[stop-imf] Argentina reaches deal with IMF

[Robert Weissman]

Date: Thu, 11 Sep 2003 11:20:55 -0400
From: Todd Tucker <todd@americasdemocracy.org>

These two articles are about the recent Argentine default to the IMF, and
then the subsequent agreement this morning.

______________________
Note from Alan Cibils, CEPR Argentina

"The bottom line is that the agreement was signed, basically all of
Kirchners "non-negotiable" demands were in there, which gives you a pretty
clear idea of how much the Fund really needed this agreement. It will be
interesting to see what the fallout of this is inside the IMF.

Basic points:
* primary surplus of 3% for 2004, nothing specific set for 2005 and 2006
(when important capital payments on new debt are due). Even though this is
presented as a victory, 3% primary surplus is very high, and much higher
than anything ARgentina achieved in recent decades (even before SS
privatization), according to newspaper reports. I haven't done the math for
this personally, though I hope to look into it after the move.
* No schedule for utility rate hikes as IMF wanted.
* Nothing on bank compensation for injunctions as the IMF wanted.
* Nothing on starting capital payments on debt to IMF.

There is a bunch of stuff on tax reform and provincial funding, some of it
immediate, other longer term, but I will have to wait until the
agreement is
published on the web site to see what all this is.

Kirchner is presenting this as a political victory, and indeed I think it
is. I don't think the agreement benefits Argentina (more than an outright
default to the IFIs would), but politically Kirchner does appear to have got
the upper hand."

_____________________________
Argentina Reaches
New Deal With IMF
By MICHAEL J. CASEY and ELIZABETH PRICE
DOW JONES NEWSWIRES

BUENOS AIRES -- Less than 24 hours after declaring the biggest default in
the International Monetary Fund's 58-year history, Argentina reached a new,
three-year financing accord with the multilateral lender.

In outlining the terms of the deal late Wednesday night, President Nestor
Kirchner indicated that he got much of what he had bargained for in tough
negotiations. The accord, he said, would allow Argentina to refinance $21
billion in coming payments to multilateral lenders, including the World Bank
and the Inter-American Development Bank. The IMF portion amounts to $12.4
billion. Mr. Kirchner said Argentina would make interest payments of $2.1
billion over the three-year period.

Left unclear was whether Argentina would make some payments to the Fund
during the early years of the accord, as proposed by the IMF late
Tuesday as
a concession for dropping some of its own demands. What is clear is that
those demands have been dropped. The accord doesn't require Argentina to set
a timetable for raising utility rates, Mr. Kirchner said, or commit to
provide fresh compensation to banks hurt by last year's financial crisis.
And while the accord targets a fiscal surplus of 3% of gross domestic
product in 2004 -- as Argentina had sought -- the two latter years' targets
are open to negotiation.

These items were among the sticking points that had prevented an accord from
being reached by Tuesday, prompting Mr. Kirchner to carry out a threat to
default on a $2.9 billion payment to the Fund.

The agreement now needs approval by the IMF Executive Board, something
Economy Minister Roberto Lavagna described as a "formality."

IMF Managing Director Horst Koehler said he would recommend approval of a
$12.5 billion credit program for Argentina over the next three years as soon
as the government clears its arrears with the Fund.

Write to Michael J. Casey at michael.j.casey@dowjones.com2 and Elizabeth
Price at elizabeth.price@dowjones.com3
	URL for this article:
http://online.wsj.com/article/0,,SB106323918215207800,00.html

_______________________________________________
The New York Times
September 10, 2003, Wednesday, Late Edition - Final

Argentina Defaults on $3 Billion I.M.F.Debt
By TONY SMITH


Defiantly refusing to make concessions to seal a three-year aid package from
the International Monetary Fund, Argentina today defaulted on a $3 billion
loan payment to the fund rather than dipping into its scant foreign reserves
to pay the debt.

An Argentine official confirmed there had been no payment of the debt
installment after the government had waited in vain all afternoon for a
signal from the fund that it had more or less approved a broad three-year
aid package that would allow $12.5 billion in multilateral debt to be rolled
over.

  At a news conference, Alberto Fernandez, President Nestor Kirchner's
cabinet chief, refused to confirm whether Argentina was now in technical
default with the fund. He merely said negotiating teams were still working
to conclude a "sustainable and socially acceptable" agreement.

Earlier in the day, Mr. Fernandez said Argentina would not use its $13
billion currency reserves to pay the I.M.F.

"We are not going to pay with reserves because, objectively, we are not in
an position to do so," he told Buenos Aires Radio Continental.

The talks between the recession-battered country and the I.M.F. have stalled
on several issues.

Argentina is digging in its heels against I.M.F. demands that banks and
utilities, hard hit by last year's devaluation of the peso, be compensated.
It has also locked horns with fund negotiators, who would like to see the
country run a primary budget surplus of 3.5 percent of gross domestic
product or more.

The left-leaning government would prefer to spend any excess cash on helping
to bolster the economy, which shrank 11 percent last year and is
expected to
grow by more than 6 percent this year.

By refusing to pay, Argentina joins other defaulters, including Liberia,
Somalia, Sudan and Zimbabwe.

That, however, seems to matter little to Argentine leaders. Speaking in
Buenos Aires today, Mr. Kirchner suggested Argentina's economy did not need
I.M.F. support at all costs. "Don't let them come and scare us with threats
of chaos and the seven plagues," he said. "We Argentines must believe in
ourselves."

Over the weekend, Mr. Kirchner rejected outright the I.M.F.'s demands that
banks should be compensated for losses incurred in the debt default in late
2001 and that utilities be allowed to increase prices, frozen since last
year's devaluation. He said the fund had no reason to be lobbying for
particular business groups.

"During the last 10 years, some I.M.F. staff gave very bad advice to
Argentina," he said.

Argentina has been emboldened in its "can't pay, won't pay" approach by the
fact that its economy has started to rebound from four years of recession
largely without I.M.F. assistance.

Although the fund has helped the country, South America's No. 2 economy,
roll over debt owed to multilateral organizations like itself, the World
Bank and the Inter-American Development Bank, it cut off any new assistance
after Argentina defaulted on $90 billion of its privately held debt in
January 2002.

"I think Kirchner wants an agreement, but one that will allow him to say
this is not a totally shameful agreement," said Alan Cibils, a Buenos Aires
economist and research associate for the Washington-based Center for
Economic and Policy Research. "And at this moment, the I.M.F. needs this
agreement just as much as Argentina does."

Argentina is one of the fund's biggest creditors, and an all-out default by
the country could shake the fund's triple-A credit rating. That, in turn,
would make borrowing for other developing nations more expensive.

Many analysts, however, point out that under I.M.F. procedures, it would
take two months for Argentina to be officially declared in arrears and in
that time a deal would probably be hammered out.