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Transcript of a Press Briefing|
By Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, August 1, 2002
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MR. DAWSON: Good morning, everyone. I am Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings.
I expect this will be my last briefing prior to the Board recess, which goes from August 12th to 26th. I suspect we will have a briefing in that first week when we are back, which will be the week before Labor Day. But we will, of course, be staffed during the recess to respond any inquiries you may have.
Before we get started, I would just like to note that we are releasing today a joint letter by Managing Director Kohler and World Bank President Wolfensohn, which was delivered yesterday to the two institutions' Executive Boards. The heads of the institutions are urging member countries of the Fund and Bank to step up where they can to aid Southern Africa, which has been gripped, as you know, by severe famine.
The UN launched a famine relief effort on July 18th, and Messrs. Kohler and Wolfensohn have made it clear that we will do what we can to support that effort. The accompanying press release explains this a bit, but if you need additional elaboration, you might check with Media Relations after the briefing.
QUESTION: Do you have a schedule today for the IMF Board meeting for Turkey? And do you think the early elections in Turkey would affect the economic program?
MR. DAWSON: We indeed have set a Board date for August 7th, and so I can confirm that. The program is on track, and we certainly believe that the continuation of the program policies in the period ahead remains key. I do not have any comment on the election.
QUESTION: About Brazil, could you tell us if the negotiations between the IMF and the Brazilian mission aims for the enhancement of the current program or a new program for 2003? And how long do you think they are going to be here?
MR. DAWSON: The discussion started yesterday, I think late morning. It was a good start. We are discussing the policies for the rest of this year and for 2003.
Regarding the nature of a possible new arrangement/augmentation, I do not think we can specify that at this point. I think it is fair to say that we are talking about a possible extension of the arrangement. The discussions will continue today, and I do not have a sense yet as to when they would conclude. But they were good discussions, and when we have something for you we will let you know. It is too early to talk about the precise nature of the new/follow-on arrangement.
QUESTION: Just a follow-up on Brazil. Given that there's such a small amount of money left available under the current credit--I believe, on the order of $1 billion--presumably the purpose of an extension through the end of 2003 would be to augment the amount and add some additional liquidity for next year. Is that a reasonable assumption?
MR. DAWSON: As I said, we haven't gotten there at this point. You are certainly free to speculate as you wish. But we have not gotten to a point yet where we are talking about size or whatever.
QUESTION: On the same point, Anne Krueger said Friday in São Paulo, talking about the same sort of possible agreement, that some form of commitment--
MR. DAWSON: Some form of understanding.
QUESTION: Understanding from--
MR. DAWSON: "Understanding" becomes "compromisso" but "compromisso" doesn't become "understanding."
MR. DAWSON: Seriously, that is what the problem is, because it goes both ways.
QUESTION: --- some sort of commitment, understanding, whatever phrase you use, will be important for the success of these negotiations.
Related to that, I would like to ask you--obviously, any understanding would be based on the continuation of current policies that the IMF has always praised the Brazilian Government for. The question is: If the policies are good, why are we having the crisis?
MR. DAWSON: Well--
MR. DAWSON: That was the most misleading introduction to a question that I have heard in a long time.
Obviously, the markets are quite nervous about political prospects in Brazil. There are also broader concerns in terms of nervousness of markets generally. This has been noted in the industrial countries in terms of spread widenings and as well as in emerging market countries. So there is a great deal of concern in markets, and this is part of how markets work.
And so that is, I think, the basis for the situation we are in now, and the authorities--I would repeat what I have said before-- have proven themselves very capable and adept at responding to pressures of this sort and at taking the kinds of measures that are necessary to deal with them.
It is a changed circumstance as opposed to earlier in the year. The markets generally are more nervous, and I think the political questions, as one gets close to election, naturally become a little more visible.
MR. DAWSON: I indicated several weeks ago at one point when there had been an expression of support on the part of at least one of the major opposition candidates for the government's new primary surplus target--that is an indication of support. But I think as we go forward, we see what a potential new program would include; then you would see what kind of political support is needed. If you wish, this is the same concept that we talk about a great deal in terms of ownership. Ownership does not mean that it is owned only by a government. It has to be owned in the political process.
What the nature of the understanding would be, I cannot say. People speculate about examples with probably the most prominent speculation drawing on the Korean example. I do not think that this is what people are talking about. But, fundamentally, this is something the Brazilian authorities and their political system will have to come to an understanding on. It is not something that we specify. It is natural that any Fund program needs to have a sufficient amount of political support within any country in order to have the prospect of success.
So it is not an unusual concern. It gets obviously a great deal of attention given the importance of Brazil, given the proximity of the elections and the nervousness of the markets.
QUESTION: Is there an understanding--is it clear that this, whatever is being agreed, has to be agreed quite rapidly or, otherwise, it will be too late?
MR. DAWSON: I just do not think I could follow that entire chain there, but certainly it is a matter of some urgency given the nervousness in the markets, the pressure that is evident. So it is being tackled on an active, urgent basis. But I cannot specify deadlines and so on or drop-dead dates and so on. That is not the nature. But it clearly is something that is being worked at very intensively, which is, you know, why the authorities dispatched the mission so promptly.
QUESTION: A quick follow-on on Brazil, then another question.
You talk about you are going to be looking at and what is needed for the rest of this year and next year. What particular policy concerns does the IMF think needs to be addressed in this new agreement or extension or whatever form it is going to take? I mean, for example, in Argentina you mentioned the monetary anchor was key. What are the key things that are needed in the Brazil program?
MR. DAWSON: We are at a point where we are discussing it with the authorities, and I do not think I want to go into any detail in answering that. I think clearly what is needed are measures, measures that have credibility with markets, but also credibility in terms of the likelihood of implementation. And, you know, when we have something for you in that regard, certainly we will let you know.
There has been a fair amount of speculation in the Brazilian press as to some of the measures that are necessary. But I do not think at this point with the team up here in these discussions that just started yesterday, I do not really feel like being specific. But, you know, you are all, of course, free to do some of your own speculating.
QUESTION: And the other question that I had was: With the situation in Uruguay, is the IMF more concerned now about spillover and sort of a regionwide crisis? Does the thing sort of snowball?
MR. DAWSON: Well, I think we have said from the beginning with regard to Uruguay that we do see that Uruguay is clearly a case of, you know, a neighborhood effect that has spilled over to them because of the interlinkages with Argentina. And I think that is a very clear case of that.
As you look at the other countries in South America, I think each one of them has, as it were, their own story as to the circumstances that they face and the difficulties that they face.
Clearly, the overall phenomena of the markets being nervous and spreads generally widening is something that is common to all of the countries. However, the other circumstances for each of the countries are quite different. You have some countries that are dollarized, other countries that are not. The pressure on some of the dollarized economies has been more intense than I think some people had expected. You have the electoral cycle in Brazil, which is a phenomena that is not necessarily common with some of the other countries. So each of them has their own story.
Clearly, there are a variety of factors, but they do differ by country, and I think it is very hard to make generalized statements other than the broad one that I noted, which is indeed that the markets are nervous. That can be seen with the performance of spreads.
But, again, even the spread performance varies very much by country and by region as well.
QUESTION: How will the U.S. Treasury position to new aid to Brazil, Argentina, Uruguay, highlighted by Mr. O'Neill's comments to Fox News Sunday, affect negotiations with the Brazilian--
MR. DAWSON: First of all, I do not think that is a correct premise, and I do not think it is up to me to discuss Treasury positions. I think you should approach the Treasury.
As I recall, the White House on Tuesday, I believe, put out some statements, and I think the Treasury has as well. But those are questions that are directed toward them, not toward us.
QUESTION: Excuse me, but the U.S. is the main member of the--
MR. DAWSON: Your premise is incorrect, so why don't you ask the Treasury or the White House what the U.S. position is?
QUESTION: What's your take on it?
MR. DAWSON: My take is that your premise is incorrect.
QUESTION: The Argentines say that they have now met the conditions and preconditions for a one-year rollover of repayments falling due and that the time is now for an interim agreement. What is your understanding of the imminence of an interim agreement with Argentina?
MR. DAWSON: We are indeed engaged in discussions with the Argentines about a possible Fund-supported program. There is a monetary affairs mission that is there at the moment discussing a number of banking-related issues.
We expect that there will be discussions next week with the mission on fiscal issues. Both of those are areas where--contrary to, I think, the premise of your question, it is a situation where there is still work to be done. There clearly has been progress made, but there is still work to be done, and I think we do also need some view as to how going forward what we view as necessary--i.e., a monetary anchor--is developed. But so it is a situation where I would say discussions are going on, they are, you know, good discussions, but by no means has everything been signed, sealed, and delivered. The missions wouldn't be there if that were the case.
QUESTION: My question is about Uruguay. There seems to be a fair amount of urgency as far as they are concerned to getting some money right quick because their banks are closed, and without a loan it is going to be rather difficult to get them open.
The question is: How fast can the Fund act in these circumstances? And is there talk of getting some sort of bilateral assistance? And, specifically, is there any talk of U.S. Treasury money--obviously, I have put the question to the Treasury, but I put it to you as well. And generally, is there talk of--because of the difficulty of getting the Fund to provide an emergency loan quite so rapidly under these rather extreme circumstances, do you think--is there talk of getting some sort of bilateral, you know, emergency short-term loan there? And the second question about Uruguay is: When you say there are clearly evidence of a neighborhood effect, would you go so far as to say they are an innocent bystander? I mean, are their policies almost as close as one can get under this sort of situation to being ideal?
MR. DAWSON: Even innocent bystanders, when they are struck with difficulties, need to take measures in response. But I think it is fair to say that their policies were reasonably strong. Indeed, you know, the arrangement that we have with Uruguay started out as a precautionary arrangement. That is in some sense, you know, an indication of policies.
Now, your question about in terms of the discussions going on now, they are going on intensively. There is a sense of urgency that things need to be done. But, of course, again, this is the line that you have heard me say before. As soon as possible, sooner is better than later, but the right agreement is still what the goal is, and that applies to Uruguay as well.
I do not answer "Is there talk?" questions about bilaterals, so you can address that. I have seen speculations in the media and so on, but I talk about things that are actually happening. And if people are talking about something, they can talk.
I would, however, counsel a bit in the context of this particular country, but also more generally, there seems to be a bit of overreporting in terms of the imminence of actions. I have read over the last 48 hours any number of reports that we were about to agree to something, something was about to happen and so on.
I think we have established here in the last three years a pretty good track record about telling the media when we are about to have something and when we have something. And so I just--you know, you are obviously all free to report whatever you wish, but I think sometimes taking a deep breath is the case. You know, we are not in the business of springing things on you in an unexpected, surprise fashion, and when we have something, we will let you know in a timely fashion.
Some of you who are wire service reporters probably will get your bonuses, if not stock options, by being three minutes earlier than somebody else, so I understand that pressure. But there really has been, in the context of Uruguay in particular, some overreporting in this regard--overenthusiastic reporting, I guess I should call it.
QUESTION: About Uruguay, are you discussing fresh money, new money for Uruguay, or advancing the credit?
MR. DAWSON: We are discussing how we can support them, and I think, you know, I am not ruling--I am not picking which option. I am not ruling either out.
QUESTION: When you say overreporting, does this mean that it is not imminent really?
MR. DAWSON: Well, certainly when I have gotten calls at 10 o'clock or later the last two nights, it was overreporting then. As we can tell this morning, it is still overreporting as of ten minutes--five minutes of 10:00.
QUESTION: No, but seriously, I mean, the Minister of Economy of Uruguay said that assistance was coming. Is this imminent or not? Do we have--are we expecting--
MR. DAWSON: We are working urgently on it. When we have something, we will let you--we will let you know. I am not--I could never figure out how to define "is" and I am not sure how I can define "imminent" as well--or "eminent," which is our panel. Our panel, of course, was eminent.
QUESTION: I know you're not the Treasury spokesperson, but how Mr. O'Neill's visit next week in the region plays into the current--any announcement regarding aid either to Argentina, Brazil, or Uruguay?
MR. DAWSON: I agree with the first part of your question.
QUESTION: Since we always have one country on the hook and Brazil is back on the hook, would you say that Argentina is almost off the hook?
MR. DAWSON: I do not know how to answer that question. I mean, you know, we are in active discussions with both; I have gotten more questions on Brazil this week than on Argentina. That is fair to say. But that is not to say that my friends here are not keeping us busy as well.
QUESTION: Tom, just to clarify something. In regard to Brazil, you said there's a matter of some urgency. At the same time referring to a new program in 2003, you said it depends on ownership, development of the political process. So is your sense of urgency different from my sense of urgency, or we are talking about a two-part agreement?
MR. DAWSON: No, it is a continuous process. The markets will take encouragement from an agreement, from commitments, but not "compromissos" in that other sense of the word. Clearly, the markets look beyond just the next few months. That is why we talk about the balance of 2002 and 2003.
Clearly--and the markets need the reassurance urgently for that entire period. I think that is the way to square that.
QUESTION: A follow-up. So are you saying that just a simple agreement that would extend through 2002 is not an option?
MR. DAWSON: Yes, we think that what is needed at this point is an understanding for what would go forward into 2003, yes.
QUESTION: I wanted to check on whether you have anything new for us on the risk assessment for the global contagion that normally comes up. And, second of all, I have a couple of questions on the CIS.
MR. DAWSON: Okay. On the former question, I did make a reference to the reality that the markets are clearly nervous, but if you take a look at how spreads perform among regions, there is clearly a great deal of differentiation. So if you are talking about the contagion word as we dealt with it in, for example, 1998, we are clearly in very different circumstances.
With regard to a broader view of the global economy and risk prospects and so on, I think we are getting close enough now to our presentation in early September of the Global Financial Stability Report as well as Ken Rogoff's WEO outlook. And as we run up to that, I am sure you'll be getting leaks from both documents, and so you can speculate out of that.
Two more questions--on CIS--
QUESTION: I am sorry. I--
MR. DAWSON: Specific--
QUESTION: Yes, specifically, two things. The Tajiks and their debts, I understand the IMF is trying now to help Tajikistan to get rid of the debt burden which is very heavy. This is an issue of concern for Russia because Russia is a major creditor. How soon do you see Tajikistan becoming a member of the Paris Club? And what can the IMF do to help it--
MR. DAWSON: I want to congratulate you for completely stumping me, and we'll have to get back to you.
QUESTION: Okay. And another of a more political nature, in recent weeks the Board looked at the programs of a number of CIS countries. In at least two cases that I can remember, the reviews were completed despite there being shortcomings. There were waivers provided to those countries. Earlier in the year, we remember the Belarussian SMP being turned down. Can you now tell me that Belarussian shortcomings were greater than the others?
MR. DAWSON: No, we follow a case-by-case approach here, and we are not in the rating and comparison of our countries. The relationship with Belarus has clearly been a difficult one over time, and relations have not had the sort of program relationship we have had with the other countries, so I think that itself distinguishes it.
On Tajikistan, actually, I do have some material here, but I am not sure it is quite of as much general interest, so we will provide it to you.
QUESTION: [inaudible] pressure in countries that are dollarized is a bit more intense than in other countries in Latin America. What is the diagnosis of the IMF about--apparently that means that dollarization--the fact that dollarization is considered a problem--
MR. DAWSON: No, I think--I mean, I--
QUESTION: --[inaudible] what--
MR. DAWSON: I will give you an example. You know, dollarization, it clearly brings certain benefits, as, for example, a currency board did in the context of a country you know well (Argentina). But also there are obligations in the context of a dollarized economy in terms of, for example, the fiscal discipline, which is a very tough issue in dollarized economies because you do not have the potential to either have an exchange rate adjustment or to have recourse to monetary financing of the deficit. So that is an issue, and there are countries where, for example, the growth rate of government expenditure in a dollarized economy has been much higher than looks consistent with having a dollarized economy, because when you import the dollar as your currency, you presumably are importing the dollar's inflation performance as well, and it is hard to sort of square that circle.
So it is the same kind of dilemmas, different from the ones that currency board countries face, but dollarization brings with it policy requirements that are every bit as tough as in the context of a currency board or otherwise. And I think some of these difficulties have become clear.
It is also in the case of not necessarily formally dollarized economies where you have got a banking system with lots of deposits in dollars, those also put pressures on, and that is a context in Uruguay, even though the economy is not dollarized, a lot of the banking sector was.
QUESTION: Yes, but my mention was the fact of dollarization. You said that countries that are dollarized--
MR. DAWSON: No, I was thinking more in the context of countries that are dollarized. I mean, Ecuador would be an example.
Okay. I think that is it. Thank you very much.
[Whereupon, the press briefing was concluded.]
IMF EXTERNAL RELATIONS DEPARTMENT