[stop-imf] Argentina's Agreement with IMF

[Robert Weissman]

Argentine Leader Extols Benefits of a New IMF Deal

By Jon Jeter
Washington Post Foreign Service
Friday, September 12, 2003; Page A21

BUENOS AIRES, Sept. 11 -- President Nestor Kirchner today
heralded the benefits of Argentina's new three-year
agreement with the International Monetary Fund and other
lenders that reschedules payment on debt of nearly $21
billion.


"It's a good deal," Kirchner told reporters today,
discussing the accord announced late Wednesday, "but not a
panacea."

The pact is widely considered a political victory for
Kirchner, whose four-month-old administration has adopted
a defiant stance toward the IMF and blamed lenders'
policies for much of Argentina's financial problems.

The restructuring is the first long-term accord between
Argentina and the IMF since the country defaulted in
December 2001 on most of its $141 billion foreign debt,
the largest government default in history. Many economists
said the agreement could provide a pivotal boost to
Argentina's halting efforts to recover from its worst
financial crisis.

The agreement will not only enable Argentina to refinance
nearly $21 billion in defaulted loans owed to
international lenders such as the IMF, but also will allow
the country to reopen international lines of credit that
have been frozen for more than a year. With an IMF accord
in hand, the country can now begin to restructure more
than $90 billion in defaulted debt owed to other creditors
worldwide.

Kirchner has repeatedly said he would not sign any deal
with the IMF that would slow Argentina's economic growth.
Political analysts agree that his negotiating position was
strengthened by his overwhelming political support and an
economy that has grown faster than that of any country in
Latin America this year, even without help from the IMF or
other international lenders that have frozen Argentina's
credit.

Simultaneously, political analysts and economists said,
the IMF was in a much weaker position than usual.
Argentina is the fund's third-largest debtor, after Brazil
and Turkey. Its role in helping developing countries could
have been questioned further had it failed to reach an
agreement with Argentina.

The accord requires that Argentina maintain a budget
surplus equivalent to 3 percent of its gross domestic
product. Kirchner had insisted on a surplus of no more
than 3 percent to allow the country to invest in public
works and anti-poverty programs; the IMF had initially
proposed a 4 percent surplus.

The pact does not require Argentina to either compensate
privately owned banks that lost money following last
year's devaluation or allow private utility companies to
increase rates frozen for more than a year. The IMF had
initially insisted on both as a condition for extending
credit to Argentina.

"This really does show that the IMF needed this agreement
more than Argentina did," said Alan Cibils, a Buenos
Aires-based economist for the Center for Economic and
Policy Research in Washington. "Kirchner really got
everything he wanted. If Argentina didn't reach an
agreement, how much worse could things get? The worst has
already happened. But for the IMF, failing to reach an
agreement leaves them exposed financially, but also calls
into question the whole basis of their power."

The agreement came only a day after the government
defaulted on a $3 billion loan payment to the IMF, the
largest missed payment in the fund's history.