Argentina has found an easy way to keep its reserves from rising

Pay off the IMF.

Argentina is one of the few countries whose reserves have been growing about as fast as China's.  It just started 2003 with about $10 b in reserves (and a ton of debt), while China started 2003 with about $300 b in reserves and very little debt.

By the end of 2003 Argentina had about $14 b in the bank.
By the end of 2004 it had about $19-20 b in the ban.
Now it has about $25 billion ...

And yes, Argentina, like China, has an undervalued real exchange rate.  Its central bank is intervening heavily to keep the exchange rate from appreciating, hence the rising reserves.

Argentina's holdout bondholders won't be happy if the IMF gets paid in full and they, well ... get nothing.  

Moreover, if Argentina doesn't need the IMF, the IMF won't be able to pressure the Argentines to reopen the deal and offer the holdouts -- mostly Italian retail investors -- something.   Nor will the IMF be able to push Argentina to reach agreement on a sensible framework for regulating its privatized - and often foreign owned - utilities.

Kirchner (Argentina's President) may be bluffing.  Elections and all.

That's what Rafael de la Fuenta of Paribas thinks:

``We don't want to owe the IMF anymore,'' Kirchner said at a rally in the Buenos Aires province. ``Because of our debt, the IMF wants to impose on us the internal and external policies Argentina should follow.''

The pledge by the leader of a country that just restructured more than $100 billion of defaulted debt is rhetoric designed to please voters, said Rafael de la Fuente, senior Latin America economist at BNP Paribas Securities Corp. in New York. The amount owed represents about 10 percent of the nation's gross domestic product, he said.

`It's not realistic,'' de la Fuente said. ``They can't come up with that kind of money.''

But with Argentina you never know.

It would be kind of strange if Argentina, which defaulted, ends up paying the IMF back before Turkey, which did not.   Not necessarily good.  Just strange.

This will only increase the IMF's angst about its role in an (over) reserved world.

Afterall, by the end of the year, the world's emerging economies may hold almost $3 trillion in reserves.  The IMF, by comparison, has about $200 billion to lend out.