MercoPress. South Atlantic News Agency

Breaking News from South America

Lula leads two to one;
IMF pushes Argentina; Ms. Krueger recommends re-scheduling;
“Sanitary alert” in Mercosur

Lula leads two to one

Luiz Inacio Lula da Silva has widened his lead over José Serra the government candidate for the October 27th presidential run off according to the latest polls published over the weekend in Brazil. A Vox Populi poll shows Mr. Lula with 60% of the vote and a 30 points lead over Mr. Serra, for Data Folha the score is 58% against 32%. Ciro Gomes and Anthony Garotinho, the two defeated candidate in the first round have both pledged support to Mr. Lula. With just two weeks left Brazilian president Fernando Cardoso has begun campaigning actively on behalf of Mr. Serra but Data Folha poll shows that only 13% of the electorate would vote for a candidate backed by Mr. Cardoso. Mr. Serra who has a long government experience is pushing for the greatest number public debates with Lula in the hope of exposing alleged inconsistencies of the former radical union leader. Political uncertainty surrounding Lula has increased turmoil in Brazil's financial markets forcing the Central Bank to support the local currency and to pay much of its existing debt since bond holders are reluctant to renew them. The falling Real has increased the size of government debt half of which linked to the US dollar. Currency decline and rising interest rates have also spurred inflationary pressures and slowed economic growth. However, Mr. da Silva has been leading the polls since the first round of voting and is the candidate with the most chances of taking office next January 1st.

The draft letter of intention the International Monetary Fund sent to the Argentine government includes among other things a further budget tightening, an increase in public utility rates and an end to intervention in the local exchange market, according to the Argentine press. "IMF is asking for a greater consolidated budget surplus, 2,3% of GDP instead of 1,5% as proposed by the Argentine government", reports Buenos Aires daily Clarín. Argentine president Eduardo Duhalde last Saturday announced that technical aspects of the IMF agreement "were virtually finished and ready for signing". Previously IMF officials and Argentine representatives publicly coincided regarding progress in the draft agreement. According to La Nación, the IMF letter of intention includes updating public utilities rates, a definitive solution for the bank deposits judicial "leakage" and letting the US dollar float freely. Argentine officials anticipated that the coming agreement with the IMF includes no fresh funds but rather the reimbursement of the country's international reserves invested in repaying IMF and other multilateral organizations loans. The IMF is also demanding a greater fiscal effort from Argentine provinces and a "political consensus gesture" supporting the future agreement, in a way similar to that expressed by the Brazilian presidential candidates. In the months leading to March when presidential elections are scheduled, Argentina faces 6,5 billion US dollars payments with multilateral credit organizations. This month only Argentina must pay back 935 million US dollars to the IMF, World Bank and Interamerican Development Bank.

Ms. Krueger recommends re-scheduling

Argentina and other countries facing debt crisis should discuss with private creditors before receiving any additional assistance from the IMF, said Anne Krueger Deputy Director of the IMF. "IMF assistance would be futile and counterproductive if there are no changes in the financial terms of government debts with private creditors", when countries are unable to honour payments said Ms. Krueger during a conference in Madrid. Ms. Krueger was addressing Spanish and Latinamerican economists during the presentation of an IMF proposal for sovereign debt default when countries are unable to honour debts, mentioning Argentina as a case model. The IMF official stressed that financial assistance was justified in countries like Brazil that have implemented "solid and reliable" economic programs. A different situation is when the three branches of government are constantly bickering (as happens in Argentina).

"Sanitary alert" in Mercosur

Uruguayan Agriculture, Livestock and Fisheries Ministry Sanitary Services reinforced border controls until claims of an alleged outbreak of foot and mouth in Paraguay, next to Brazil in the heartland of South America are cleared up. A technical delegation from the Pan-american FAM Centre will begin inspections in the area next to Matto Grosso to confirm or discard the alleged presence of the virus that ravages cattle. Ricardo Ugarte head of Uruguay's Sanitary Services said that there was a "sanitary alert" on, although "this does not have an alarmist objective, it does want to create awareness of the situation, that is delicate and involves not one country but all the members of the River Plate basin, and we're determined to remain free of FAM". Once the alleged outbreak was reported Brazil immediately banned all Paraguayan beef imports and later on Argentina, making it extensive to all food products of animal origin, virtually isolating landlocked Paraguay. Argentina also demanded a joint effort with Brazil and Uruguay to verify the alleged outbreak. Mercosur countries beef and lamb was banned from world markets several months in 2001 because of an outbreak of FAM that beginning in Argentina rapidly expanded to all the area. Precisely this week Uruguayan Agriculture and Livestock officials publicly declared for the first time that, based on data collected from different reliable sources, when the original outbreak of FAM in late 2000, "Argentina lied about the situation and for months attempted a cover up the disease". The president De la Rúa administration policy had a devastating impact for the meat industry and farming in all of Mercosur member countries.