MercoPress. South Atlantic News Agency

IMF and Argentina soothe relations.

The International Monetary Fund, IMF, will contemplate Argentina enabling the delay of a billion US dollars payment that are due next December, reported the Buenos Aires press this Monday.

Apparently Mr. Rodrigo Rato, IMF Director General will make the announcement when he stops in Argentina next week during a visit to several Mercosur members with the purpose of easing the "tension climate" following the suspension of negotiations between IMF and Argentina.

However IMF will request the President Nestor Kirchner administration to cancel with international reserves another 1,5 billion US dollars which have to be repaid between September and December.

According to the Buenos Aires press the IMF does not want to strain relations with Economy Minister Roberto Lavagna or his negotiation strategy, after the multilateral organization did not approve the third review of the long term agreement.

This basically means that Argentina will be canceling standing debt with the IMF with its own resources, in spite of the Argentine default dating back to December 2001.

The IMF insists with several structural reforms originally agreed with Argentina but which are still pending in Congress.

Argentina argues that all other technical requirements have been met and in some cases overshot, such as the budget primary surplus. July figures indicate that in seven months Argentina has managed a primary surplus of 13,497 billion pesos, well above the 10,800 billion twelve months target.

Last week President Kirchner forecasted the Argentine economy would expand between 5 and 6% in 2004. His statement followed fears about a growth setback in the second quarter of this year, which President Kirchner and Minister Lavagna blamed on the energy crisis of last April, May and June. "This is exclusively because of the energy crisis", said Mr. Lavagna.

In the second quarter of this year the Argentine economy actually receded 1,9% after eight consecutive quarters. In 2003 Argentina expanded 8,7% after collapsing 10,9% in 2002 because of the financial melting and default. Next year the forecast is between 4 and 5%.