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REPORTS: ARGENTINA |
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Tuesday 16
September 2003
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IMF
Talks Continue Despite Default on
Payment
Marcela
Valente
BUENOS AIRES, (IPS) - Argentina
failed to meet a 2.9-billion-dollar
payment to the IMF that came due
Tuesday, but both sides are confident
that an agreement can be reached to
prevent the country from defaulting on
payments to the multilateral lending
institutions, as it did on privately
held debt.
''Don't come and try to scare us with
talk of chaos and calamity,'' said
Argentina's left-leaning President Néstor
Kirchner, referring to the warnings
from members of the opposition
regarding his decision not to make the
payment, since there is no guarantee
that the agreement in discussion with
the IMF will be finalised.
International Monetary Fund (IMF)
penalties in cases of default do not
come into effect until the end of a
lengthy process that can last up to
two years, government spokespersons
explained.
''Let's have confidence in
ourselves,'' urged Kirchner, who
received the full support from
lawmakers of the ruling Justicialista
(Peronist) Party for his decision and
for what they have described as the
''dignity and strength'' with which
his administration has approached the
talks with the IMF.
Despite the government's failure to
make the payment, the financial
markets were calm, and the exchange
rate of the local currency remained
virtually unchanged from Monday's
level.
The Kirchner administration intends to
continue negotiating.
In fact, the IMF mission led John
Thorton will stay in Buenos Aires to
continue the talks with the aim of a
medium-term accord for restructuring
Argentina's debt. This would enable
this Southern Cone country of 37
million people to strengthen its
incipient recovery from a prolonged
and devastating crisis, and eventually
meet its debt payments.
Argentina owes more than 145 billion
dollars, 70 billion of which is
comprised of treasury bonds that were
declared unpayable in December 2001,
when the economic collapse and
widespread rioting and looting toppled
the government of Fernando de la Rúa
halfway through its four-year term.
Alberto Fernández, Kirchner's cabinet
chief, confirmed Tuesday that the
government did not make the payment
because it was not willing to dip into
the country's international reserves
without having first reached an
agreement with the IMF.
''The government does not want to
repeat the same steps that triggered
the recession,'' he said, referring to
previous administrations that
committed to strict fiscal spending
targets and policies that contributed
to deepening the economic crisis.
''We are working well, without any
problems,'' and the government is
interested in ''living up to its
commitments,'' added Fernández.
But he acknowledged that in the talks
with the IMF, both sides are sticking
to their guns. The Kirchner government
''does not want to postpone
Argentina's economic development any
longer.
''It is a question of reaching an
agreement for a socially sustainable
country,'' and one that will allow
Argentina ''to live up to our
obligations to the international
lenders, but without slowing our
growth,'' he said.
There appears to be some discord among
the government's economic team,
however. Economy Minister Roberto
Lavagna tried without success to
convince Kirchner to pay at least part
of the debt servicing that fell due
Tuesday.
The president's refusal ignited
tensions between the two men, a source
familiar with what occurred in their
meeting, told IPS, speaking on
condition of anonymity.
A rumour that Lavagna might hand in
his resignation began to make the
rounds Tuesday, although it was
refuted by the minister's spokesman,
Armando Torres.
The tense situation has forced Lavagna
to suspend his participation in the
World Trade Organisation (WTO)
ministerial conference, which opens
Wednesday in the southeastern Mexican
resort city of Cancun.
The negotiations for restructuring the
debt payments that will come due over
the next three years came to a
standstill on Friday, when both
parties to the talks dug in their
heels due to the proximity of the
Tuesday deadline.
Kirchner accused the IMF of lobbying
in favour of private companies, like
banks and the firms that have taken
over Argentina's public utilities in
privatisation processes, and refused
to allow increases in utility rates --
a condition set by the IMF for
reaching an accord.
Buenos Aires also refused to meet
another IMF requirement -- to expand
the compensation paid to banks for the
losses they suffered as a result of
the measures the government adopted to
confront the financial crisis that
erupted in late 2001, such as a freeze
on deposits.
The banks will receive three billion
pesos (around one billion dollars) in
compensation for the cost of returning
deposit-holders' savings in dollars
while they were forced to accept loan
payments in pesos.
But the IMF is now demanding that the
banks be given another seven billion
pesos (2.3 billion dollars) for
returning the deposits in dollars to
account-holders who secured court
injunctions to release their savings
from the freeze.
The government also refused to a
budget surplus target higher than
three percent of gross domestic
product (GDP) over the next three
years, saying it would only agree to a
target above that level for 2004, but
not for 2005 and 2006. The IMF has
demanded four percent GDP.
The Argentine economy began to show
timid signs of recovery in mid-2002,
after the late-2001 collapse
culminated nearly four years of
recession.
No fresh funds have been received from
the multilateral lenders, but the
country's economic indicators began to
improve slightly in June 2002
nonetheless.
Economic authorities forecast 5.5
percent GDP growth for 2003.
Central Bank reserves, which plunged
from 35 billion dollars in 1999 to
less than eight billion in 2002, have
rallied to 13.6 billion, and inflation
stands below 10 percent a year.
Against that backdrop, Lavagna
defended a commitment to a fiscal
surplus equivalent to three percent of
GDP for 2004.
But he said that for the following two
years, the target should depend on the
level of economic growth, the
country's success in bringing down
unemployment, and the poverty rate,
which has soared to more than 50
percent of the population of this
once-rich country, Latin America's
third-largest economy.
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