Argentina and the IMF
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Transcript of a Press Briefing
by Thomas Dawson
External Relations Department
International Monetary Fund
Thursday, December 20, 2001
MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of the IMF's External Relations Department. Welcome to this, our last briefing of 2001.
Before I start, I'd like to share with you our sadness over the death over the weekend of Dietrich Zwätz, who until recently was Washington correspondent of Handelsblatt. He was a fine journalist, who performed great service in explaining Washington and the United States to German audiences for many years and will be missed deeply. He enlivened many of these briefings with his tough questions, and I understand his last reporting assignment was an interview with Horst Köhler, the Fund's Managing Director.
On a different note, we're saying good-bye today to one of our own of EXR. Vasuki Shastry, hiding there back in the back row, will be leaving us to take the position of communications director of the Monetary Authority of Singapore, a position for which I applied and was turned down.
But Vasuki will be going there for two or three years, and hopefully we may be able to entice him back. Vasuki has made an enormous contribution to the work of External Relations at the Fund, not only in Asia Region, about which he has encyclopedic knowledge, but also in strengthening our outreach generally. I'm not sure who will miss him most, EXR or you, the journalists he has so ably helped. We look forward very much to your return, Vasuki.
On a different note, the Fund is today releasing the work program of its Executive Board for the next few months as part of our continuing efforts to increase public awareness of Fund activities. The work program is a road map for the work of the Executive Board, which consists of the 24 officials appointed or elected by the IMF's 183 members, with the Managing Director as Chairman of the Board.
The Board meets regularly to assess economic developments at the national, regional, and global levels and to discuss and decide on the IMF's loans to member countries and to consider general policy issues concerning the international financial system. In addition to considering the global outlook, the new work program takes the work of the Fund forward in several areas in terms of strengthening surveillance, crisis prevention and resolution, including private sector involvement, financial sector work, including the Fund's action plan on combating money laundering and the financing of terrorism, focusing IMF conditionality, and country ownership of Fund-supported programs as well as sustaining our poverty reduction effort.
I think that is all I have in terms of a prepared statement. I'll be happy to take your questions.
QUESTIONER: Do you feel at all responsible for what's going on, as an institution as the Fund, for what's going on in Argentina? And can you give us the bottom line as to what needs to happen in Argentina for the country to get IMF help?
MR. DAWSON: As we have discussed on a number of occasions recently, both in the context of the press conferences and otherwise, Argentina faces a very difficult situation and has a need for and is continuing to find—to search for a sustainable economic program. We stand ready to work with the Argentine authorities, with the change of Ministers and of government taking place—the Cabinet, as I understand it, has resigned—we stand ready to work with and assist the new government as they assume their responsibilities.
QUESTIONER: Can you just address the first part of his question, which was what responsibility, if any, does the IMF have after so many IMF-guided programs?
MR. DAWSON: Well, we certainly have had a relationship with Argentina as one of the longest-standing members. We've had programs in the context of the present currency regime for something like, I guess close to 11 years. We have been working with the authorities to help support their programs. So we have the same nature of a relationship and a responsibility as we have with all of our members to work with them to develop their programs. And I think the concept of ownership of the program is something that has been felt strongly in Argentina. The accomplishments over the last 11, 12 years in terms of the defeat of inflation and so on had a very positive effect in the country. The present difficulties are difficulties that I think have been discussed in this forum and other fora quite extensively.
We've been trying to assist the authorities as they have tried to achieve their goals. So I think that is pretty well understood, and as noted in the statements, for example, not only previous recent press briefings here but in other statements that we've made over the last several weeks in terms of our commitment to help the authorities. So I think it's a little hard to answer a general question. If you have specific suggestions — but as we've made — or specific follow-up, that's fine. But as we've made clear, we were not requesting any specific policy measures. Our attempt has been to help the Argentines develop on their own a program that can be sustained both economically and politically, and that remains our goal.
QUESTIONER: In the past, or in other administrations that have been the case that the White House would, through the Treasury, solicit or encourage the action from the international institutions like the IMF, and find a political will to solve solutions that are clearly critical. What is the IMF waiting for and what signal does the IMF need to act in a situation that is clearly critical at the moment?
MR. DAWSON: We are looking, we are standing ready, as I said in my initial comment, to work with the now prospective new authorities, to work to develop a sustainable program. That was our goal previously. That continues to be our goal. I think, frankly, you're asking much the same question as the others.
QUESTIONER: Last time we met, you said that the problem was the deficit and that the negotiations were focusing in the deficit. Now, two days ago, Rogoff said that the problem was the mixture of fiscal policy, debt, and exchange rates. Does this mean change in policy? Do you have anything really specific to say about convertibility?
MR. DAWSON: No, I think you misstated both my previous statement and Mr. Rogoff's statement. When Minister Cavallo was here on his last visit, we agreed with him on what the parameters were, basically essentially what the economic assumptions were, what the implications were for the budget. That, therefore, had implications for taxing, spending, debt, so on. That was the context in which my initial statement was made, that is simply straightforward, and I think the Minister described it that way when he went back and we described it at the time.
What Mr. Rogoff described in his interim WEO press briefing the other day was in many senses the same point. And as I have made clear on a number of occasions, the Argentines have a particular approach on a number of policy areas, but in particular on the exchange rate regime. That has certain consequences for how they handle their fiscal and monetary and reserve situation. In the particular context of Argentina, that involves something that the Argentines themselves proposed, which was the zero deficit law. And I think Mr. Rogoff was saying that in an arithmetic sense, a number of things follow from that. He was not implying that there was any difference in terms or suggesting any difference in terms of policy options. He was taking exactly the same starting point, which is that the Argentines have some fundamental basis for their program, which is the currency board and the zero deficit law. And what he was commenting on was essentially an arithmetic conclusion from that as to what the possible options were, and he was not making any policy prescriptions.
QUESTIONER: Given how long you've been looking at the Argentina situation, does it really just boil down to the fact that the debt is simply too large for the economy to support anymore?
MR. DAWSON: I think hunting for single explanations tends to simplify and overlook the complexity of situations. It's clear there is a debt issue. The authorities have recognized that by starting initially with the domestic debt exchange offer and by working on an international debt offer. At the same time, they've also been concerned about the fiscal situation. So, I mean, they're all involved, and I don't think any of the issues can be solved without looking at it as part of a whole.
QUESTIONER: I wonder if you can tell us how the resignation of Mr. Cavallo has affected the pace of the negotiations between the Argentine government and the IMF, and especially when you said that you stand ready to work with the new prospective authorities. Also, I was wondering if the fact that you have been saying that this time you don't expect that the crisis could have impact in other countries has a specific way in how you are seeing the crisis. I mean, if the fact shows that this crisis could have an impact in other countries, I wonder if you will have a different reaction, maybe a different pace...
MR. DAWSON: At least the last report I have heard is that the differentiation in markets among countries continues to be the case. Obviously, the news overnight, you know, has caused some market reactions, but what some have called the decoupling continues to be the case. We will look, of course, throughout coming days as to how that develops, but I think that continues to be the case, and you can look at the spread numbers as they've progressed over the year and indeed over recent months and weeks to see how the spreads tend to follow developments involving, you know, countries' individual characteristics.
With regard to how the resignation would affect the dialogue that we have with the authorities, I think I said that in the initial statement, we need to have new interlocutors to deal with, and we look forward to that and will be in touch with them, stand ready to work with them.
QUESTIONER: What do you believe should be the effects in Brazil, for instance? And, secondly, how would you react to a devaluation, hypothetically, in Argentina...
MR. DAWSON: I will absolutely not deal with that question, that latter question. The Argentine authorities have the responsibility for addressing their policies and issues in that regard. Now, as far as the effect on Brazil, I think I indicated that the markets at this point seem to be differentiating among countries according to the views that the markets have on them. And while I think the overnight news was to some extent unexpected, I think the markets, judging by their performance over recent months seemed to be quite able to discriminate.
QUESTIONER: What did it take so long between the discussion with Mr. Cavallo in Washington and the declaration of Mr. Rogoff on Tuesday? I mean, why waiting 10 days to say that the policy mix was unsustainable?
MR. DAWSON: Well, that is simply not the case. First of all, we have indicated in our last statements that we are hunting for a sustainable program. That is precisely the same thing as Mr. Rogoff said. In terms of the timing, there is absolutely no relationship in timing at all. He had a regular scheduled interim WEO press briefing that has been scheduled notionally in our books for several months for that particular day. So there's absolutely no intentional timing and, indeed, there was, as I said, no indication of a change in policy advice in Mr. Rogoff's statements.
QUESTIONER: Are you waiting now for the new Argentine authorities to present a new program. What are you waiting for?
MR. DAWSON: We're waiting for the new Argentine authorities, and then they will take stock of the situation as they see it, and we will, I am sure, be in touch with them, and they will develop their program.
QUESTIONER: Do you have any board meetings planned to discuss Argentina, informal or just staff briefings to the board?
MR. DAWSON: I am not aware of any right at this point. We did have some discussion of it in recent days with the board. I believe the board's last scheduled session was yesterday. Now, the board is, of course, in permanent session so it can be called in for briefings at any time. But at this time, I'm not aware of anything. Certainly we would be communicating with board members in one fashion or another.
QUESTIONER: The Bank of Japan has eased monetary policy, but do you think more aggressive measures, including buying up foreign bonds, are necessary?
MR. DAWSON: I think, frankly, I would just prefer, since I've been concentrating on some other issues, to pass on that one this morning.
QUESTIONER: How much does the IMF feel responsible for the present difficulties in Argentina, or you don't feel responsible at all?
MR. DAWSON: We've been working with the authorities and our relationship is like with any of our members. We are a cooperative organization and we're working with them.
That is a question that is very hard, I mean, it's a very general question, and so I have to give a general answer. If you wish to suggest, you know, something specific, that would be something different. But that is the nature of our relationship with Argentina, and I think, as I've said on a number of occasions and discussed with a number of you, the Argentine program is one that has had one of the highest degrees of national ownership. And so that our relationship with them has been very much one of working closely together, but the program is fundamentally owned by the authorities, which is the ideal for our membership.
QUESTIONER: Can I follow up on that?
MR. DAWSON: Sure.
QUESTIONER: I'll give you something specific. Do you think that your decision to withhold $1.3 billion a couple of weeks ago helped unleash the riot and the looting?
MR. DAWSON: Well, actually, a couple of points on that one. First of all, a major Washington-based newspaper this morning had the chronology rather wrong in that regard, where they stated that the deposit freeze came after that announcement, which is not true. In fact, it was the other way around. The deposit freeze was December the 1st, and our indication to you all about the inability to conclude the review was December 5th. So you're not responsible for that, but I think that's an important point because the chronology is an important issue.
The inability to conclude the review was a consequence of the inability to meet the targets under the zero deficit law. That is a decision that flows naturally from the authorities' owns desires, commitments to make it. And the authorities I think fully understood that. The program was in the judgment of the staff and the management not sustainable. And if you look at the orders of magnitude people are talking about, $1.26 billion, which is I think the amount it was, it was not an amount that was going to, you know, seal the deal.
QUESTIONER: You were implying that the design of the plan by the Argentine authorities was restrictive in terms of what the IMF could have done?
MR. DAWSON: The Argentine authorities have a zero deficit program, law, which they passed, which is an integral part of their agreement with the Fund. So there was a clear inability that the Minister noted when he returned to Argentina, an inability to meet the terms of the law. The Fund lending was supportive of the law. I don't think that there's an issue that comes up there.
QUESTIONER: Do you have a diagnosis of the situation, a group of people studying the contingency plans, I mean, you are waiting for the new authorities, but I imagine that you are...
MR. DAWSON: I think it's fair to say the staff are always looking at alternatives and contingencies.
QUESTIONER: A specific group of people doing that?
MR. DAWSON: There are any number of groups of people doing it in a variety of contexts. But certainly we look at alternatives and options, and in the present situation with the change in administration, we are looking at how to go forward. But the main need is to have authorities to discuss, because a Fund-supported program is a program where we work with the authorities to help them, give them advice in terms of their developing a program.
QUESTIONER: I have two questions. First, specifically, are you in contact with the U.S. administration? Are they asking you to do something or pressuring the IMF or asking them to take faster action on Argentina? Second, a more general question, theoretically speaking. When the IMF is confronted with a situation such as in Argentina where you're having social unrest and a very unstable political situation, does the approach of the IMF change? That is to say, your degree of flexibility in how you approach plans, is it a factor in how you deal with a certain situation?
MR. DAWSON: I'm not quite sure how to answer the latter question. It may be too theoretical. On the former question, as I indicated, we've had discussions recently in the executive board, and I have taken note of Secretary O'Neill's comments last night, with which we would agree in terms of the need for a sustainable program. So certainly for many of our shareholders, we have been in touch with them in this situation.
If you'd like to try to summarize that last question, I'll try to answer it. But I had a hard time following it.
QUESTIONER: Is the prospect that an IMF solution may, in fact, not be socially tenable in the...
MR. DAWSON: Absolutely. This is what the entire concept of ownership is about, to have a program that is supported and owned by the country in a political and economic and social sense. That is what ownership is about.
QUESTIONER: Going back to the question of sustainability of the program, since Mr. Rogoff was good enough to tell us what we already knew, which is that the current mix of policies is not sustainable, does the Fund have an opinion about what is the sustainable mix? And would the Fund share it with us or, if not, why not? And what will take the Fund to share this opinion since, if the government of Argentina continues to do things that are obviously not to the benefit of the country, is the Fund going to just keep the public attitude of not saying what it thinks about what should be done?
MR. DAWSON: No, excuse me, I think we have made it clear what we think, which is that, you know, we stand ready to support the authorities in the program, in programs —this is general, leave aside Argentina in this specific case — programs that are sustainable. We came to the judgment that we're not in a position to recommend completion of the review because it was not at that point sustainable. Now, in terms of going forward, which is the next part of your question, I think it would be highly inappropriate for me to announce here these views, which actually I'm not in that sense privy to. The first step is for us to be in consultation with the new authorities as they develop their program, and that's, I'm sure, what will be happening.
QUESTIONER: No formal Board meetings for the rest of the year?
MR. DAWSON: Well, I could easily say yes, no formal board meetings, but there could be informal ones. And I don't know. We are in effectively the Christmas recess, so there are no scheduled board meetings at this point. Whether there will be briefings or not is a judgment that can be made at any time over the course of the next couple of weeks.
QUESTIONER: And the Argentine program still exists?
MR. DAWSON: That is correct. That is correct. It has an expiration date, and so it does continue, yes.
IMF EXTERNAL RELATIONS DEPARTMENT