MercoPress. South Atlantic News Agency

“Useful and constructive” dialogue

The International Monetary Fund and Argentina held this Monday in Miami a top level five hours meeting that was later described in an official release as “useful and constructive”.

The meeting was in anticipation of the second review of the last September IMF Argentina agreement, scheduled for next March 9, when Argentina faces a crucial 3,1 billion US dollars repayment.

It also follows a stern warning from the G-7 industrialized countries Finance Ministers summit in Florida demanding Argentina negotiate with defaulted sovereign bond holders in a "constructive spirit".

IMF Managing Director Horst Koehler and Argentine Finance Minister Roberto Lavagna first met privately and then were joined by their delegations which included First Deputy Managing Director Anne Krueger, Director of the Western Hemisphere Department Anoop Singh, head of the Argentine case John Thorton and IMF resident representative in Buenos Aires John Dodsworth, and on the Argentine side Finance Secretary Guillermo Nielsen, Economic Political Coordination Secretary Leonardo Madcur and Finance Under Secretary Sebastián Pallá.

"The dialogue was constructive and useful" with the purpose of "preparing the way for the (IMF) mission that will be involved in the second review of the stand by agreement", which is scheduled to begin next week in Buenos Aires.

The second review of the IMF-Argentina three years stand by agreement has become crucial not only because of the funds involved but also because the IMF and some of the most influential members of G-7 believe Argentina is not acting in "good faith" in the restructuring of its 88 billion US dollars debt in defaulted bonds.

The second review covers the last quarter of 2003, and the Argentine government insists it has complied with most of the quantitive and qualitative conditions of the stand by loan. The September agreement with Argentina does not involve fresh funds but rather revolving the standing credits as long as the periodical reviews are approved by the IMF Board of Directors.

The first review scheduled for December was only approved in late January after a long and unusual debate in the IMF Board, -as well as strong lobbying from the US-, and was preceded by an exchange of recriminations between Argentine and IMF officials.

Argentina has proposed bondholders a 75% face value cut which has been rejected by creditors. President Kirchner administration argues that it must first honour its "internal social debt", (the roaring nineties left half the Argentine below the poverty line), but the IMF and some of G-7 members insist the rebound of the Argentine economy gives margin for a more constructive dialogue.

Japan, Italy and Britain in a very uncommon attitude actually abstained in the IMF January Board meeting from supporting Argentina's first review arguing they wanted "an effective compliance of the promised commitments (by Argentina)".

Irritation in different degrees also extends to Spain, Italy and France, which have seen their investments in Argentina, many of them in privatized public utility companies, questioned or turn sour because rates have been frozen since December 2001.

To achieve a better debt restructuring, "policies or recommendations that affect growth of the economy", must be avoided, said a spokesperson for the Economy Ministry in Buenos Aires.

The restructuring process will only be successful "in the framework of an expanding economy".