IMF will advance loan to Argentina.
International Monetary Fund Director General, Horst Koehler announced he will recommend an accelerated disbursement of a 1,2 billion US dollars loan to Argentina, once the IMF mission currently in Buenos Aires, ends its review of the country's austerity program.
Simultaneously but in a second release, IMF announced a 15 billion US dollars credit line for Brazil that is under strong international pressure because of a possible "spill over" effect from Argentina and its own debt problems, equivalent to half the country's Gross Domestic Product.
The decision follows a hectic week of talks and meetings, including full public support to Argentina from several world leaders, among which Prime Minister Tony Blair, Spanish president José Aznar and US president George W. Bush who explicitly pointed out the country's commitment to a "zero-budget deficit" policy.
This last week US Treasury Under Secretary John Taylor visited Argentina where he held talks with Central Bank officials, private bankers and businessmen to assess the situation and local support to the De la Rúa's austerity program. With the additional 1,2 billion, Argentina will have had access to 7,3 billion of the 13,4 billion US dollars original IMF credit line. The "accelerated" disbursement means the country will be receiving the loan in the second half of August instead of September.
Regarding Brazil, IMF agreed to extend the current program that expires next December for another twelve months, with a 15 billion US dollars contingent credit line. Brazil has agreed to strengthen fiscal and monetary policies and continue with structural reforms, opening other sectors of the economy to foreign investments.
In Argentina, Mr. Taylor said local talks had been "fruitful and detailed" and expressed support for the whole package.
Brazilian economic officials expect a first 4,6 billion US dollars installment for next September.
However in spite of the international support, Argentina's "country risk" is still above 1500 points, several billion dollars deposits have left banks and some investors appear to be betting that Argentina won't be able to keep up its debt payments, forcing a default on its 130 billion US dollars debt or a devaluation of the currency.
G 7 countries, following the new American administration guidelines so far are standing firmly behind IMF to support Argentina, and have not insinuated any bilateral direct action as happened under president Clinton with Mexico, Far East, Russia, Braz