Uruguay and the IMF

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UruguayLetter of Intent

Montevideo, Uruguay
February 24, 2003

The following item is a Letter of Intent of the government of Uruguay, which describes the policies that Uruguay intends to implement in the context of its request for financial support from the IMF. The document, which is the property of Uruguay, is being made available on the IMF website by agreement with the member as a service to users of the IMF website.

Mr. Horst Köhler
Managing Director
International Monetary Fund
Washington, D.C. 20431

Dear Mr. Köhler:

This supplement to our Letter of Intent dated February 24, 2003 is to inform you that the Government of Uruguay is preparing a comprehensive debt exchange program. This operation is an important element of our economic program which is designed to restore sustained economic growth, stable public finances, and a strong external position.

To this end, the Government of Uruguay has filed the relevant securities documentation with the U.S. Securities and Exchange Commission in order to initiate consultations with the private sector creditor community. We intend to launch exchange offers in early April 2003 and expect to complete the debt exchange by early May 2003. The key objectives of the operation are to: (i) provide sufficient cash flow relief in order to fully eliminate any residual financing needs during 2003-05; and (ii) achieve a sustainable debt and debt service profile over the medium term, under the economic assumptions contemplated in the Letter of Intent. We understand that achieving the above-defined key objectives is a condition for the completion of the third review under the stand-by arrangement.

Together with the targeted improvement in the primary surplus close to 4 percent of GDP over the medium term, the debt-to-GDP ratio is projected to decline to a manageable level of less than 55 percent by 2012 under the assumptions contemplated in the program. In turn, the improvement in the profile of the debt service and clear prospects for medium-term debt sustainability should enable a gradual return to market access, strengthen investor confidence, and support a durable recovery of growth.

As noted, we are consulting our private creditor community in designing the details of the exchange. On a preliminary basis, we expect the operation to have the following broad features: (1) the exchange offer will include almost all outstanding government securities denominated in foreign currencies having an original term of more than 12 months; (2) assure, as far as possible, the equal treatment among creditors; (3) the exchange will maintain the original currency of the old bonds and will extend maturities compared with the old bonds; and (4) participation in the exchange will be voluntary. Nevertheless, to ensure the financing of our program and medium-term cash-flow relief, we are aiming for a high level of participation by creditors in the exchange.

While we believe that we will be able to implement this debt exchange, the government stands ready to take, in consultation with the Fund, any additional measures that may be necessary to ensure successful implementation of the program.

Sincerely yours,


Julio de Brun
Central Bank of Uruguay

Alejandro Atchugarry
Minister of Economy and Finance
Republic of Uruguay