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Headlines: IMF-Argentina talks begin; “Special envoy” for Latinamerica; EU and UK rates unchanged; “Everything possible to help Argentina”;

IMF-Argentina talks begin

An International Monetary Fund arrived Thursday in Buenos Aires to continue negotiations involving a "transitional agreement" with the Argentine government. The delegation is headed by John Dodsworth Deputy Director for the Western Hemisphere, who is scheduled to remain in Buenos Aires four days preparing the draft of the assistance agreement that will extend until next August.

According to Argentine sources, the transitional agreement will stand until the newly elected administration (April 27th) takes hold of office and includes restructuring 3 billion US dollars and postponing payments for a further 3,8 billion US dollars. The agreement should also help Argentina with the World Bank and the Interamerican Development Bank.

Last December Argentina failed to cancel a 976 million US dollars World Bank loan although it did reimburse interest, and next January 17th must face a repayment of 1,064 billion US dollars to the IMF.

In a short statement from Washington, the Executive Board of the IMF announced it had completed Argentina's 2002 Article IV consultation. "Directors discussed the origins of Argentina's severe economic and financial crisis, the steps that have been taken by the government to respond to it, and the challenges that still remain to build an enduring recovery and sustain growth.

While Directors generally regretted the time it has taken to put together an economic program that would address these challenges in a comprehensive way, Directors recognized the greater economic and financial stability seen during the second half of 2002. Directors agreed that fiscal restraint has been a contributing factor to this stability.

Directors cautioned, however, that this stability should be nurtured. They recommended that, to ensure an enduring recovery, Argentina should focus on achieving a clear political consensus in favour of reforms, building a sound fiscal framework, restoring confidence in the banking sector, increasing trade openness, and restructuring debt.

Board members looked forward to the early finalization of a short-term economic program that would be a step toward the more comprehensive program Argentina needs to restore growth and place the economy on a sustainable path.

The Argentine authorities have authorized the publication in due course of the staff report and their accompanying assessment of the situation".

"Special envoy" for Latinamerica

US President George Bush announced this Thursday the naming of hardliner Otto Reich as "special envoy" to Latinamerica. Mr. Reich, born in Cuba and who until last November was Assistant Secretary of State for the Western Hemisphere, will report directly to National Security Advisor Condoleeza Rice.

This way Mr. Reich's nomination avoids legislative confirmation. Last November Mr. Reich was forced to resign as Assistant Secretary after a powerful group of Democrat Senators refused to accept his nomination.

Mr. Reich is a recognized anti castrate, former Ambassador in Venezuela who was also an outstanding figure in the Reagan administration as coordinator of efforts and resources, (some illegal) in support of the "contras" with the purpose of derailing the Sandinista government in Nicaragua in the eighties.

In private business Mr. Reich has worked for the Bacardi group, a company belonging to exiles Cubans and as a representative of Lockheed during the recent sale of jet fighters to Chile.

In his new post as presidential special envoy Mr. Reich will have an office adjacent to the While House and direct links with Ms. Rice and therefore quick access to President Bush himself.

Another hardliner, former advisor to Senator Jesse Helms and currently Ambassador in the Organization of American States, Roger Noriega, will take the post of Assistant Secretary of State for the Western Hemisphere.

EU and UK rates unchanged

The European Central Bank decided to keep the key interest rate in the Euro zone unchanged at 2,75%. The expected decision follows the strong 0,5% cut of last December prompted by fears over the sluggishness of the Euro zone economy. Last December's cut was the first since November 2001 and the first reaction to the ongoing controversy in the Euro-zone divided by those concerned with the slowness of the economy and those insistent in keeping rates high to fight inflation.

Early in the morning the Bank of England announced it would maintain unaltered the key rate at 4%, the lowest in 38 years since November 2001.

Last week Edward George, head of the Bank of England anticipated the decision saying that the main uncertainties for the British economy are the sluggish activity in other developed countries plus the threat of a war in Iraq.

"Everything possible to help Argentina"

Brazil's new Foreign Affairs Minister and former Ambassador in London Celso Amorim said that doing everything possible to help Argentina, Brazil's main partner in Mercosur, is a matter of solidarity but also of interest.

"For investors in foreign pension funds, Brazil and Argentina are the same, so the new Brazilian administration will have a more active participation in regional affairs, so long as we are asked to do so; we have no desire to interfere, but the current Brazilian process could be of inspiration for others", said Mr. Amorim in an interview with the Argentina press.

Regarding Mercosur Mr. Amorim indicated that the ideal model should be based in a customs union, with free movement of people, capital, technology, so "we effectively become not only an economic space but a social space. This will enable us to jointly negotiate with other blocks and countries".

Mr. Amorim anticipated the agenda for the coming visit next week of Argentine president Eduardo Duhalde to Brasilia to meet with counterpart Luiz Inacio Lula da Silva: "it's an open agenda but priorities are the recovery of Mercosur, how to further advance in the integration of Mercosur with other blocks such as Free Trade Association of the Americas, the European Union, the Andean Group".

"Distortions in Mercosur must be transitory, we must rapidly return to harmony, if not it won't be a block. With out a clear understanding between Argentina and Brazil, there's no Mercosur", emphasized Mr. Amorim, adding that the Mercosur project is not only commercial but also political, and this means mending distortions in the Common External Tariff and creating supranational institutions such as a Mercosur parliament.

As to relations with the United States and the coming discussion involving FTAA, Mr. Amorim revealed that in talks with US Trade Representative Robert Zoellick Brazil pointed out that the incoming administration "can't sacrifice the content of our proposal to a rigid timetable. We have to consult with industry, Congress and other sectors".

However Mr. Amorim said the Lula administration was open to negotiate the FTAA, but Brazil is concerned about the size and of its industrial capacity, and "we're going to defend our interests in the same way as the United States defends its own interests".

Finally regarding the Lula administration's foreign policy, Mr. Amorim stressed that a greater emphasis will be given to South America; a stronger stand in trade affairs, be it with the FTAA, European Union or the World Trade Organization, as well as reinforcing relations with other large developing nations such as South Africa, Russia, India and China.