G20 in India: Massa demanded a deep reform of the financial system in the face of the crisis of the war in Ukraine and climate change

(Special Envoy to Bangalore, India) Exactly one year after Russia’s invasion of Ukraine, which heightened global tensions between the United States and China, Sergio Massa took advantage of the first session of the G20 summit finance ministers and central bank presidents to execute a scathing critique of the world system which preserves the the status quo and economic asymmetries between rich nations and poor and middle-income states.

The boss of the Palace of Finances gave his speech while Argentina was sleeping and the temperature in the streets of Bangalore was approaching 30 degrees. In the convention center of the Hilton hotel, you could see the Secretary of the Treasury of the United States, Janet Yellento the Vice Minister of Finance of China, Wang Dongwei, to the Managing Director of the International Monetary Fund, Kristalina Georgievato the head of the World Bank, David Malpassto the German Minister of Finance, Christian Lindner, to the Minister of the Economy of France, Bruno the Mayorto the Minister of Finance of India, Nirmala Sitharaman and the Minister of Finance of Brazil, Fernando Haddad.

“Global economic conditions are particularly difficult, marked by a tightening of international financial conditions, in a context of growing debt vulnerabilities and limited fiscal space. These circumstances not only jeopardize the recovery in the short term, on the contrary, they undermine the ability of countries to achieve long-term development goals. Massa maintained a clear political message to the United States, Germany, France and the IMF.

These global power factors demand that Argentina respect the objectives set out in the Agreement of Extensive facilities this implies a debt of 44 billion dollars, but in practice they have not yet articulated a roadmap that allows the conditions of financing to be met without favoring an extreme adjustment of public expenditure and investment.

With the tacit endorsement of Joseph Biden, Olaf Scholz and Emmanuel Macron, the Fund’s board resists lowering surcharges and keeps credit rates at a level that contradicts its multilateral essence as a provider of last resort. Massa, in his almost seven-minute speech, said that this institutional contradiction must end as soon as possible.

From this point of view, the head of the Palacio de Hacienda pointed out that “the already existing asymmetries in the financing conditions between developing and advanced economies, both in terms of public and private financing, have been exacerbated by the tightening of interest rates and interest rates in many advanced economies.

Massa knows that during the G20 in Rome and Bali, the need to reformulate the IMF’s interest rate policy has already been raised – at the request of Argentina. This is why it is not surprising that at this G20 summit, the Minister of the Economy insisted on a position supported by the debtor countries and opposed by the board of directors which gives the orders to Kristalina Georgieva.

“In a context where we are debating multiple ways to increase funding capacity, I do not want to forget to recall a mandate that Argentina has repeatedly mentioned in this area. And that is the claim for monetary fund surcharges and fees. It’s a regressive policy, because it falls on the countries that have the greatest financing needs; pro-cyclical, because it hinders economic recovery, and opaque because countries rarely know that they will have to pay surcharges”.

The G20 summit in Bangalore was used by the United States, Germany and France to condemn Russia’s illegal invasion of Ukraine and warn China that it will face financial and economic sanctions if it supports with arms and information the illegal war launched by Vladimir Putin.

The conflict in Ukraine has captured the attention of central countries, but there was also time to deal with the implications of climate change for the global situation. Powerful nations are demanding that poor and middle-income states adapt their productive structures to the canons of the Paris Agreement, a necessary goal that is causing unforeseen tensions on the planet.

Without funding from the United States, Europe, Japan, Canada, the IMF and the World Bank, the demands of emerging countries linked to climate change goals can mean more poverty and global asymmetries. For example: for the South, adjusting its productive apparatus to the requirements of the North, would lead to the impossibility of using – in the medium term – gas and oil reserves.

Thus, in the case of Argentina, there would be a strange paradox: Vaca Muerta is the key to reducing the budget deficit and multiplying the reserves of the Central Bank by selling the surpluses to Europe, which is suffering from the energy blockade of Cheese fries.

But in this context of adaptation to the canons of Europe and the United States, Argentina should forget about gas and bet on hydrogen, which still cannot be produced due to lack of investment provided by credit organizations and central countries.

“The climate challenges we face also respond to the different degrees and times of development of countries. At this table, we have countries rich in economic and financial resources and, on the other, countries rich in ecosystem resources. Our country is a financial debtor, but it is an environmental creditor in this context,” Massa recalled in his speech.

And he ended: “Those who caused the damage must mitigate the effects, as our countries only need to adapt at this stage of climate change.”

After his speech at the Bengaluru summit, Massa held official meetings with the finance ministers of Italy, Germany, France and Brazil to deepen bilateral relations and analyze the international table, while receiving key information on the negotiation that the technical mission of the Palacio Treasury is closing with IMF staff in Washington.

If the Fund finally approves the agreed targets for the fourth quarter of 2023, Massa and Kristalina Georgieva will make an official announcement tomorrow after their meeting at the Convention Center of the Hilton hotel. The meeting is set for 6:00 p.m. here (7:30 a.m. in Argentina).

Later, the Minister of Economy will return to Buenos Aires.