Former Spanish Economy Minister Rodrgio de Rato has just completed six months as Managing Director of the International Monetary Fund, one of the main multilateral instruments for world financial stability created in 1944 in Bretton Woods, towards the end of World War II by the victorious allies.
Mr. Rato moved into the IMF chair last June at a relatively calm period of the world economy, --compared to the turbulent mid nineties--, although there are some storm clouds gathering in the horizon mainly linked to the "twin deficits" of United States and the weakening US dollar.
The world economy is currently growing at a fast pace and will reach a 5% expansion in 2004, and 4,3% next year according to IMF forecasts.
The dynamism of the Chinese, Indian and US economies, plus some speculation, has helped oil prices soar to new highs, threatening the current pace of world expansion even when there has been a significant retraction in the last weeks.
IMF has recommended Central Banks to keep close track of inflationary pressures as a direct consequence of oil prices and has requested prudence from OPEC countries.
But the fact is that record oil prices (55 US dollars pb) have not caused crisis such as those of the seventies and eighties, helping Mr. Rato to sit with certain relief in his Washington office.
So far the energy prices boom has had "a positive but modest" impact in the world economy, points out Michael Mussa a former IMF economist. "IMF's importance comes from managing crisis and there hasn't been any crisis. Mr. Rato has yet to be tested", added Mr. Mussa.
However a situation that could sound the alarm is the drastic drop of the US dollar that has lost more than 15% of its value against the currencies of its main trade partners, even when the depreciation has been gradual.
The main reason behind the weak dollar performance is basically the awesome US "twin deficits", current account deficit equivalent to 5,5% of GDP and the federal budget deficit which stands at 3,6% of GDP.
Mr. Rato has requested the US to take action in reducing the "twin" deficits which so far have been financed by the massive purchase of US dollars by the Asian Central Banks, particularly China fearing an appreciation of their currencies and problems with exports.
IMF and the President Bush administration have repeatedly requested China float its currency, the Yuan which is pegged to the US dollar, but so far Beijing has been cautious fearing the over exposure of much of its banking system and indebted government companies.
Argentina is another headache for Mr. Rato and IMF.
The country defaulted at the end of 2001 in the middle of one of the worst recessions in recent history and although it began a dramatic recovery in mid 2003, relations with the IMF are strained and particularly complicated with private holders of Argentine sovereign bonds.
"Obviously Argentina and the IMF have a difficult relation. This has been the most disputed case since Mr. Rato became Managing Director and it's still too soon to see the results", said Fred Bergsten , head of the International Economy Institute.
Argentine president Nestor Kirchner administration supported the nomination of Mr. Rato and was relieved when he took over from acting Managing Director and number two in the IMF Anne Krueger who has always favoured a "hard line" to address the "Argentine problem".
But even with Mr. Rato relations are not easy: last August Argentina requested the suspension of the September 2003 stand by agreement so it can fully address the defaulted private sector debt which with capital and interest totals almost 100 billion US dollars.
The bond exchange with private holders is forecasted for next January 17, and following that a new round of negotiations with the IMF begins when Argentina is expected to begin applying a package of reforms originally agreed in 2003.