural Output, and Insurance: Evidence from South America
Juliette Caucheteux
,
Jonas Nauerz
, and
Svetlana Vtyurina
Extreme weather has profoundly affected countries across South America (SA), given the importance of the agricultural sector for the economies. However, these effects have not yet been properly measured. In our study, we construct a unique dataset of high-frequency satellite data on temperature, precipitation, and a Normalized Difference Vegetation Index (NDVI) that proxies the agricultural yield in selected countries. In particular, we then examine the effect of droughts on agricultural yields (soy output) and find that they have a significant negative impact and that there is heterogeneity in the response across countries. While insurance could help protect farmers against severe losses, coverage in the region is low, and barriers remain high. Building on existing literature and using a calibrated structural model, we highlight the benefits of insurance for Total Factor Productivity (TFP) and offer some recommendations for its expansion.
Keywords:
Agriculture; Productivity; NDVI; SPEI; Weather; Drought; Insurance; South America; weather event; soy output; loss from drought; benefits of insurance; NDVI in Brazil; Natural disasters; Agricultural sector; Agricultural production; Insurance companies; Caribbean
Cover IMF Working Papers
Spillovers from Large Emerging Economies: How Dominant Is China?
Hany Abdel-Latif
and
Adina Popescu
This paper investigates the global economic spillovers emanating from G20 emerging markets (G20-EMs), with a particular emphasis on the comparative influence of China. Employing a Bayesian Global Vector Autoregression (GVAR) model, we assess the impacts of both demand-side and supply-side shocks across 63 countries, capturing the nuanced dynamics of global economic interactions. Our findings reveal that China's contribution to global economic spillovers significantly overshadows that of other G20-EMs. Specifically, China's domestic shocks have significantly larger and more pervasive spillover effects on global GDP, inflation and commodity prices compared to shocks from other G20-EMs. In contrast, spillovers from other G20-EMs are more regionally contained with modest global impacts. The study underscores China's outsized role in shaping global economic dynamics and the limited capacity of other G20-EMs to mitigate any potential negative implications from China's economic slowdown in the near term.
Keywords:
Emerging Economies; Growth Spillover; Global transmission; GVAR model; outsized role; China's contribution; IMF working paper No. 25/27; domestic shock; Spillovers; Supply shocks; Emerging and frontier financial markets; Oil prices; Global value chains; Global
Cover IMF Staff Country Reports
Argentina: Ex-post Evaluation of Exceptional Access under the 2022 Extended Fund Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Argentina
International Monetary Fund. Western Hemisphere Dept.
This paper analyzes Argentina’s Ex-post Evaluation of Exceptional Access under the 2022 Extended Fund Facility (EFF) Arrangement. The 2022 EFF came about in extremely difficult circumstances. Argentina was unable to regain external viability under the 2018 Stand-By Arrangement and faced large and concentrated repurchase obligations to the IMF. The combination of a gradualist reform strategy, large adverse shocks, and progressively weaker implementation resulted in outcomes substantially worse than in the baseline by end-2023. The program got off to a difficult start, with the surge in global commodity prices due to Russia’s war in Ukraine feeding inflation expectations and creating additional fiscal spending needs that were met through direct and indirect monetization, further fueling inflation. A major course correction subsequently undertaken by the Milei government—notably a sharp fiscal consolidation, an upfront devaluation, and an end to monetary financing of the budget helped Argentina avert a full-blown crisis and make important strides toward macroeconomic stabilization. Overall, the 2022 EFF did not achieve its original macroeconomic objectives, but it was successful in easing the burden of Argentina’s financial obligations to the IMF by rescheduling repayments over 2026–2034, and may have helped Argentina avoid even worse outcomes in 2022–2023.
Keywords:
program ownership; IMF view; disinflation process; Policy strategy; lending decision; risk tolerance; Fiscal consolidation; International reserves; Inflation; Reserves accumulation; Global
Cover IMF Working Papers
The Scalability of Credit-Enhanced EM Climate Debt: What Role Can Guarantees, Collateralization, Securitizations, and Investment Funds Play?
Peter Lindner
,
Ananthakrishnan Prasad
, and
Jean-Marie Masse
This paper reviews the main types of credit enhancement approaches used to support climate debt issuances by EMDE borrowers. Fragmentation on the part of the providers of credit enhancements was identified as a major factor impeding scalability of credit-enhanced debt. The acceptance of credit-enhanced debt is also hampered by the structural characteristics of the capital markets, especially the fragmentation of the investor base. To place significant amounts of credit-enhanced climate debt with private sector investors, MDBs, DFIs, and other stakeholders should focus on simple and replicable debt structures. Securitizations and investment funds could help fund private sector climate investments in EMDEs.
Keywords:
Credit enhancements; blended finance; debt-for-climate swaps; climate mitigation; climate adaptation; climate finance; guarantees; securitization.; climate debt; B. credit enhancement; EMDE investor base; enhancement approach; replicable debt structure; capital market consideration; Bonds; Loans; Credit; Securities; Global
Cover IMF Working Papers
Inelastic Demand Meets Optimal Supply of Risky Sovereign Bonds
Matías Moretti
,
Lorenzo Pandolfi
,
German Villegas Bauer
,
Sergio L. Schmukler
, and
Tomás Williams
We present evidence of inelastic demand for risky sovereign bonds and explore its implications for optimal government debt policies. Using monthly changes in the composition of a major international bond index, we identify flow shocks unrelated to fundamentals that shift the available bond supply. From these shocks, we estimate an inverse demand elasticity of -0.30 and show that it increases with countries’ default risk. We formulate a sovereign debt model with endogenous default and inelastic investors, calibrated to our empirical estimates. By penalizing additional borrowing, an inelastic demand acts as a disciplining device that reduces default risk and bond spreads.
Keywords:
inelastic financial markets; institutional investors; international capital markets; sovereign debt; IMF working paper research Department; debt issuance; price reaction; convenience yield; default cost parameter; long-term debt; U.S. dollar; bond payoff; investor demand; bond characteristics-month; inelastic investor; bond price change; unit price; price movement; Bonds; Asset prices; Demand elasticity; Debt default; Sovereign bonds; Global
Cover Policy Papers
Progress Report to The IMFC on The Activities of The Independent Evaluation Office Of The IMF
International Monetary Fund. Independent Evaluation Office
Since the 2024 Spring Meetings, the IEO finalized the evaluation on The Evolving Application of the IMF’s Mandate and launched a new evaluation on The IMF and Climate Change. The IEO has continued its progress on the ongoing evaluations of The IMF’s Exceptional Access Policy and the IMF Advice on Fiscal Policy. The IEO will develop an Evaluation Policy that addresses the recommendations of the Fourth External Evaluation of the IEO, which was concluded in July 2024.
Keywords:
evaluation Policy; evaluation policy; maintaining high-quality policy advice; IMF's mandate; policy area; Climate change
Cover Policy Papers
Initial Considerations For The Review Of Charges And The Surcharge Policy
International Monetary Fund. Policy Development and Review Dept.
On October 11, 2024, the IMF’s Executive Board concluded the Review of Charges and the Surcharge Policy. The review is part of a broader ongoing effort to ensure that the IMF’s lending policies remain fit for purpose to meet the evolving needs of the membership. Charges and surcharges are important elements of the IMF’s cooperative lending and risk-management framework, where all members contribute and all can benefit from support when needed. Together, they cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent and temporary borrowing. This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.



Against the backdrop of a challenging economic environment and high global interest rates, the Executive Board reached consensus on a comprehensive package of reforms that substantially reduces the cost of borrowing for members while safeguarding the IMF's financial capacity to support countries in need. The approved measures will lower IMF borrowing costs by about US$1.2 billion annually or reduce payments on the margin of the rate of charge as well as surcharges on average by 36 percent. The number of countries subject to surcharges in fiscal year 2026 is expected to fall from 20 to 13.



Key reforms include a reduction in the margin for the rate of charge, an increase in the threshold for level-based surcharges, a reduction in rate for time-based surcharges, an alignment of thresholds for commitment fees with annual and cumulative access limits for GRA lending facilities, and institution of regular reviews of surcharges.



The series of three papers informed the Executive Board’s first and second informal engagements (July and September 2024) and the formal meeting (October 2024) on this review.
Keywords:
General Resources Account; Charges; Margin for the basic rate of charge; Surcharges; Commitment Fees; Precautionary Balances; Income; multilayered framework; fund arrangement; surcharge rate; intermediation cost; fund's liquidity; borrowing cost; Credit; SDR interest rate; Balance of payments need; Credit risk; Global
Cover IMF Working Papers
Reported Social Unrest Index: September 2024 Update
Philip Barrett
This is the third update of the reported Social Unrest Index (Barrett et al. 2022), describing the evolution of social unrest worldwide since June 2023. It shows that the global incidence of unrest has stayed broadly stable in the last year. However, the global distribution has not been even, with a concentration of major events in Europe and sub-Saharan Africa and, to a lesser extent, in the Western Hemisphere.
Keywords:
Social unrest; Media coverage; unrest event; RSUI data; unrest index; copyright page; RSUI-defined event; Stock markets; COVID-19; Western Hemisphere; Global; Sub-Saharan Africa; Europe
Cover IMF Staff Country Reports
Uruguay: 2024 Article IV Consultation-Press Release and Staff Report
International Monetary Fund. Western Hemisphere Dept.
The 2024 Article IV Consultation discusses that in 2023, Uruguay confronted the impact of a once-in-a-century severe drought and external headwinds, but the economy remained resilient, owing to the authorities’ sound macroeconomic policies, the country’s political stability, and strong institutions. While economic growth decelerated in 2023, employment rose, and inflation fell within the target range. As inflationary pressures cooled off, the Banco Central del Uruguay started lowering its monetary policy rate in April 2023, while maintaining a contractionary stance. The economy is expected to strongly rebound in 2024, underpinned by the recovery of agricultural exports, increased cellulose production, easing of financial conditions and robust private consumption. Main risks are broadly balanced. Overall fiscal and external risks are low. The post-drought growth momentum creates opportunities for reinvigorating fiscal consolidation efforts. The crafting of the next five-year budget law opens an opportunity to recalibrate the fiscal rule targets to place debt on a downward path. Refinements to the fiscal rule would help consolidate recent credibility gains. Monetary policy should remain contractionary to ensure that inflation and inflation expectations stay within the target range in a sustained manner. Structural reforms are key to unlock potential growth, create policy space to preserve the country’s safety net and social cohesion, and support favorable sovereign debt ratings.
Keywords:
government bond bond market; inflation expectation; BCU inflation target; data ROSC reassessment; support policy continuity; Policy issue; Inflation; Fiscal stance; Fiscal councils; Anti-money laundering and combating the financing of terrorism (AML/CFT); Caribbean; Global
Cover IMF Working Papers
Crypto as a Marketplace for Capital Flight
Clemens M. Graf von Luckner
,
Robin Koepke
, and
Silvia Sgherri
This paper shows how cryptocurrency markets can fuel cross-border capital flight by serving as marketplaces that match counterparts with and without (illicit) access to FX. In countries where international transactions are restricted, crypto exchanges effectively allow domestic agents to pay a premium to buy foreign currency. The counterparts to these transactions are agents with access to FX, who sell crypto holdings purchased abroad. A stylized model illustrates that restricted foreign currency amid economic imbalances incentivizes these transactions via persistent crypto premia in local relative to global markets. We analyze relative crypto pricing data in several country case studies, providing empirical support that crypto markets serve as marketplaces for capital flight that already took place, rather than a novel channel for capital flight. We make available a novel dataset on crypto market premia, which we propose as indicators of excess demand for foreign currency and capital control intensity. The dataset will be posted along with this paper and updated periodically.
Keywords:
Capital flows; digital money; capital controls; cryptocurrency market; cross-border capital flight; crypto market; trading illicit capital flight; IMF working paper 24/133; Capital outflows; Currencies; Global