[stop-imf] 9/15/01: IMF says its policies will help Argentina

[Robert Weissman]

A note from our friend Tony Avirgan of the Economics Policy Institute:

>From the Los Angeles Times last Sept. What would the IMF say today!!

IMF Loan Agreement Good for Argentina

A Letter to the Editor
By Thomas C. Dawson
Director, External Relations Department
International Monetary Fund

Los Angeles Times
September 15, 2001

We differ strongly with Mr. Weisbrot's characterization of Argentina's
latest loan agreement with the IMF as "helping Argentina dig itself into a
deeper hole"("Community `Helpers' Such as IMF Make a Junkie of Argentina,"
Sept. 5). It is his prescription of default and devaluation that would see
Argentina digging itself deeper.

Yes, there are risks in the new program, but Argentina's recipe for reform
is the right one, well deserving of strong international support. And the
new agreement has already begun to restore confidence domestically. In
recent days, Argentine depositors have not only stopped withdrawing money
from the banks but begun to return money to the financial system.

Mr. Weisbrot is wrong for a number of reasons. First, Argentina's currency
board enjoys widespread support in the country. And given Argentina's highly
dollarized economy-most debts of firms and households are denominated in
dollars-a devaluation would have a devastating impact on companies' balance
sheets, with a likelihood of large-scale bankruptcies and unemployment.

Second, Argentina has no option to a zero-deficit policy because of its loss
of access to financial markets. This reality would hold even if there
were a
devaluation or an involuntary debt restructuring: in fact, experience shows
that the latter would result in loss of access for several years. With no
inflows, there can be no deficit.

Third, the government is taking steps to protect the poor from the worst of
the adjustment, by safeguarding key social programs, strengthening the
social safety net, and limiting cuts in wages and pensions.

Argentina's program-as crafted by Argentina and not the IMF-will build on
the country's very good record of economic transformation over the last
decade. As Finance Minister Domingo Cavallo recently said, under a
zero-deficit rule, Argentina "will be able to adjust more easily to external
shocks without continuously having to shift the burden on to the productive
and efficient private sector."

IMF EXTERNAL RELATIONS DEPARTMENT
Public Affairs: 202-623-7300 - Fax: 202-623-6278
Media Relations: 202-623-7100 - Fax: 202-623-6772



--
Tony Avirgan
Global Policy Coordinator
Economic Policy Institute
1660 L Street, NW, Suite 1200
Washington, DC 20036
Phone: 202/533 2555
Fax: 202/775 0819
Home: 301/585 6484
www.epinet.org
www.gpn.org