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IMF delegation in Argentina & Uruguay.

Monday, December 16th 2002 - 20:00 UTC
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IMF and Argentina resume talks

An International Monetary Fund high level mission is scheduled to resume talks with the Argentine government this Monday in Buenos Aires, in an attempt to unlock the current situation and extend financial assistance to a country that is technically in default with multilateral credit organizations. "The mission will complete discussions in some issues and will continue efforts to solve other pending objectives that should enable the achievement of a program with the approval of the IMF", said IMF sources in Washington consulted by the Argentine press. The mission will be headed by John Dodsworth Deputy head of the IMF's Western Hemisphere Desk and British born John Thorton who is responsible for the Argentine case. Argentine Economy Minister Roberto Lavagna, who has been at loggerheads with the IMF, said in Buenos Aires that in spite of the high level of the mission, "it could end up as another informative mission; it's basically a follow up of the latest data, and eventually its members could insist in addressing the ongoing discussions". However the IMF spokesperson David Hawley indicated that one of the purposes of the mission will be to address Article IV of the organization's legal framework. Under Article IV the IMF holds annual bilateral discussions with country members whether the country has an ongoing program or not. It basically consists of collecting financial and economic information and holding talks regarding the evolution of the economy of that country. The last visit of this nature to Argentina was in September 2001, when the former president De la Rúa administration was beginning to collapse. Mr. Hawley did admit that some country members during the last session of the IMF board, expressed concern about the delay in reaching an agreement. Argentina has been discussing for the last eight months with the IMF a financial assistance program that would enable the country to honour multilateral organizations debts due in the next 18 months. After several months of skirmishes all seemed to be advancing but in late October discussions fell through and relations cooled. Argentina however announced that without IMF assistance she could not face impending payments and desisted from honouring 805 million US dollars to the World Bank. Argentina actually only paid interests but no capital. Mr. Lavagna who has been quiet critical of IMF has repeatedly said that he's in daily contact with the IMF, Inter-american Development Bank, World Bank and the G 7 group that "are the most influential members of the world financial community". "We've heard a lot of excuses (from the IMF), but the truth is that in these eight months we've managed to overcome IMF's darkest forecasts", explained Mr. Lavagna.

Uruguay's economy plummets

Uruguay's Gross Domestic Product, GDP, plummeted 12,9% during the third quarter compared to a year ago and 9,3% compared to the second quarter, a historical record. Under the influence of the Argentine contagion the Uruguayan collapse was forced by a bank run that led to the closure of four banks, partially froze foreign currency deposits in government institutions, significantly devalued the local currency, rocketing unemployment in one quarter from 15,6% to 19,2%. However according to a letter of intention signed by the Uruguayan government to ensure financial aid from the IMF, the economy is forecasted to contract 11% in 2002 and at this rate is just less than two points short. During the first quarter of 2002 the Uruguayan economy dropped 10,2%; again 5,2% in the second as agriculture began to pickup recovering from the outbreak of foot and mouth disease in 2001, and in the current quarter much will depend on tourism and foreign trade. Domestic consumption, commerce, construction, manufacturing and, transport and communications were the sectors most affected by the sudden contraction of average income, (less activity and weaker currency) while farming and public utility rates were the only positive signs as agriculture and related export industries began rolling again. Another complicated issue is the growing budget deficit MF have weakened because of third quarter figures related to the growing budget deficit and the still unsolved problem of the banking system and the possibility of having to reschedule the country's foreign debt given the accumulation of maturing bonds in the next two years have cooled relations with the IMF.

Categories: Mercosur.

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