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Headlines: Chile moves ahead; ICU for the “agonizing patient”; Tough negotiation ahead; G7 to press Argentina and the IMF.

Chile moves ahead

Chile and United States resume this Thursday in Washington talks on a free trade agreement and will assess prospects following the recent approval by the US Senate of the Trade Promotion Authority, TPA. Osvaldo Rosales Head of Chile's International Economic Relations will meet with Regina Vargo, US main trade negotiator for the Americas to consider mutual proposals involving sanitary regulations, intellectual property, financial services and financial investments. Not included in the agenda but almost certain to be addressed is the recent Farm Bill of the Bush administration granting massive subsidies to agriculture. Chilean sources believe that with the passing of TPA the way is open for an agreement before the end of the year, although the process still needs to be considered by a joint Committee and approved by both Houses of Congress. Chile's annual trade with the United States totals over 7 billion US dollars. In Santiago US Ambassador William Brownfield said that the US is committed to sign a free trade agreement with Chile, "with or without TPA". "Washington accepts the possibility of having an agreement even without the TPA", indicated Mr. Brownfield, although "the ideal is to discuss the agreement with the TPA approved". Meantime in Brussels the Chilean Deputy Foreign Secretary Mr. Christian Barros and Guy Legras from the European Union signed the Association Agreement on Political, Economic and Bilateral Cooperation, opening the way for the following steps. In Europe the 1,500 pages document must be approved by the European Council of Ministers and the European Parliament. In a second stage the different country parliaments must consider the political and some of the commercial aspects of the document. In Chile the agreement must be passed by Congress. The agreement has been described as the most ambitious signed by the European Union and a non member country of the EU.

Tough negotiation ahead

An International Monetary Fund, IMF, mission is expected this Thursday in Buenos Aires to formally begin negotiations with Argentina regarding much needed financial aid for the credit stripped country, the third economy in Latinamerica suffering the worst recession in over half a century. "This will be a negotiating round and not technical, as the previous ones", said Anibal Fernandez, Secretary General of the Argentine presidency, adding that "it's no time to continue generating uncertainty since Argentina has complied with all the pre requisites. We are now going to discuss economic and financial policies". Mr. Fernández remarked that "this was clearly explained to Ms Anne Krueger, Deputy General Director of the IMF, by Economy Minister Roberto Lavagna during a long phone call". However in Washington the IMF spokesperson, Francisco Baker indicated that the mission sent to Argentina was "an advance team" in the "ongoing negotiation process", and not necessarily a "negotiating team". The Duhalde administration is desperately seeking at least 9 billion US dollars in aid from the IMF to support the Argentine banking system which should simultaneously open the way for further credits from other multilateral institutions and promises of support from friendly governments. The 9 billion correspond to a 22 billion US dollars assistance program agreed with the previous Argentine government that fell through last December, helping to force the demise of the lackluster De la Rúa administration and a radical reaction in Congress that named populist Eduardo Duhalde president and defaulted on the country's foreign debt of 141 billion US dollars. The Duhalde administration has anticipated that once an agreement is reached with the IMF, Argentina will proceed to reschedule its foreign debt including the massive default. Although the Duhalde administration insists that is has complied with the IMF demands, elimination of the bankruptcy and "economic subversion" bills plus convincing provincial governments to cut 60% their estimated budget deficit, IMF officials are angry at the fact that some of the "economic subversion" charges have been incorporated to the Penal Code. Apparently the launching of the "negotiation" round is conditioned to president Duhalde's vetoing those "transfers" to the Code. This kind of incident has irritated both sides and unnecessarily extended the timetable for an agreement, further debilitating the Duhalde administration political standing and the IMF's new policy of demanding strict compliance of its recommendations. Nevertheless in July Argentina has to reimburse 1,3 billion US dollars from a previous IMF loan, and with the Argentine Central Bank ever so short of international monetary reserves it's hard to see how much more the IMF will push. Besides the uncertainty of the Argentine situation is also having contagion effects in Mercosur and the rest of the continent, in spite of all the precautions and support promised to Uruguay and Brazil. The dispute has also had an impact inside the IMF where this week the Head of the Western Hemisphere for Latinamerica and the Caribbean Department, Argentine born Claudio Loser was unexpectedly replaced by Anoop Singh, until then Head of Special Operations and presiding over the current ongoing negotiating process with Argentina.

ICU for the "agonizing patient"

Brazil is determined by all means to keep the "agonizing patient" alive, when it takes over the pro tempore chair of Mercousr next July, according to political and diplomatic sources in Brasilia. The "agonizing patient" is the Mercosur block, afflicted by the Argentine crisis and the uncertainty it has spread to other member and neighbouring countries. "The regional block demands intensive care, but it's not dead", said the Carlos Cozendey head of the Mercosur Department in the Brazilian Foreign Affairs Ministry. Mr. Cozendey added that Brazil is quiet aware that "miracles" or "great achievements" are not possible under the current circumstances, but "from the Mercosur presidency we will make all efforts to reassure the imperfect customs union remains alive". Brazil is expected in the coming days to announce a package of measures to prop the agonizing patient, actions which it pretends to begin enforcing once it takes over the presidency from Argentina in a regional summit to be held next July 4th. in Buenos Aires.

G7 to press Argentina and the IMF

The Economy Ministers of the Group of Seven will press Argentina and the IMF to sit down and begin a round of real negotiations on a sustainable economic program. Economy Ministers form Germany, Canada, United States, France, Britain Italy and Japan, besides Spain acting for Europe, are scheduled to meet this Friday in Halifax, Canada to assess and discuss the global economy. One of the issues in the agenda is the possible impact of the Argentine situation in the global economy and how to help the IMF and Argentina to begin discussions. The G 7 ministers are very interested in knowing why the negotiation round is taking so long to start. G 7 ministers underline that to put Argentina back on the right track and help the economy to begin growing again, an agreement with the IMF is essential. Apparently Argentina and the IMF have yet to begin considering macroeconomic variables, such as the country's total debt, monetary policy, acceptable inflation, long term sustainable growth, "which is quiet surprising", remarked Spanish diplomatic sources. Argentina desperately needs IMF approval, and assistance, to avoid defaulting multilateral organizations loans and to spur the economy in the recovery path, so far unattainable since the current situation has left the country virtually with no financial and banking system.