Argentina and the IMF
Brazil and the IMF
Turkey and the IMF
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Transcript of a Press Briefing by Thomas Dawson
External Relations Department
International Monetary Fund
Thursday, August 30, 2001
MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the IMF. This is another of our regular media briefings. I don't have any prepared remarks today, although I would like to observe that some of you don't seem to be really up to your job lately. We're quite surprised that it took something like three weeks for the draft of the WEO to leak to the press, and we're particularly surprised that it leaked in August in Rome. I guess European holidays aren't what they used to be.
Let me say, without confirming or denying some of the specifics, that reports regarding the WEO, some of them are a bit off-base, and so I would caution you that some of the--I guess I could call it Machiavellian interpretations of data--are making the rounds. But these and other things will become moot on September 26th when our new economic counselor and research director, Ken Rogoff, will hold his first WEO press conference. And for those of you who are hoping to--wondering what dealing with him will be like, I would just note that he is an international chess grand master.
We're planning the WEO press conference for 9:00 a.m. on the 26th and embargoing everything for release until 11 o'clock on that day. This and other details of Annual Meeting arrangements, press events, will be posted on the external website within the next week. That's all I have to start with. I'll be happy to take any questions that you may have.
QUESTIONER: If I could start with Turkey, two questions. In the last several days, there have been some positive developments, including a drop in foreign currency rates and interest rates. Do you think this could be the beginning of a good trend? And, secondly, the government and some business circles have launched a psychological campaign to promote the lira. Do you think that could work at all? And anything else you would like to say about Turkey.
MR. DAWSON: I think I would agree with the premise of your question that recent developments in Turkey have been encouraging, with July inflation below expectations and treasury bill rates declining by more than 10 percentage points in the last week or so. If these trends continue and recovery starts, Turkey obviously would have turned the corner. But to ensure this, it is clearly crucial for the authorities to continue to implement their strong program.
I have noted on a number of previous occasions that investor confidence is indeed one of the key issues there, and I think it's quite natural and appropriate for the authorities and investors to be taking this sort of approach.
In terms of the status of the program, I would just note that a mission will visit Ankara in early September for the 10th Review of the program, and assuming that things went well, the Board meeting on the review would be held in late September or early October.
QUESTIONER: The second part of the question?
MR. DAWSON: Well, that's what I indicated. Investor confidence is indeed very important, and we've said that from the beginning. So attempts to rally support among investors and so on is entirely appropriate. I thought I'd answered that.
QUESTIONER: On Argentina: Is there any information or comment regarding the meetings here at the IMF with the major bond holder for Argentina?
MR. DAWSON: As you all know, Minister of the Economy Domingo Cavallo did meet with the Managing Director yesterday. I understand that the Minister gave a briefing, I think at his hotel, yesterday evening. I don't really have much to add to that. Obviously, both we and the Argentine authorities are concentrating on the implementation of their program, and I think that's the appropriate priority at this point. But it was certainly a good meeting, but I don't think we really have much to add beyond what the Minister said last night.
QUESTIONER: Tom, a number of private sector economists are questioning whether Argentina will be able to meet the fiscal target for the third quarter. Do you anticipate the need for a waiver for the third quarter? And at this point, what's the IMF's assessment of Argentina's ability to meet the full-year target?
MR. DAWSON: Well, first of all, the third quarter, as I calculate, doesn't start until Saturday, so it's a little premature to be talking about that. Clearly, the zero deficit law is a very stringent law and one that we think--that the authorities developed and we think is appropriate under the circumstances that they face. So we recognize and the authorities certainly recognize the challenges ahead, but they are determined and I don't think there's any doubt about their commitment to achieve that. So we will deal with the issues on the program later, but it's way premature to speculate on that.
QUESTIONER: Could I just clarify what you said in your opening remarks, please, about the WEO numbers that have leaked? Were you saying that the numbers that have been reported from Rome are incorrect?
MR. DAWSON: No, we do not comment on the actual numbers. What I was commenting on was on the interpretation that was given to them in at least one of the news stories about speculation about changes, speculation about differing views within the institution. I think I would steer people away from that. But we do not talk about any of the particular numbers. You will get your chance when Mr. Rogoff deals with that issue in September.
QUESTIONER: Regarding the fall meetings, are you considering any compensation to the District of Columbia?
MR. DAWSON: I understand that is an item of some interest. I would just note that the IMF and, for that matter, the World Bank are governmental institutions, and I really don't know of examples where governments tax other governments. International organizations worldwide are invited to headquarter, to locate in various locations, capital cities, similarly embassies. And I'm frankly unfamiliar with any precedent at all about the taxation of other governments. After all, remember, the Fund is a member organization of 183 member governments, and the issue of taxation to my mind, to my understanding, has never arisen in any of our member countries.
QUESTIONER: Is it a question of taxation or--
MR. DAWSON: I think it's a question that we are a governmental organization, and I'd be interested in examples where governments tax other governments. It just isn't normally the way things go. I do know the demonstrators have had a reference to Bureau of Land Management having some certain payments in lieu of taxes out West. It's my understanding that has something to do with the history of the Wild West, and I'm not sure it's applicable to an international organization.
QUESTIONER: Could you explain to us a little bit more what is going to be the role of the IMF in the restructuring of the debt in Argentina? And in that frame, what does it mean, the meetings that the bond holder--the Argentinean bond holders had yesterday with--I think it's the Capital Market Division.
MR. DAWSON: Well, the primary responsibility for dealing with the debt situation in Argentina is the Argentine authorities talking with their creditors. It's certainly natural and understandable that the creditors would, at the same time, wish to speak with others. They will speak with the treasury. They will speak with the IMF. And so that's entirely an appropriate way to go forward.
I think people are, frankly, in a brainstorming situation now, and so that is completely to be expected.
MR. DAWSON: Excuse me. I do have a correction. I'm sorry. The third quarter doesn't start until October 1st. I was perhaps engaged in a little bit of wishful thinking. The fourth quarter doesn't start until then. I'm sorry.
QUESTIONER: Mr. Dawson, some weeks after the announcement of the $15 billion package to Brazil, the exchange rate hasn't moved down as much as everybody would have expected. Do you think--is the IMF worried about that? And, also, do you think that by the end of the year some official with the IMF will be able to brief us on the Brazilian program? Because we have no idea--we haven't heard from the IMF.
MR. DAWSON: Well, Brazil's request for a stand-by arrangement will be considered by the Board on September 14th, and I will take under consideration your suggestion that we have a briefing. I don't think we would have any difficulty with that, and we'll try to arrange to have a staff member brief.
You know, the authorities, as part of the program, the authorities are strengthening their fiscal policy, reaffirming their commitment to reducing inflation within an inflation-targeting framework and with a floating exchange rate system. So I'm not quite certain that it would be appropriate to say what was or wasn't expected in terms of exchange rate movement since that's what a floating system is about.
So I think that our view is that the Brazilian authorities took the appropriate step given the uncertainties in the region, and more broadly, to approach the Fund for an arrangement that they expect will be precautionary. And I think that's appropriate. We will--but as I said, to repeat the answer, I think we certainly can arrange some sort of a briefing for those who are interested on Brazil.
QUESTIONER: Tom, if you'd just go back to the fall meetings for a moment, I was just wondering if you could address what sort of difficulties or challenges are going to be faced, if it's going to be hard to get all the business done now that the meetings have been truncated and, you know, just what--
MR. DAWSON: Certainly, the fact that the two key committee meetings will be held on one day and that the Annual Meetings will be cut into one day could lead to an inconvenience, and certainly the meetings traditionally provide the opportunity for a wide range of meetings between governments, the official sector and the private sector. This will be obviously much more difficult this time and in some cases impossible. I've noted earlier, for example, that we cancelled the Bank cancelled the program of seminars.
So I think that is simply a reality. We are trying to deal with it the best that we can. But we don't think that really given the nature of the security concern, I really don't think that we had much choice but to adopt this sort of a prudent approach.
QUESTIONER: What's the official position of the IMF on the Tobin tax and chances of it being implemented?
MR. DAWSON: The Fund does not have a position on the Tobin tax. There have been a number of research papers that have been done on that, and we could perhaps direct you to some of the research done on that, that the Fiscal Affairs Department and others have done. It obviously is a subject that is getting renewed attention, not just in continental Europe, and so I am sure we will be voicing our views on that.
There has generally been a view that financial transactions taxes are difficult to maintain because of the potential for evasion unless they are in some fashion very broad and very loophole-proof. But this is a debate that I am sure--that has tended to be on a country-by-country basis, that discussion. But I'm quite certain we will be continuing to discuss the Tobin tax issues that have been brought up, not only in the Fund context but in the UN financing for development context, and more recently in a major member country.
QUESTIONER: Just a follow-up. You say you will be voicing your views [inaudible]. At the Annual Meetings?
MR. DAWSON: Not necessarily a position, but--I am sure, because it is a matter of international interest--there will be a lot of discussion and work on the part of the Fund on the pros and the cons of this sort of an approach or alternative approaches. It is a measure that has been advocated in a number of different contexts. It's been advocated in some contexts as a revenue raiser, in other contexts as a measure to smooth volatility. And I think there are lots of questions in both areas as to how it could work, how it would work, and how to consider it.
So I am sure it will come up. I'm sure it will be discussed in and around the Annual Meetings. At this point, I would not expect it would be a formal agenda item. I think, as you know, that's not how the Annual Meetings are typically structured.
QUESTIONER: Three billion dollars of the IMF credit to Argentina have been linked to so-called market-based operations in reducing the debt. Has any progress been made?
MR. DAWSON: Well, that was referred to in the earlier question about the discussions with bond holders.
To be precise, however, what we indicated was that $3 billion of the augmentation that would otherwise have been available later in the program could be accelerated to be a part of an enhancement to a voluntary debt operation. That is a matter of discussion. The nature of the operation is a matter, as I indicated earlier, primarily discussion between the Argentines and their creditors, although the Fund and other governments are interested in that result.
It is also fair to say that the Fund--this element, this $3 billion, is unlikely to be the sole element of such a package, because if you just go through the math, you will see that $3 billion of IMF money doesn't provide a particularly large amount of enhancement. Therefore--and as has been commented on publicly previously, and I believe Mr. Fischer was quoted on that this morning--one would expect there would be other elements to the financing, the so-called enhancement of such a voluntary operation.
QUESTIONER: Tom, what is your assessment of Chile's efforts to deal with any contagion effects from Argentina? Specifically, they've allocated $2 billion for the central bank reserves for potential intervention against the--in favor of their currency. Two days ago they intervened in the market to protect the peso, and they've announced intentions to issue a sovereign bond next month. Do you think that these are appropriate efforts? Do you think that they have the opportunity of insulating Chile?
MR. DAWSON: I will take my lifeline option on this question and refer back, since I am unprepared, and my lifeline, Eduardo Aninat, is presently on vacation.
QUESTIONER: Will the new--you call it the augmentation of the program, the new program, whatever, of Argentina to be considered by the Board September 7th.
MR. DAWSON: Yes.
QUESTIONER: And also your statement on the day of the announcement said it was contingent on a review. Could you specify what type of review and what type of things you'll be looking at before the Board approves this augmentation? Are you talking about the sharing agreement of taxes between provinces and the nation? What will you be looking at?
MR. DAWSON: Well, first of all, you are correct in terms of the date. It is scheduled for September 7th. Formally, what is happening on September 7th is also the conclusion of the previous review, so I'm not quite sure--I don't have the press communiqué right in front of me, but I believe that's what we were referring to. But, obviously, you know, any Board meeting is always subject to the continued implementation of the program up until the time of the Board meeting. So I don't think there was any particular significance to be drawn from that language.
But in a technical sense, this Board meeting has two issues. It has the augmentation of the program and the conclusion of the review under the previously existing program. That's the $1.2 million disbursement. And then the augmentation is the approval of $8 billion, including the $5 billion immediate disbursement.
QUESTIONER: So there will be an immediate disbursement of--?
MR. DAWSON: $6.2 billion would be the number. Immediate is usually two or three days.
QUESTIONER: Mr. Dawson, would you respond to critics, specifically those organizing the protests? You've probably noticed there are four demands. And what about making the meetings open to the public? And what about stopping all advocacy for privatization and the halt of all infrastructure projects that damage the environment?
Just as a supplement to that, Argentina, it's alleged that these IMF policies that are now being part of this agreement prolong the recession and further impoverish the people. Would you just address those, please?
MR. DAWSON: Well, on Argentina--and then I will come back to the four demand. On Argentina, I don't think anyone who knows the nature of the Argentine Government and who knows who Domingo Cavallo is can have any sense that the IMF is imposing anything on Domingo Cavallo. That is nonsense on its face.
Now, as far as the nature of the demands go, I will respond in detail, and we will have, of course, many opportunities to discuss this issue going forward.
In terms of the openness of the meetings, I think we view the meetings as indeed being quite open. I would note that this regular press conference is itself a demonstration, almost going on two years, of our commitment to openness. Several thousand journalists are expected to attend. For example, last year we had something like 400 NGOs attending the meetings.
It is certainly true that some meetings are not open to the press, the IMFC and Development Committee meetings, as an example. This is not at all unusual for governments when they get together meeting to discuss market-sensitive information, decision making.
On the other hand, it also should be noted that it's quite clear what we are discussing at the Development Committee and IMFC. It's reported on more or less instantly. People's speeches, the papers prepared for them are often made public. So I think we view we have a very open and increasing commitment to transparency and openness. I think it is fair to say that this year's meetings will be less open than in the past, but that's not our fault. So that would be that answer.
In terms of the forgiveness of debt, which is, I think, the second demand, the forgiveness of debt, it's interesting in this as a demand. We certainly think the Fund--and, if I can, at least a little bit, speak for the Bank, that our record in terms of working for significant debt reduction for the poorest countries is a good one, one that is on the way toward an approximately two-thirds reduction for the most afflicted countries. We think that complete debt forgiveness is not the way to go for a number of reasons, which we've gone into in the past. We can continue, if you wish to follow up on that.
I would also note that, notwithstanding this demand for debt forgiveness, this is not a demand we are hearing from our member countries. Remember, we are an organization of 183 member countries, and they aren't asking us to forgive the debt because they understand, you know, the nature of the problem and how best to deal with it. And while debt reduction in some cases is appropriate, they recognize that good policies are important, retaining the ability to have market access for countries is important.
In terms of the third demand, which, as I recall, is essentially an end to all structural adjustment programs, structural adjustment is simply a matter of life and adjusting to change. The idea that the Fund or the Bank go into countries and slash social spending is simply not the case. We do, at least in the case of the Fund, tend to go into countries that are in difficulty. That makes it natural that the budgets will be under pressure, and we have put this work out before. Our belief is that countries with Fund programs, the poorest countries of the Fund programs, show increases--not decreases--increases in social spending under Fund programs as compared to countries that are not under that situation.
I would also note a headline, I think about two days ago, that came across my news screen in the context of Pakistan. The headline was "IMF Urges Pakistan to Increase Social Spending." So I think if you look in the history and the experience, I think you will find quite a different record.
The protesters in that regard also seem to have a model in which there shouldn't be any privatization. I think the record of the last few decades is that market forces work and that private ownership leads to better performance, better growth prospects. Maybe they don't share that model. Maybe they think that there's a state-dominated model that has a better record. I would challenge them--I would never demand; I would only challenge them--to perhaps come up with examples of such countries that have followed this alternative path.
The final demand, which I think is mostly directed toward the Bank instead of us, which has to do with doing away with environmentally destructive projects of one sort or another, I think the Bank's position--again, not speaking for them, but speaking for them--is that they believe that their record is one of trying to avoid precisely that and of where in the past there have been mistakes, of learning from that, and that their intention is indeed not to have such projects.
That's a short answer.
QUESTIONER: On Argentina, you mentioned that the meeting with the bond holders was completely to be expected because somehow they are involved in any eventual debt restructuring. The same--
MR. DAWSON: It's their money.
QUESTIONER: Yeah. The same agreement imposed conditions on revamping the so-called co-participation law in Argentina and put strict limits on how much bonds the provinces can issue. So do you consider also completely natural to have a meeting with the governors of the provinces?
MR. DAWSON: I think the discussion was of sovereign debt at the national level. So I'm not quite sure how this other law has to do with that. I mean, the bond holders can meet with whomever they wish. Partly I don't understand the question, but also I'm not entirely sure what it has to do with us.
QUESTIONER: One of the conditions of the agreement is revamping the law that is--
MR. DAWSON: Right, okay. Which law?
QUESTIONER: The so-called revenue-sharing law.
MR. DAWSON: Okay, fine.
QUESTIONER: And one second condition is that there will be an amount of how much in bonds the province can issue. So there is a $1 billion limit to the so-called--
MR. DAWSON: But that's part of the zero deficit law, and I think that's totally understandable. What the bond holders are meeting with the treasury, I guess, yesterday, with the Fund staff, and with the Argentine authorities is about the existing stock of debt and what to do about it. So, again, I'm not quite sure what the linkage is.
QUESTIONER: If I could follow up, earlier you characterized the process that's ongoing now between the Argentine Government, its creditors, this institution, and some other governments as brainstorming about how to deal with--
MR. DAWSON: On the debt issue.
QUESTIONER: On the debt issue, correct. Do you have any idea about how long you expect this process to go on? And, also, are you aware if there is any thinking that is moving in a particular direction? Is there constructive thinking, do you think, that is getting broad support?
MR. DAWSON: Well, I'm certainly sure there is constructive thinking because everyone's approaching this in a constructive fashion. But I don't have an ability to provide a timeline, and since our discussions with the bond holders are, of course, confidential, I would suggest that what you should do is talk with bond holders, talk to others, to try to get their perspectives. But given that this is an ongoing discussion of options, I don't think it's really appropriate to speculate. But in terms of timing, to get to that point, I can't specify for you a particular time. But this is obviously, in the last week of August, something that people are looking into and working on despite the holidays.
Maybe two more questions Who hasn't asked?
QUESTIONER: Coming back to the meetings, are any arrangements being made for Finance Ministers from developing countries who regard these meetings to a large extent as an opportunity to come make their pitch to both the top Fund management and staff and to the private sector? What arrangements are being made, since there will only be two days for the actual meetings? Are the Managing Director, Deputy Managing Director, other top members of the staff, planning to have the usual round of meetings with these people in the days before and after? What arrangements are being made so that the--what one could reasonably argue are the really important business of the meetings are going to be taken care of?
MR. DAWSON: It's obviously going to be very difficult. To the extent we possibly can, we will be concentrating the meetings on the Saturday and the Sunday. Whether individual meetings then may take place before those two days or after those two days, I'm sure there will be some. But it is our intent to try to compress it as much as possible.
I would also note that many of these meetings--I mean, you're correct, when governments come here, they have an opportunity to have meetings, particularly, I would say, with the private sector. In the case of meetings with the Fund, we do have other opportunities to talk with them. It would be more expensive, but we do have other opportunities to talk with them.
In the case of the private sector, they may not have as much opportunity, but, actually, we are not involved in the scheduling of meetings between delegations and the private sector. But the delegations as well as the private sector are well aware that there are serious time constraints. So whether they have meetings before or after in other places, perhaps, in terms of coming through New York--when I was in the private sector, often the delegations would come through New York to see my former employer. So what will happen, I don't know. But it is obviously a serious inconvenience, and it is, I would repeat, an aspect of which this is becoming a less open and a less productive meeting, and I think that is quite regrettable, particularly given the world economy facing the difficulties it does not. This is an opportunity for dialogue and advancement on serious issues that's being diverted by the threat of violence.
QUESTIONER: Tom, I just have a question about pegged exchange rate regimes. At the risk of getting another--a third non-answer this morning.
MR. DAWSON: Oh, please.
QUESTIONER: A large number of people--Dr. Fischer, many officials, you yourself--have said that one of the positive aspects to the current state of the global financial system is that a large number of emerging market countries have moved off of pegged exchange rate regimes, particularly in East Asia. In his published interview in the Financial Times today, Dr. Fischer says that one of the things he's learned in recent years--if I remember correctly, he said something to his surprise--is that he has learned the value of moving off pegged exchange rate regimes. Why is Argentina different?
MR. DAWSON: Excuse me. I think you're taking his comment somewhat out of context. Go back to his January speech, the Managing Director's January speech. The observation on pegged exchange rates is pegged exchange rates of the type that had existed in Asia prior to the '97-'98 Asian crisis.
Indeed, there is a strong view in the academic community as well as the Fund that hard fixed, meaning currency board-type arrangements or floating arrangements, both are defensible, require certain policies in support of them, but both of them are ways to go. The currency board approach, as we know, in the case of Argentina requires very tough measures. There's no doubt about it. But the observation on pegged exchange rates is an observation that's coming out, and we have published on this issue. Again, I refer you to the two speeches earlier this year by the Managing Director and Mr. Fischer on that issue. So that was not a commentary directed at Argentina in any fashion because there is a difference between the sort of fixed approach, pegged approach that was attempted in a number of countries that led to the crisis. So his was a reflection on lessons learned, as it were, from the Asian financial crisis or other crises of those years.
I take only mild offense at being accused of not answering the questions. I do recall the first such one of these briefings that I held in October, I guess, two years ago, I was accused by Mr. Phillips, I believe, of the Wall Street Journal for not having made any news in the press conference. I did not realize that it was an obligation to make news in press conferences. So perhaps that's the context in which you meant that otherwise nasty-sounding question.
Thank you very much.
[Whereupon, the press briefing was concluded.]