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Transcript of a Press Briefing by Thomas Dawson
External Relations Department
International Monetary Fund
Wednesday, July 25, 2001
MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the IMF, and this is another in our series of regular press briefings. The briefing is under our standard ground rules, embargoed until 15 minutes after its conclusion, and we'll set a precise time when we conclude.
The Executive Board is scheduled to go into its annual recess from August 6th through August 17th, so this will be my last briefing before the Board recess. I will be taking recess myself, but I can be reached. I will only remind you of my e-mail address not of my cell phone number. But if anything urgent, I look forward to hearing from you. So it probably will be three weeks or so before our next regular briefing.
I have no prepared remarks to offer at this point, so I'd just be happy to start by taking questions. As usual, in the interest of decorum, please identify yourself and your organization.
QUESTION: Stanley Fischer will be in Turkey quite soon. Could you tell us a few words about what he will be doing there? Does this have anything to do with the Ninth Review, and do you have an idea about when the next Board meeting on Turkey will be held? And a couple of remarks on the Turkish economy, please.
MR. DAWSON: I will try to answer most, if not all of that.
Mr. Fischer will be arriving in Turkey on Friday, as I believe the Prime Minister noted this morning, for a couple of days of discussions with the public sector, and the private sector. And there will be certainly some press availability as well. Our Mr. Hawley will be there, too, so that there will be a point of contact during Mr. Fischer's visit.
As you know, there is presently a Fund mission led by Mr. Kahkonen in Turkey for the Ninth Review of the program, and Mr. Fischer's visit there is obviously related to the mission being there because it makes it much more convenient in terms of both the visit and having conversations with the authorities. We expect the mission will conclude its discussions more or less with the timing of Mr. Fischer's visit.
In terms of the next Board meeting, we anticipate a Board meeting on this Ninth Review to be held in early August, and this approval would make available additional funding.
In terms of the purpose of the visit, it is an opportunity for him to meet with the authorities with the advantage of having the mission there to discuss the progress, which we believe has been quite substantial under the program. And to have a chance to meet with various elements of the Turkish body politick, if I could call it that -- public, private, and press. So I think that's the basic line.
But as I say, we do remain -- to answer your question on the program -- we do remain quite impressed with their commitment under the program and the achievements under the program.
QUESTION: The IMF is much more open. We know that they are in negotiations at this point. So when should we expect the letter, the new letter of intent to be signed?
MR. DAWSON: Be careful of what you think you know. Despite there having been a number of stories yesterday saying that the Ministry had announced that they were coming here to negotiate a program, we've checked with the Ministry and the Ministry says they, in fact, did not make such an announcement.
There is indeed a mission here from the Brazilians that will be discussing with the Fund recent developments in Brazil under the existing program as well as options to consider as the program approaches its conclusion, which is December 1st of this year. So to describe this as a mission to negotiate a new program I think is, at the least, premature -- that is not, in fact, precisely what is going on -- and the speculation that I noted in particular in yesterday's press about amounts of a program are even more premature.
So that, yes, indeed there is a mission that will be here--I'm not sure if they're here physically at the moment, but they'll be here shortly -- to have meetings with IMF staff on the progress under the program as well as options for when the program expires. There are also a number of senior Brazilian officials who, coincidentally, happen to be in Washington this week, as well.
I know Arminio Fraga will be here for a conference, and I am certain he will be taking advantage of that visit to visit the Fund, and I believe one other of the senior officials will be here for the private sector seminar and will also be meeting with staff. And that's quite common when senior officials come for Bank or IDB conferences to come over to the Fund, but as I think Francisco noted with one of the wire services last night, this is not a mission to negotiate a program -- even though I read it in at least six or eight publications yesterday.
QUESTION: Isn't it too early -- isn't it too early to discuss options for when the program expires? It expires in December, I mean, six months from now. And it was not only newspaper that said that. Secretary O'Neill yesterday said that Brazil should receive funds from the IMF. So I think it's not only a speculation.
MR. DAWSON: No, that would still be a speculation, because the question is: `Is this a mission to negotiate the program?' That is a determination made by the authorities, the Brazilian authorities. And it's actually four months from now, as a matter of fact, and, no, that is--by no means would that be early. Indeed, we would normally have program reviews of one sort or another since Brazil does have a program with the Fund. And as I indicated at my last briefing, we are in constant contact with the Brazilian authorities given the general situation in the markets, particularly in that region.
So it is not too early. This is, in fact, something that we would hope that would take place, and this is, I think, just another demonstration of the very open and cooperative attitude from the Brazilian authorities in recent times.
QUESTION: I'm sorry. I'm a little bit confused. This is not a mission.
MR. DAWSON: No. It is a mission.
QUESTION: But it's not too early to negotiate or...
MR. DAWSON: No, that wasn't the question.
QUESTION: No, no. Isn't that what you just said?
MR. DAWSON: Is it too early...
QUESTION: I'm just confused. I'm sorry.
MR. DAWSON: What's the confusion?
QUESTION: No, it's not a mission, but, on the other hand...
MR. DAWSON: No. It is a mission. It is a mission.
QUESTION: Uh-huh. No, it's not a mission to negotiate...
MR. DAWSON: A new program.
QUESTION: A new program.
MR. DAWSON: Correct.
QUESTION: Right. But you're also saying that it's not too early to start negotiating a new program. Is that what you said?
MR. DAWSON: No, I didn't say that either.
QUESTION: Oh, no? I'm sorry.
MR. DAWSON: I said it is natural to be discussing options since the program has four months and seven or six days to go. It is natural for discussions to be taking place.
Secondly, there is, of course, an existing program, so it is also natural for discussions to be taking place.
QUESTION: So, just to be clear, it's an informal discussion to negotiate...
MR. DAWSON: No, I didn't say -- excuse me. It is a...
QUESTION: ...a new program.
MR. DAWSON: It is a mission to here to discuss current developments and options for the relationship as the program approaches its conclusion. And what it turns into is another question. But the idea that there's a mission coming here and we expect the College of Cardinals to produce white smoke and there will be an agreement and money is premature, vastly premature. It is simply not. Who knows what will happen? Things do change. But the idea that this is a mission that has come with a mandate and an expectation that they will be negotiating a program, there will be an announcement and a news brief, that is simply not the case.
QUESTION: All that being the case on Brazil, is it reasonable to assume that, given their strong performance under the program, that should they seek an extension from the Fund that they will be in a relatively strong position to have their wishes granted?
MR. DAWSON: There are some hypotheticals in that. I certainly would agree with the premise regarding the strong performance under the program and also perhaps an unstated premise about the close cooperation with the Brazilian authorities.
But the nature of this continuing support, if the Brazilians are coming up, they will, I'm sure, be presenting ideas to us. We will have ideas. Whether that is an extension, as you call it, or what other form it takes and what timing this takes in terms of how quickly an agreement would be reached or a decision made as to how to go forward we don't know at this point. Those discussions haven't taken place.
I'm not saying that everyone should go off on recess and come back in September, but the reality is this is not something that is being done in some sort of crisis sort of mode. There are tensions in the region, obviously, but this is not sort of a rush to put together a program. Of course, there is a program.
QUESTION: There's a mission in Buenos Aires now, and you said on your last briefing that the program was on track. And I think that would imply that the government has been saying that there's no fiscal problems with the targets for this period. But are you reviewing now the targets for growth for the year? Because it's clear at this point that Argentina won't be able to grow 5 percent in the last period, as it's on the letter of intent, and it would be 1 percent for the whole year. Are you going to look at it now?
MR. DAWSON: The mission is obviously reviewing performance. It is natural for the mission to look at the balance of the year targets and so on. So, I mean, those are all subjects that obviously come up in the discussion, but I don't have any report in terms of -- or any specifics for you in terms of what the conclusions of it. The mission, of course, went down the end of last week and has been working at this point just a couple days, and I don't have feedback from them. I know they are there.
QUESTION: I have a couple of questions, actually.
One, Mr. Fischer's visit to Turkey, do we have any actual date for him and to start the talks with Turkey?
Second, I believe it was Ankara's request to directly talk to Mr. Fischer. And so far we know a couple of items that they are going to discuss and lead to a revision in the program. And one which we find very, you know, important is the interest rates. And Mr. Fischer also himself stressed that a program starts it to work, and the inflation starts it to go down, but the interest rates are still up.
What are the measures that IMF can advise to control this? Or is IMF still, you know, in the understanding that there should be a political -- more stability to take the interest rates down? What's the reason?
MR. DAWSON: Obviously, some of that is also speculative. It's certainly true that Mr. Fischer is going to Turkey at the invitation of the authorities. He will be arriving on Friday and I believe departing Sunday.
I have seen some speculation as to elements of the program that are supposedly going to be revised or whatever. I would steer you away from taking those comments too literally because this, in fact, is a visit by Mr. Fischer at the request of the authorities to discuss it. We are quite firm, Mr. Fischer is very firm, that this program has been and is a strong one, that the authorities have accomplished a great deal, and we have also stressed, as you stated in your question, the need for strong domestic political consensus. But I don't think one should expect that he is going there with specific revisions in mind that will be -- that are the subject of his visit. I think his visit is a somewhat broader -- has a somewhat broader purpose and it's not to renegotiate the program.
MR. DAWSON: I think I would describe it somewhat more broadly than that in terms of market confidence, of which that is an element.
QUESTION: I would like to know which kind of discussion the IMF is doing about Brazil. Which level is the...
MR. DAWSON: These are staff-level discussions.
QUESTION: Yes. Well, what they are talking about, because...
MR. DAWSON: They have the Secretary...
QUESTION: Excuse me...
MR. DAWSON: The Secretary of the Finance Ministry and senior officials from the Western Hemisphere Department.
QUESTION: And I know that you have made the last analysis...
MR. DAWSON: I think the Planning Ministry is there, too. But it's not the Ministers, it's not the Managing Director.
QUESTION: I also want to know, do you have any new analysis about Brazil? Because, of course, when we talked about Brazil earlier this year, it was a very different situation. What I want to know, if you can tell us what -- how the IMF is looking at Brazil at this moment, with all this Argentina crisis and so on? What is new in this analysis?
MR. DAWSON: I think that's a bit too open-ended a question. We have made it clear that we believe the Brazilian performance under their program has been very, very strong and it remains strong. It is also quite clear that the Brazilian economy has been adversely affected by a number of developments, some domestic, some in terms of the global economy, some regional in terms of particularly the spillover from Argentina. All of those three broad categories are adverse developments that have impacted the external and internal performance. So it's entirely appropriate that we would be intensifying our discussions with the Brazilians, they would be intensifying their own considerations, and that they're up here to look at what all of that means for their relationship with the Fund at present under the current program -- and I will repeat, again, there is a program presently in effect -- and what implications there are from that for the relationship with the Fund as the program approaches its completion on December 1st.
QUESTION: I understand Daniel Marx from Argentina is coming up this week as well. Have you heard anything about that? And if so, are there particulars that you can discuss that he will be raising or that you will be raising with--the IMF will be raising with him?
MR. DAWSON: Yes, I did know Daniel Marx was coming up because I said to somebody to say hello to Daniel, and they said, "You'll be seeing him in a couple of days."
I believe, unless I'm mistaken, he is coming up -- yes. He is coming up for the private sector seminar that we are putting on, on Thursday. A number of officials are coming up for that, so that is -- Daniel Gleizer was the Brazilian who was coming up for that whose name I couldn't remember. So that is the reason that he is coming up.
But as I indicated, it is quite natural for them when they are up here -- and this actually is a Fund-sponsored seminar -- for them to be meeting with whoever happens to be around at that point. But he is not coming up for an Argentina agenda in particular. This is a seminar that has participants from eight or 10 countries on private sector involvement.
QUESTION: Could you just clarify how much money Brazil still has left under the old loan? And when would they expect to draw that between now and December?
MR. DAWSON: They have a stand-by that has an outstanding availability -- both availability and then balances yet to be made available.
The disbursements that potentially could still be made under the current stand-by amount to approximately 950 million SDR. Your multiplier is about 1.27 dollars. There's about 515 million SDR of that would be available at the moment. In other words, it's already passed reviews and is available. And approximately 434 million SDR would be available in the remaining two tranches of the program, the first of which would be made available on the conclusion of the Eighth Review, which at this point, according to the established schedule, would be sometime in September, and the balance would be available at some point in October. Their outstanding Fund credit -- not meaning to change your denominators on you -- is approximately 97 percent of quota. So they've actually paid down quite substantially the amount of borrowing that they had done originally.
QUESTION: Does the IMF have an opinion on O'Neill's attempt to lower the global production of steel?
MR. DAWSON: No.
QUESTION: Yesterday, Alan Greenspan got the Argentina question, and he said, you know, looking at the financial markets, appears to be more confidence, danger, whatever, diminishing, and very limited danger of global contagion. Do you share that assessment?
MR. DAWSON: Well, it is all of our jobs to worry and to be on alert. We have made it clear -- in my last press briefing we discussed this issue, that we do not see contagion in the sense of the word that it was used in '94-'95, '97-'98 or the summer of '98. We are, of course, always on the alert.
I would note, for example, that for a number of countries that the spreads at the moment are lower than they were at the beginning of the year, and obviously for other countries they're higher than they were at the beginning of the year. I mean, that may be slightly simplistic, but that is an indication that you don't have some sort of generalized contagion.
So I think we see that in a number of ways the fundamentals are much more conducive towards stability and moving ahead than they were at some of those earlier periods. We talked about issues such as transparency, issues such as relatively less leverage in the financial system. And discrimination on the part of markets in terms of performers. So I think in that sense of the word we see a very similar picture.
QUESTION: Back to Argentina. Since "premature" seems to be the word of the day...
MR. DAWSON: What? I'm sorry?
QUESTION: "Premature" seems to be the word of the day for you. Last week...
MR. DAWSON: I thought "missions" was the word of the day.
QUESTION: Mr. Fischer kind of indicated that it was premature to discuss new restructuring of the disbursements for Argentina or even more money because he wanted to see what would happen in Argentina. The fiscal adjustments seem to be going on fairly well, but now it's only the Senate that is remaining. And I was wondering whether you still considered this premature, or could this come up during Marks' discussions with IMF officials?
MR. DAWSON: As I say, I don't see the Marx meetings with officials are heavily program-related in that sense. Obviously, the state of the developments will come up, but I do not believe that's an issue that is on the agenda. I think, although I would agree with you -- and this point was made two weeks ago, made in our statement, and then we've discussed it since then -- is that this zero deficit plan does seem to be moving forward and there does seem to be, as you said, support for it.
So I think in that sense of the word, I wouldn't necessarily say premature, but things are progressing in an orderly way. Things are moving forward. So I do not believe that's an issue in terms of Daniel's visit.
QUESTION: After the violence of the G-7 in Italy, are you planning any change for the next Annual Meeting?
MR. DAWSON: Caroline Anstey at the Bank, I think a couple weeks ago, 10 days or so ago, made it clear and I think we have confirmed in terms of there are a number of changes in terms of the format of the meeting, not in terms of the substance or the content, and that the activities, the official activities of the meetings will be consolidated into what I guess we might call a downtown campus centered on the Bank-Fund headquarters buildings, with the opening ceremony to be held at Constitution Hall. So those of you who were looking forward to spending a week of your life at the elevators at the Marriott will be spared that opportunity. But in terms of the planned events for the meetings, they are proceeding as we had anticipated.
QUESTION: Is there a local hotel here that you're going to be holding some of the seminars in, the Melrose or one...
MR. DAWSON: No. The seminars will be held in the Bank and Fund buildings, as well as other office buildings in this area, within our campus.
QUESTION: A follow-up. Are the negotiations a little bit harder now that all kinds of negotiations...
MR. DAWSON: Could identify your country?
QUESTION: Sorry. Brazil. Are the negotiations now a little bit harder with the new government, the U.S. new government, with the more hands-off attitude from the Bush administration? Are the negotiations a little bit harder than they used to be under the older -- you know, Bill Clinton's government?
MR. DAWSON: I don't think I want to go there. I mean, first of all, there's a premise in there about negotiations that I'm not sure is correct. It depends what you talk about what the mission is doing. And certainly the relationship of the Fund with the U.S. authorities is quite a good one. But the negotiations are, as I think your question implies, in fact, taking place between the Fund and the Brazilian authorities.
Obviously, major shareholders all have an interest in what is going on, but I'm not sure -- I would have a hard time seeing how it would be...
QUESTION: I'm sorry...
MR. DAWSON: ...made more difficult or easier.
QUESTION: The question is not even about Brazil. I'm talking in general. I mean, now with the new government, the new U.S. Government, with the new attitude that's more hands-off, how are things are different, is my question.
MR. DAWSON: Ah, okay. Because I had the impression that the question somehow implied that there was something wrong with hands-off. The salmon-colored newspaper, the FT, has an extensive interview with Secretary O'Neill this morning, and I think he expresses quite clearly the administration's attitude toward the Fund and the role the Fund should play in situations such as this. And I think I would just refer you to his quotes in terms of that -- of their attitude toward the Fund, and I think I would just complement that by saying that our relationship is a very strong one, as it has traditionally been with our major shareholder.
QUESTION: I might not have been clear. The question is: How is the Fund relating to the U.S. more than how the U.S. is relating to the Fund, how is your attitude, I mean, the Fund's?
MR. DAWSON: We're relating very well.
QUESTION: Yeah, but how is it different from the...
MR. DAWSON: Oh, I don't think I need to go into those discussions. I mean, they both were good relationships. And we continue to enjoy strong support from our major shareholder, as we do from almost all of our shareholders.
Could we get some new questions? Or else I'm going to call it off. Okay.
QUESTION: Mr. Dawson, can you just confirm if...Just going back to Turkey, you said that there's going to be an Executive Board meeting in early August. Is that right?
MR. DAWSON: After vacation, yes.
QUESTION: And they will...
MR. DAWSON: Or the recess.
QUESTION: They will vote then on a potential further tranche?
MR. DAWSON: Correct.
QUESTION: And have you been given any indications of how much that could be?
MR. DAWSON: We can get it for you. Yes, it would be approximately US$1.5 billion, which would bring total disbursements to about US$12 billion.
QUESTION: Going back to Argentina, in the last meeting, last press conference, you said that there wouldn't be any speeding up of the disbursements for Argentina...
MR. DAWSON: There's nothing planned at this point. No change.
QUESTION: Let me ask you why that is. Since then we've seen pension funds, we've seen local businesses promise to pay more funds. How come the IMF won't come in there with faster disbursing funds to help them through this present crunch?
MR. DAWSON: Well, I think they are dealing with what is the domestic financing situation. I don't think there's an analogy there. I mean, our financing is sort of there, and then it's a question of how else they meet program targets. But it's a need to fulfill the program, so I don't think that follows logically from that at all.
By the way, and all indications are they are, you know, meeting the targets.
QUESTION: Is the IMF planning a new mission to Indonesia or a mission to Indonesia to meet the new authorities in the near future?
MR. DAWSON: I just have to check my notes. We have the ad referendum letter of intent that was brought back a week or so ago. It is being reviewed by staff and management. We would expect that the new authorities there would be looking at it as well, although I would note that the mission did meet with then-Vice President Megawati at the time. And our expectation or our hope had been that we would be looking for a Board meeting coming after the recess, maybe in September. I don't think there's any change in that timing.
Whether there will be a mission before then or not, I honestly do not know. But I think there were a number of scenarios that were contemplated at the time of the mission. The developments in Indonesia in the last week were part of sort of that baseline scenario, so that the change in government itself need not cause a mission to go there. There may be some other reason that develops for a mission to go there, but as I say, the mission had been in touch with the then-Vice President and actually had a meeting with her.
Maybe just two more questions.
QUESTION: Going back to the fall IMF meetings for a moment, last time around the city spent about $8 million in security costs, and given what happened in Genoa, it's likely to be much higher. I know the IMF doesn't have an obligation to contribute to these costs, but is there any plan right now to contribute to the security costs of the fall meetings?
MR. DAWSON: I think that that's a question best directed to the U.S. Treasury.
MR. DAWSON: Microphone, please.
QUESTION: Mr. O'Neill said yesterday that exchange banks, foreign exchange banks are a problem in relation to Argentina. Does the IMF agree with this view that this is one of the main...
MR. DAWSON: No, I think...
QUESTION: ...risks for...
MR. DAWSON: As I discussed, I believe, in the last press briefing, the issue of exchange regimes is one that we have under intensive discussion and review, and I would direct you to the same -- to the speeches on the subject that I did last week, which were the speeches by the Managing Director and the First Deputy Managing Director last January, in which they sort of laid out the conditions under which approach should be followed at which point.
They did point toward the conditions under which floating regimes were more appropriate and the conditions under which fixed regimes were more appropriate. And there indeed are such conditions, and they require, of course, very, very strong policies. And I think the Argentine authorities understand that. And as we look at, for example, the zero deficit proposal, that is a very, very tough policy that, if implemented, should be able to protect that sort of a regime.
I would not want to go beyond that in terms of discussions of philosophies of exchange rate regimes, but that is a big-- it is an issue, and the proper policies need to be followed under both regimes. They're tough under fixed exchange rate regimes, but the Argentine authorities know that well and have quite a track record in being able to work with their system.
I think that's it. The embargo will be lifted at 20 minutes after 10:00. Thank you very much. Everyone have a nice summer vacation, and I look forward to seeing you in three weeks.