Bush Commends Argentina on IMF Loans
By THE ASSOCIATED PRESS
Filed at 10:33 a.m. ET
WASHINGTON (AP) -- President Bush congratulated Argentine President Eduardo Duhalde on Friday on an agreement with the International Monetary Fund that will provide $6.78 billion in new loans to help deal with the worst financial crisis in Argentina's history.
In his telephone call Bush stressed that successful implementation of an IMF-approved economic reform program would build on the success Duhalde's government has achieved in stabilizing the economic situation in South America's second largest economy, White House spokesman Ari Fleischer told reporters.
The IMF announced last week that it was providing Argentina with the new loans, ending an arduous 11 month negotiating process in which Duhalde at one point complained that the IMF was demanding too much in terms of economic reforms.
However, in his first public comments on the new loan package, Duhalde on Tuesday called the loan agreement favorable and fair. Argentina must meet a series of monthly economic goals through June, such as keeping its currency stable, controlling government spending and maintaining adequate international reserves.
If Argentina meets the economic targets it will receive $2.98 billion in fresh funding and another $3.80 billion in loans coming due to the IMF through Aug. 31 will be rolled over.
The new agreement is expected to provide a financial cushion to allow Argentina to elect a successor to Duhalde in April and for the new government to take over in May.
Ecuador secures preliminary IMF deal
Nicholas Moss in Quito
Ecuador on Friday reached a preliminary agreement with the International Monetary Fund for a $200m stand-by loan accord that will help plug a $2.1bn fiscal hole and avert the risk of a debt default.
"We've reached a preliminary deal with the Fund after 15 or 16 days of government. That's a national record," said president Lucio Gutierrez, who was sworn into office January 15.
"The new Ecuadorean government has been very courageous in its first few days by quickly taking measures to address the difficult fiscal situation and has developed a comprehensive program of far-reaching structural reforms," the Fund's Quito office said in a statement.
The letter of intent will need to be presented to the Fund board in Washington for approval, with the disbursement of an initial $40m. "This is the big move. Usually the rest is no major obstacle, rather just a bureaucratic process. I'd expect to see the deal signed by the board in mid-March," said Jan Dehn, analyst with CSFB in New York.
It will pave the way for an additional $300m of multilateral financing, that will be taken into consideration in the $6.7bn budget which finance minister Mauricio Pozo was expected to present to Congress Friday afternoon.
Prices for Ecuador's bonds rallied after the announcement of a deal. The IMF financing and fiscal cuts should avert a default this year, said analysts. Ecuador will receive four additional tranches of $40m each through March 2004 assuming the government can enact three sets of legislation.
First off Mr Gutierrez is expected to submit legislation to Congress that would overhaul the administration of the Andean nation's customs and ports, and far more closely involve the SRI tax agency in monitoring the flow of goods.
Mr Gutierrez is then expected to push for a civil service reform, which will improve transparency in the structuring of wages, and "is aimed at moderately lowering the nominal wage bill in 2004, helping make the economy more sustainable," said a source close to the negotiations. A 40 per cent increase on public sector wages last year exacerbated the government's financing problems.
Finally, Mr Gutierrez will have to present a comprehensive bill of tax reforms, which will eliminate many of the pre-assignments in budgetary spending. It is likely to raise most opposition from legislators. Mr Pozo said he wanted to extend the 13-month deal through 2004, to guarantee IMF assistance and fiscal discipline once oil revenues from the $1.3bn private OCP 450,000 barrel per day pipeline start feeding through.
Last week Mr Pozo announced an austerity package aimed at producing $600m in savings from a combination of fuel price hikes, wage freezes and tax reforms. His predecessors in the government of former president Gustavo Noboa had been chasing a Fund deal for more than a year.