IMF offers Argentina $8 billion in additional loans under conditions pressed by the United States
Wednesday, August 22nd 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ After lengthy negotiations, the International Monetary Fund agreed to offer Argentina an additional $8 billion in loans, which will bring to $22 billion the amount of IMF help available to help the country weather a severe economic crisis.
The new money comes with a series of conditions that the United States demanded be included in an effort to make sure the economic rescue package had a better chance of healing South America's second-largest economy.
Argentina's problems have reverberated through financial markets in Brazil and other countries in the region. Fears have been aroused of a repeat of the Asian crisis, in which troubles that began in Thailand pushed 40 percent of the globe into recession as investors rushed to take money out of volatile, emerging markets.
However, initial market response to the new IMF loans was strongly positive on Wednesday with Argentine stocks soaring in value in early trading.
Agreement on the new package was announced late Tuesday night by IMF Managing Director Horst Koehler after 12 days of talks with an economic team from Argentina.
Treasury Secretary Paul O'Neill, who has criticized massive IMF bailout packages assembled during the Clinton administration to deal with the Asian crisis, hailed the new accord.
``This is an important step as we continue to work toward a sustainable long-term solution to Argentina's economic problems,'' O'Neill said in a statement.
He said a portion of the new IMF loans would be ``specifically dedicated'' to help Argentina work out a voluntary restructuring of its $130 billion foreign debt burden.
In Buenos Aires, Argentine President Fernando De la Rua said the new package would wipe out doubts about his country's resolve to put the debt crisis behind it.
``The uncertainty has ended,'' De la Rua declared at a state dinner. He said his country's agreement with the IMF would strike a blow at ``speculators who were betting against Argentina.''
Finance Secretary Daniel Marx, who headed Argentina's negotiating team, told reporters in Washington that many details remain to be worked out on restructuring Argentina's foreign debt.
``We're open to suggestions,'' he said and added his government would rely on advice from private-sector advisers to devise a plan to restructure the debt.
Marx stressed the moves would be voluntary. Financial markets have been roiled in recent weeks by fears that Argentina would force foreign bond holders to write off part of the debt.
A chief criticism in Congress of the more than $100 billion in bailout packages assembled by the IMF during the 1997-98 Asian crisis was that U.S. money was used to bail out rich bondholders who had made bad investments in developing countries.
The new agreement will boost the amount of loans Argentina can obtain from the IMF to $22 billion, up from an original $14 billion the agency had made available last December as part of a $40 billion rescue package put together at that time to aid an economy mired in a serious recession for three years.
O'Neill complained last week that the IMF effort needed to be directed more toward finding a way to ``create a sustainable Argentina, not just one that continues to consume the money of the plumbers and carpenters in the United States who make $50,000 a year and wonder what in the world we're doing with their money.''
In his statement, Koehler said $5 billion would be added to Argentina's emergency credit line immediately upon approval of his recommendation by the IMF's 24-member executive board and that the other $3 billion would be added later.
The Bush administration also got a commitment from Argentina to work to lower trade barriers in the region.
O'Neill had complained that Argentina, by failing to support trade liberalization, was not securing the kind of foreign markets it needed to boost exports and help lift the country from recession.
U.S. Trade Representative Robert Zoellick announced that as part of the administration's support for the new IMF loans, he planned to meet with the trade ministers from Argentina, Brazil, Paraguay and Uruguay. U.S. officials said the meeting probably would occur in September, but no firm date is set.
``The purpose of the meeting would be to pursue our common interest in free trade as an engine of economic growth globally, regionally and bilaterally,'' Zoellick said.