[stop-imf] Kohler news conference

[Robert Weissman]

IMF Managing Director Kohler reveals that: 1) he's had lots of meetings;
2) he's a convert to the importance of dialogue; 3) he's not budging on
the importance of economic reform (read structural adjustment); 4) he's
establishing an internal committee to review the role of the IMF; and 5)
he's hopeful that protests in Argentina against the IMF can be controlled.

On Argentina, he offered the following:

MR. KOHLER: First, I would like to answer that I was quite impressed that
the President of Argentina strongly told me that it is his government's
program and not an imposition of the IMF. So I took note of that and of
course I was pleased with that because it is my own understanding. And I
will look how it is implemented, that whatever we do, from here, from the
IMF, the ownership of programs and reforms is very, very important. That
there is ownership is more important than a short-term effect of maybe a
number, a specific number, in a program of the IMF.

The full text follows below. The whole thing is posted at:
<http://www.imf.org/external/np/tr/2000/tr000525.htm>

Robert Weissman
Essential Information			|   Internet:	rob@essential.org


Press Briefing 
by
IMF Managing Director Horst Khler
Thursday, May 25, 2000
Washington, D.C.


Mr. Khler and Mr. Dawson
THOMAS DAWSON, DIRECTOR OF IMF EXTERNAL RELATIONS DEPARTMENT: With us this
morning is the Managing Director of the IMF, Mr. Horst Khler. As is our
normal practice, we will embargo the press conference until 15 minutes
after conclusion. Mr. Khler will have some introductory comments and
reflections, and then we will take questions. Thank you.
MR. KHLER: Good morning, ladies and gentlemen. I thought I should meet
with you, not in a very prepared manner or with a statement, but really
reporting a bit out from the workshop of the IMF. The IMF has a lot of
construction sites, and I am meeting you within this process. So for three
weeks now I have been in the Fund. I am very impressed with--or more
impressed than ever with the quality and commitment of staff, my
management colleagues, and the board. 
Yesterday we had a full day's discussion about the work program of the
IMF, and I think this will also be published if it's finalized. We agreed
in the board that we will organize our work for the next weeks and month,
in what I call a double track process. And one track is that we will work
on the homework which was given to us at the spring meetings. And you know
all these items: there is the review of facilities, standards and codes,
transparency, the HIPC Initiative.
On the other hand, I want also to put these work items into a broader
picture -- what I call a vision about the future of the Fund. And for this
purpose, this second track, we have organized a special working group
which is concentrating on that.
My personal priority in these first weeks is, as you know, listening and
getting input, because I have not come here telling people I know
everything and everything better. I have some ideas, I have my ideas, but
I do think it is very important, in order to get a better understanding
for the reform discussion, and not to miss important things, to listen
very carefully, to have talks, and build up a dialogue.
And the first element of this listening, building up input process, is
that I talk very intensively with staff. I have been meeting individually
with every executive director of our member states. And as you know, I
came back from a tour to Latin America just last week, where I met with
the leaders and economic teams of Mexico, Brazil, Argentina, and Honduras.
I also took the opportunity there to meet with the private sector business
people. I had, for instance, a lunch meeting in Honduras with
representatives of all parts of society-- farmers, women, NGOs, and so on.
So that is the listening to Latin America.
I will, next week on Tuesday, start my tour in Asia. In Asia I will meet
with leaders and people from the financial sector of Thailand, Korea,
Indonesia, India, and China. And coming back from this tour I will have a
meeting in New York with--and that is the second element of my listening
tour and taking input--I will meet with representatives of private capital
markets.
And we will, hopefully, timely enough before the Annual Meetings in
Prague, organize here in the Fund a meeting, as part of an already ongoing
discussion, with representatives of civil society in order to show that we
are prepared to have a dialogue with civil society and the NGOs. These are
my personal priorities in these first weeks.
Now then I would like to give you a short report on what I have heard,
what impressed me, in Latin America. First, it impressed me most how
clearly and how dedicated the leaders, presidents, the ministers of
finance, central bank governors, and also business people--and I include
in this even the trade unions, whom I met in Argentina--are committed to
continue on a process of being democratic, and to organize their economies
on a market-oriented basis. I was really impressed how clearly this came
out of these talks, how far these major countries in Latin America have
gone toward democracy and the market economy.
I was even impressed by the leaders, that they mentioned and made me
aware, for instance, of the dialogue with the civil society. They
encouraged me to build up this dialogue, but they also told me that they
have some concern that this dialogue should not undermine the legitimacy
of democratically elected and established institutions. So one very good
result of this, at least what impressed me, is the clear firmness of these
leaders to stick to democracy and market-oriented economic policies.
Secondly, based on that, I was also very much impressed with how prepared
they are to continue with a clear agenda for reform policies. The sequence
was Brazil, Argentina - then I met shortly with the Central Bank governor
of Chile in Santiago, Chile - and then Honduras and Mexico. This was the
sequence of the visits. All of them told me they will stay on track with
their economic policies which they have been pursuing the last years.
And as you know, this has already paid off for Mexico, which has very
strong growth performance. It seems clearly to be paying off for Brazil,
which shows that the recovery is gaining strength. It also demonstrates
success in Argentina, but the Argentina economy is not recovering so
strongly. Honduras, as you know, was very much damaged by Hurricane Mitch.
There is, I think, a good chance that in this very poor, very small
country, there is a spirit, a new spirit--that they have detected that the
community, say, the self-effort of the country, of the people, is the most
important thing to get out of the mess. So they stay on track.
I discussed very carefully the situation in Argentina. As you know, there
have been demonstrations, particularly in the north. I had a very good
talk, a very serious talk with the trade unions, the leaders of the trade
unions. And of course, the main focus in the discussion with the trade
unions was the social problems, the social tensions in Argentina. And I
made clear that the market economy needs to be based also on social
consent--on a consensus about the social dimension of development. There
cannot be blindness to poverty and social problems. And that was also the
understanding of the president and the government. So I hope that despite
the difficulties and the sacrifices, there will be an ongoing process to
stay on track, particularly also in Argentina.
What was also important, and that is the next element of this listening
tour, is that these countries didn't ask so much for particular favors
from the IMF. They said, "We do our job, and based on that, we want to get
the support of the international community." So that was a very strong
point. They rely on themselves.
But what came out of this is that they complained strongly about an
understanding or a possible understanding in the developed countries, that
reform and structural change is a kind of one-way route, that only the
emerging countries have to do reforms or have to change. I agreed with
them that in order to make growth in the world economies stronger and
steadier, there has to be a strong reform process and structural change,
particularly also in the developed or industrial countries, the mature or
rich countries. For instance, the euro, the weak euro was a point of
concern, in Argentina particularly, but also in Brazil and in Mexico. And
the request to open markets more rapidly for these countries was a
constant, permanent, repeated demand of these leaders.
And I do think that in the dialogue in fora like the IMF and other fora,
there is an understanding that to gain stronger and steadier world
economic growth means that structural change and reform policy are not
just in the emerging countries or the transition countries, but that there
be a parallel process in the developed countries. This has to get more
attention in the political debate in order to fight poverty and to reduce
the frequency and the severity of crisis.
Thank you very much.
MR. DAWSON: Now, we'll take questions. Please identify yourself and your
organization. Thank you.
QUESTIONER: You mentioned that you heard concerns about the weak euro.
What kind of structural changes are needed in order to rescue the euro?
MR. KHLER: Well, this has first to be defined country by country in
Europe, but the main direction is quite clear. There is a need
particularly for the big countries in Europe to reform their social
security systems, their tax systems, and particularly also their labor
markets, which must have more flexibility. This is the core direction of
reform needs in Europe. And of course, I have just reported that in the
Latin American countries I visited, in the big countries, there was a
question about the sustainability of the agricultural policy in the EU.
QUESTIONER: I'm sorry. Those kind of changes obviously would take a long
time. Is there something you really think needs to be done sooner in order
to help out with the euro?
MR. KHLER: Reforms take time, and often I do think we should have this
also in mind when we are going to give advice to transition countries or
to emerging countries. But this is not in contradiction to short-term
effects of the policy. This means that if the direction is clear, if the
commitment is clearly demonstrated, I do think that will also have a
short-term impact on the euro.
QUESTION: I understand your concern about the social explosions and
manifestations that were in Argentina. My question is how can Argentina,
at the same time that it adjusts and reduces the deficit - which are
needed to comply with the IMF - face those broad social problems?
Apparently there is not enough room to pay that, and at the same time to
pay what they call the social debt.
MR. KHLER: First, I would like to answer that I was quite impressed that
the President of Argentina strongly told me that it is his government's
program and not an imposition of the IMF. So I took note of that and of
course I was pleased with that because it is my own understanding. And I
will look how it is implemented, that whatever we do, from here, from the
IMF, the ownership of programs and reforms is very, very important. That
there is ownership is more important than a short-term effect of maybe a
number, a specific number, in a program of the IMF.
I cannot overlook that Argentina has to take very tough choices, because
indeed, you cannot spend a dollar or a peso or a deutsche mark, at the
same time for everything. You have to decide to spend it for investment or
consumption, and there is a need in these emerging countries to have a
priority for investment. But when I met with the trade unions, I had the
feeling that this basic principle is understood, or that there is a chance
that it can be explained and at the end will be understood. And therefore,
I am not pessimistic that these tough choices at the end will be taking
the right direction and will pay off for the people, because the people
will see if we spend more for investment, we cannot spend more for
consumption.
The debt issue is a difficult thing, particularly for the poorest
countries, and therefore, the international community has to tackle this
issue. There is the issue of the HIPC Initiative, which I too think is
right, which has to be made a success. 
The most important way to deal with debt with regard to countries like
Argentina, which is not one of the poorest--it's an emerging country--is
to strengthen growth. On this basis the country should be able to find a
solution for its debt.
QUESTIONER: You gave a fairly comprehensive agenda of who you were going
to talk to. You didn't mention anyone in the US Congress. Are you planning
to go up to Capitol Hill to present yourself, and to go into the lions
den?
MR. KHLER: Well, of course, but before I come to the US Congress, I should
tell you that I met with members of the congress, for instance, in
Honduras, at this already-mentioned luncheon. And we had a very
interesting discussion. As you know, Honduras is a HIPC country. They are
in the process of getting to the so-called decision point, and in order to
get to the decision point, in order to get the debt relief, they have to
take prior actions. And one of the items the IMF had suggested in order to
take prior actions, is reform of the social security system. A second
thing is to approve a framework law for the energy sector, particularly
for the electricity sector. The reform of the social security is well
under way, but the law for the energy and electricity sector is a bit
stalled because--and that is the point--the people from congress told me
time is too short to understand the full impact of this law. And I said
that certainly the IMF will not press for approval by congress in two
weeks times. It is too important that congress, which is the most
important institution in a democracy, have the full understanding of what
the law means, what it requests, what the impact of the law will be.
And therefore we agreed--or I agreed on a personal basis, because the HIPC
Initiative it not something which is just decided by the IMF. As you know,
it's a common effort of the World Bank, the IMF, of bilateral donors. I
said on a personal basis I would agree that the IMF is not requesting that
this law be decided now by congress in two weeks time. We are flexible in
process, but we are firm in substance, so that the issue of, for instance,
raising tariffs, electricity tariffs, in the medium term is not forgotten.
And based on that, I do think that we will get a good conclusion in
Honduras.
Now to the US Congress, but you will have realized that it was important
for me to elaborate first on the congress of a small and poor country
before I come to the congress of a big and rich country. But, of course, I
do think I will take up a dialogue with the US Congress. And I am in the
process of organizing appointments, and I am quite confident that it will
be a very constructive dialogue.
QUESTION: You, no doubt, have heard of the Meltzer Commission report on
reforming the IMF. Professor Meltzer testified before the Senate Foreign
Relations Committee the day before yesterday, and one of the senators
asked him whether the IMF had formally responded to the Commission's
report, and he said, "No." So my first question is: will the IMF formally
respond to the Meltzer Commission report? And my second question is: do
you have any intention to meet with Professor Meltzer or other members of
the commission as part of your listening process?
MR. KHLER: That is absolutely clear, I will meet with Professor Meltzer. I
have already told him so in a letter when I answered him, because he
congratulated me on my appointment as Managing Director. So this is in
process.
But as far as I know, the Acting Managing Director, Stan Fischer, has
testified to the Congress Committee in the debate about the Meltzer
report.
MR. DAWSON: And I might add, Mr. Fischer has appeared with Professor
Meltzer as recently as last week, and the actual formality of the
commission is that the US Treasury, to whom it was in part directed, is
preparing a response. So this is a process that's going on.
QUESTION: Going back to the question of Argentina, you mentioned that
growth is the answer to this problem of debt. The problem in Argentina in
terms of the debt is that you have basically $10 billion in interest
service--on service every year. And you have the problem of growth and
trying to answer to the social problems that my colleague mentioned. Some
people on Wall Street told me that the IMF is partly responsible in
Argentina, because [inaudible]. So the only way for Argentina to really
come back to growth is to have an important restructuring of the debt.
What is your view on this?
MR. KHLER: I will not go into details about restructuring, rescheduling,
or otherwise of the Argentine debt. That is Argentina and the debtors'
issue. But I want to be clear that I do think a major point for dealing
with this issue is to keep the confidence Argentina has built up in the
last years with regard to private capital markets, to the international
community. And the Fund is prepared to play a role in this ongoing
confidence-building process. That's my answer to this, because I don't
want to go into details. I am sure that this country has the potential to
prove that it is a reliable partner, and also that it --even more
importantly--has the potential and the commitment to achieve a very strong
growth path.
QUESTION: Mr. KHLER, you just mentioned this working group that supposedly
is working on the vision thing. Could you elaborate on this working group?
Who is it actually made up of? Are they only people from the Fund or
external experts as well?
MR. KHLER: When I came here, I discussed a bit with Tom how far I should
go with information at this stage of the discussion, and I said, "When we
are going to say exactly who is a member of this group and what's the
process, then we are raising expectations, and a variety of questions."
We are in mid-process of organizing that. The core of this group is some
heads of departments here at the Fund. And of course, we will also try to
get some external advice, but give us a bit more time to organize it more
carefully.
MR. DAWSON: And you are personally chairing it.
MR. KHLER: Yes, I am chairing it, but it involves the full management
team. Let me answer this way. It should be big enough to have the full
range and expertise that are necessary, but small enough to be practical.
QUESTION: Going back to Mexico, sir, as you know, the Mexican
economy--well, had a really great performance in the first months of this
year, growing at more than 7 percent. Beside that good performance, there
are some people in Mexico that say that maybe by the end of the year the
Mexican economy will have some sort of over-heating. I was wondering, now
that you have been in Mexico, did you see any signal of this risk? What
would be your assessment after your visit to Mexico?
MR. KHLER: Well, I think that the Central Bank of Mexico was right when it
took the decision to raise its interest rates. But I personally would also
not like to comment on whether it is now overheated or is it just strong
growth. It is very, very strong growth, and it seems to me it's better, --
a bit of kidding or a joke--it's better to talk about over-heating, than
to talk about recession.
I think the fundamentals of the Mexican economy have improved remarkably,
and therefore, there is the potential for steady growth. With some
vigilance, which has been demonstrated by the decision of the Central
Bank, it should be possible to hold up strong growth for some period of
time in Mexico.
MR. DAWSON: Two more questions.
QUESTIONER: Mr. Khler, what has been the greatest surprise to you of your
first three weeks at the IMF?
MR. KHLER: Greatest surprise? Not a surprise, but something where I
realized it's really clear. The menu card of the IMF is totally French.
[Laughter.]
MR. DAWSON: I wish that had been the last question, but I promised one
more.
MR. KHLER: But I like really, the--I like it really.
[Laughter.]
QUESTION: So when are you going to Africa, and to what countries will you
go?
MR. KHLER: It's in the planning, it's in the process. I would have liked
--to be quite honest-- after Latin America to go to Africa, rather than to
Asia, because I had been in Asia before I came to the Fund, but it takes a
bit longer to organize the Africa trip. So I will come back, I think, from
Asia on the 7th of June or so. And it's now in the planning that I will go
to Africa the 10th of July for one week. And I certainly will meet
with--it's my idea and it's not yet totally decided--to go to South Africa
and Nigeria. I am in the process of seeing which francophone country I
should visit, the francophone countries in Africa for this meeting. So I
will go to four or five countries, but please, it is not yet decided. And
you should also know why. I mean, it's difficult for the moment --a lot of
crises and even war. I want to have the best effect for this trip.
MR. DAWSON: Thank you very much. The embargo will be lifted at 20 minutes
after 10:00. Thank you.
[End of press briefing.]
IMF EXTERNAL RELATIONS DEPARTMENT
Telephone: 202-623-7300  Fax: 202-623-6278