MercoPress. South Atlantic News Agency

Argentina-IMF talks continue.

The Argentine government officially decided this Tuesday to suspend repayment of an IMF 2,9 billion US dollars credit that was due today. Argentina had anticipated that if an agreement, currently being discussed with the IMF was not reached by September 9 it would take this drastic action which means the country defaulted

However Casa Rosada sources stressed that "we are willing to honour the commitment and we will continue negotiations", further underlining that the "technical" default only "becomes a real full-fledged in thirty days time".

Economy Minister Roberto Lavagna, who was scheduled to fly to Mexico for the Cancun World Trade Organization talks, cancelled the trip and will remain in Buenos Aires to continue negotiations.

Discussions for a three year program with the IMF face three main stumbling points: primary budget surplus, public utility rates and bank compensations.

IMF insists in a primary surplus equivalent to 4,5% of GDP, sufficient to ensure repayment of the December 2001 defaulted sovereign bond debt; Argentina argues that 3% is enough since the country needs to grow to be able to pay.

Regarding utility rates and bank compensations, the President Kirchner administration rejects what it describes as private foreign corporations "IMF lobbying", insisting that one out of two Argentines is poor and "they also have to be compensated".

Besides president Kirchner has repeatedly accused IMF officials of economic and financial "ill advice" that helped Argentina collapse into the current situation.

Actually Mr. Kirchner in the coming days and weeks faces crucial provincial and legislative elections and flatly rejects talking about utility rate hikes or compensation to banks.

"We will not sign agreements we can't honour or that could thwart the incipient recovery of the economy", said Argentine cabinet chief Alberto Fernández.

The Argentine and Chilean press reported that Chilean president Ricardo Lagos phoned president Kirchner to express his solidarity in his dispute with the IMF.

On Monday the US Under-Secretary for Latinamerican Affairs Roger Noriega suggested the IMF should be more flexible with Argentina.

Most public utility companies and banks demanding compensations for the 2001 devaluation of the Argentine currency are European.