MercoPress. South Atlantic News Agency

Ms. Krueger criticizes Argentina's strong rhetoric

International Monetary Fund interim Managing Director Anne Krueger said that Argentina in the future will need a primary surplus above the 3% agreed for this year, with the purpose of increasing payments to the country's creditors.

In an interview with "Clarín" published this Tuesday Ms. Krueger criticized Argentine President Nestor Kirchner's strong rhetoric towards the IMF and creditors, arguing that this attitude makes dialogue and negotiations more difficult.

Ms. Krueger also coincided with those who allege that the Kirchner administration "blackmailed" when it threatened last week not to repay the IMF a 3,1 billion US dollars credit, and finally cancelled the operation at last minute.

However Ms. Krueger anticipated that the second review of Argentina's agreement with the IMF will be approved next week by the Board of Directors, although as happened with the first review some significant countries will be abstaining from the vote. Such was the position of Italy, Britain and Japan last January.

Regarding the Kirchner administration argument that if the primary surplus is increased in 2005 and 2006 to help repay creditors, the economic expansion of Argentina will be imperilled, Ms. Krueger openly disagreed.

"For the moment Argentina's economic growth is a rebound from the lowest point of the recent financial crisis (estimated at the end of 2001). Nobody knows how long the country can go on without addressing structural problems, I don't know, the Argentine government doesn't know. But in the near future Argentina will need fresh investments and for that they need access to international money markets, this means they have to reach an agreement with creditors, and the sooner the better".

Ms. Krueger described the 3% primary surplus agreed between Argentina and the IMF for 2004, "as the minimum possible".

According to the Buenos Aires press the Argentine government anticipates that the third and fourth review which should be approved in the second half of 2004 will open another strong confrontation with the IMF regarding the primary surplus which Argentina wants at a minimum and the IMF well above this year's 3%.

The strongest frictions between the IMF and Argentina arise from the 81 billion US dollars in sovereign bonds which the current government has offered to repay with a face value cut of 75%, openly rejected by bondholders.

Both the IMF and the group of most industrialized countries, G-7, have repeatedly insisted that Argentina act constructively and improve its offer to private bondholders.

In the coming weeks Argentina is scheduled to present its complete restructuring offer to private bondholders, but has anticipated it will not move from the original 75% face value cut.