Thomas C. Dawson
Thomas C. Dawson

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Argentina and the IMF

Bolivia and the IMF

Ecuador and the IMF

Turkey and the IMF

Proposals for a Sovereign Debt Restructuring Mechanism (SDRM) -- A Factsheet

IMF Surveillance -- A Factsheet

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Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations Department
Thursday, December 19, 2002
Washington, D.C.

View this press briefing using Media Player

MR. DAWSON: [In progress] -- say that this is a major focus of our discussions at this point. We are having discussions with the Argentine authorities on a number of issues, and this is not a headline issue of the sort that perhaps it got over the weekend.

QUESTIONER: [inaudible].

MR. DAWSON: Certainly to some extent it is my job to manage expectations, I suppose, but I am not in a position to really give you much guidance on that. You know, we are certainly continuing to discuss with them. But I do not have or expect anything imminent at this point to announce. But it certainly is good that we continue to discuss and both sides continue to find it worthwhile having these meetings.

QUESTIONER: Could you for the less technically apt amongst us sort of explain what an Article IV discussion is?

MR. DAWSON: The Article IV is what is traditionally an annual review of a country's economy that is conducted for all countries, whether program countries or non-program countries.

Typically when you have a program country, a country that has a lending relationship, quite often the Article IV is linked to Board discussions of disbursements and so on. So it is not at all surprising that the Article IV discussion hasn't taken place because we have been continuing to conduct program negotiations without actually bringing anything to the Board. So basically with the passage of time--I think it has been essentially two years, I believe, since we actually had a Board discussion of the Article IV. So it was time for it to happen, and the authorities and we concluded that this was the right time to go ahead and have the Board discussion, which will be taking place, as I said, in early January.

QUESTIONER: A follow-up on that. If you do discuss Article IV at the Board level, does that mean an agreement is imminent? Are the two sort of--

MR. DAWSON: No. There is no conclusion to be drawn in either sense. It is simply that it was delayed, and I think we all agreed that it would be good for the Board to have an opportunity in some depth to discuss the situation in the Argentine economy. It does not preclude an agreement and it does not indicate that an agreement is not likely. It is neutral in that fashion. It is, however, a fact that one of the reasons that it was delayed was that we had program negotiations going on, and quite often you wait until the conclusion of program negotiations to actually have the Article IV discussion. But as I say, it is almost--I think it is two years since the last Article IV discussion, so the time was up.

QUESTIONER: What happens if there is no agreement by the time--by January 17th when this $1-billion payment is due to the IMF?

MR. DAWSON: We continue to be working with them to reach some form of an agreement, and we are certainly aware of that date and that pending payment. But it is not something that is affecting our discussions at this point. And I think it is premature as well as speculative to say what would happen at a later point when we are trying to work out to see whether we can come to some form of an agreement.

QUESTIONER: The new Turkish Government is planning to do a number of things, including an announced intention to postpone by one year the implementation of a bidding law, which I think is an integral part of the IMF-supported program. A second thing is they are planning to support hazelnut producers with some few hundred million dollars.

Are these deviations from the program? Any comments on Turkey? And, secondly, do we have an update on possible effects of an Iraq war?

MR. DAWSON: With regard to the last question, no.

With regard to the present status, as I think you know, there was a mission in Turkey, an initial introductory mission a couple of weeks ago to meet the new government, and we welcomed their support for the broad thrust of the Fund program. There is a full mission to continue the fourth review at this point. It has been in Ankara since December the 9th. They will return in the next few days. I am aware of the first one of the issues that you raised. I was not aware of hazelnuts. I will educate myself. But I would expect, given the nature of our missions in Ankara, that they will have an end-mission briefing. That is typically what they do, and so I just would have to beg off until that point because I do not have a report from the mission in terms of how the discussions are going.

QUESTIONER: [inaudible].

MR. DAWSON: No, just simply that, you know, we had good initial introductory discussions with the authorities, welcomed their strong indications of interest and willingness to work with the Fund and in the broad thrust of the Fund program, and the fourth review mission that is presently in Ankara is continuing those discussions.

QUESTIONER: A couple of questions. The first one on Ukraine. The Ukrainians also have a new government and a new central bank chief. So have you had any initial contacts with them? Do you expect any such contacts in the near future? What are your expectations for the resumption of the program for Ukraine?

MR. DAWSON: We have been in contact with the new government. In particular, the staff based in Kiev had met with the First Deputy Prime Minister and Minister of Finance as well as with the Minister of Economy. The government has expressed a desire to engage in discussions on a precautionary stand-by arrangement. To this effect, a mission is planned to Kiev in February, and by then the government has indicated to us that it will have elaborated its economic reform program.

QUESTIONER: Secondly, the Moldavians. The Moldavians were here yesterday, and I understand you are not ready at this point to complete the review of their program. Do you have any timeframe in mind as to how soon it can happen?

MR. DAWSON: No, I do not have a timeframe for that, and I will have to get back to you on that.

QUESTIONER: Okay. And one last thing. The Russians seem to be ready to resume borrowing in international markets this year. At least the Finance Minister has said that. Basically it is just refinancing their costly debts. Do you regard this as a prudent measure? Do you regard this as something that you would comment on?

MR. DAWSON: I do not have any detailed comments on it. Certainly the broad macro-management of the authorities over the last several years has been very, very strong, and I think it is not at all surprising that they would be looking at accessing the markets in a prudent fashion, particularly given that the markets have accorded them a pretty strong relative performance in terms of spreads and so on. So I think that it is obviously their decision. They are in the process of rapidly paying off the remaining Fund exposure. They ended the post-program monitoring earlier this calendar year. So I think it is not at all surprising, and actually in some sense it is a welcome development to see that the capital markets are willing to provide funding at reasonable levels to countries with strong performance.

QUESTIONER: On Argentina, as I understand, you were trying to downplay the significance of that $2.5-billion gap. Are you denying that this gap exists or was not--

MR. DAWSON: It depends when you started counting, at what point in time they say that we discovered this. I have no indication that we have, quote, discovered anything. So as I said, I thought the word "discovery" is not a very useful formulation. We are regularly in contact with them about the fiscal situation at both the federal and the provincial level as well as the financing requirements, and all the time, frankly, I get questions about a gap of this or a gap of that. And the only way I can ever answer those questions is if someone gives me a balance of payments table, shows me what all of their assumptions are, and then maybe I can figure out what kind of a gap they are talking about. So, yes, I am definitely steering you away from thinking that this is some major issue.

The fiscal situation there has been difficult. There is no doubt about that. So that is why we are in good, close discussions with the authorities on that situation. But that there is sort of a number or a new number that people are focusing on, I definitely would steer you away from that.

QUESTIONER: But if this gap exists, it is something--

MR. DAWSON: As I say, I do not know that it does exist. I am saying I do not know that it exists. I mean, I can produce any gap that you want for any country, as long as you let me make my own assumptions.

QUESTIONER: Do you have any comment on the private sector's opposition to the IMF's work in the sovereign debt protection areas that you are working on? You are quoted in the paper this morning as saying it is old wine in new bottles.

MR. DAWSON: I kind of like that quote myself. Not exactly original, but I haven't used it for a few years so I am allowed to recycle it.

The seven trade associations that had a press conference, I think a couple of days ago here in Washington, I think I would describe it as, in fact, reaffirming their opposition. In that sense of the word, it is old news. We are well aware of the concerns that many in the private sector have. However, we have had conversations with some in the private sector who are interested in and sympathetic toward this proposal.

We have a mandate from the IMFC from last September to work on a two-track approach, to continue working on collective action causes, but for the Spring Meetings to present to the IMFC language that could be incorporated in a possible amendment or possible proposal for an SDRM. So we continue on the two-track approach. This is a mandate we got from the 24-member IMFC representing our entire membership. We have had several informal Board discussions, I think at least one or two formal Board discussions, since September. We have actually another discussion scheduled for this afternoon. We will be having further discussions with the Board as well as in the sort of outreach sense, meeting with the private sector. We have had a number of meetings with the private sector. We have had meetings with emerging market economies. We have had meetings with developed country governments as well. So this is a process that is going on.

I have to say we were disappointed by some aspects of the statement. We certainly know that they have concerns, and we have tried to address these concerns. The proposal is, in fact, something that we take comments on and we try to see if they can be accommodated.

We, of course, have other interested parties who want a proposal that goes in directions that I guarantee the private sector is not interested in. So we are trying, as is often the case, to have something of a balancing act to get a proposal that can attract the broadest possible support.

But I would say I did find some aspects of their statement a little bit surprising. For example, when they said they did not think that there was any collective action problem that exists at all, that is a little puzzling if they are also claiming that they support collective action clauses. So I do not quite understand how they can reconcile those two positions. Certainly it is our view that there is a collective action problem, that the experience of the last 20 years or so, at least, has demonstrated that. And that is a view that is pretty clearly supported by our members, and that is why we are continuing on this effort to see if an SDRM proposal can be fleshed out that gets sufficient support. At the same time, as I said, it is a two-track approach, and we do continue working on the collective action clauses.

QUESTIONER: They are also stressing that the cost of borrowing will rise.

MR. DAWSON: I do not think there is any evidence of that. In fact, I think the idea would be that by having a greater degree of certainty in terms of a process if a country runs into an unsustainable debt situation, that indeed the holders of the securities would understand that there was an exit approach that can be taken as opposed to the sort of approach that happens now where a country gets into difficulty and you go into an agonizing process that can last for several years as values continue to atrophy.

I would also say the evidence of collective action clauses in terms of their existence in present bond arrangements, because it is a practice under English law, there does not seem to be any evidence that spreads are wider with the collective action clauses.

So I think, markets are quite able to discriminate in that regard, and, similarly, they have also made comments in the direction that they thought that some of the recent uncertainty in bond markets and in access in emerging market countries was because of the SDRM. I happen to think there is a lot of other things going on in the world that are more likely to explain what is going on.

QUESTIONER: On Bolivia, I understand you have here--or you had it this week, a mission from Bolivia. I would like to know if you can tell how the conversation is going on.

MR. DAWSON: Yes. The Bolivian delegation, led by Mr. Guillermo Justiniano, Minister of Sustainable Development, along with the Minister of Finance and the President of the central bank, is visiting Fund headquarters this week to continue negotiations toward a three-year PRGF arrangement. It is a follow-up to a mission that visited La Paz in November for the Article IV consultations as well as to begin the PRGF negotiations.

The talks, which will continue through today, are focused on pending issues related to the design of the fiscal program and of a corporate financial sector reform strategy. The latter will be developed in close consultation with a joint Bank-Fund team which is conducting an FSAP--Financial Sector Assessment Program--for Bolivia, and the first FSAP mission visited La Paz in late November as well. So that is our status. I do not expect we will have a further statement beyond that.

QUESTIONER: On Argentina again. First of all, the January 17th payment, is that one that can be extended or postponed? And if so, for how long?

MR. DAWSON: No, it is an already extended SRF payment, so it is an obligation as opposed to an expectation.

QUESTIONER: And, also, the Spanish President was here yesterday and made some comments about--having his meeting with the Managing Director, and his statement was that the time is now right for an agreement with Argentina. Obviously they have strong reasons for wanting the situation there to stabilize.

Does the IMF agree with that statement? And what kind of influence does that kind of a meeting have on the discussions?

MR. DAWSON: Well, I agree with your latter characterization. Everyone has an interest in hoping that the situation stabilizes and that we can reach an agreement. So I do not think that is surprising, and certainly it is not at all unusual for major interested governments to express their views to the Fund. And, indeed, the Managing Director did meet with the Prime Minister at Blair House, and we share the desire to reach an agreement, and that is exactly what we are trying to see if we can do.

QUESTIONER: But do you share his assessment of the situation?

MR. DAWSON: The assessment that now is the time to reach--is that the question? I mean, we hope it is the time to reach an agreement. But, you know, we have to reach an agreement to reach an agreement.

QUESTIONER: Two questions. First, did Mr. Köhler or other IMF officials already have meetings or contacts with the new economic team of the U.S. administration?

And the second question, how the IMF assessed the impact of the dollar going down on the international economy?

MR. DAWSON: With regard to the latter question, we do not comment on those sorts of currency movements. The markets make their judgments, and, you know, on a regular basis, Ken Rogoff through our WEO process and so on will comment on exchange rate relationships and developments.

With regard to the new U.S. administration, I believe you are referring to the new Treasury administration, it is my understanding that Secretary O'Neill stays in office until December 31st. I am not aware that we have had any contact with the nominee to be Treasury Secretary, although I would note just as a matter of some interest that there is indeed a new United States Executive Director at the IMF who took office on Monday, Ms. Nancy Jacklin, so that we are happy to have a new U.S. Executive Director here.

I am sure we can provide for you her biography, which is--this is an unsolicited advertisement, but an extremely impressive résumé, including being the person who first taught me about the IMF when she was a Treasury attorney in 1981 and I had joined the Treasury. So we are happy to have a new Director here, but in terms of the new Treasury, no, we have not. We continue to be in regular contact with the existing officials at the Treasury.

QUESTIONER: The Argentine Government is saying that now there are no technical obstacles to a deal. Would you agree with that assessment? What is your comment on that?

MR. DAWSON: We are obviously down there because we are discussing what needs to be agreed on and accomplished in order to reach an agreement. Whether you call that technical or you call that political or whether you call that management, I do not know. I mean, we still are discussing and trying to find the elements we can agree on and whether it is sufficient for a program to go forward. So I do not want to get hung upon on what the word "technical" is. We are in contact with them, and we are trying to reach--see what kind of progress we can make.

QUESTIONER: What is the status of the talks with Ecuador? And, also, how long do you think Uruguay's review is going to be delayed?

MR. DAWSON: As far as Ecuador goes, we have a fact-finding mission in Quito that will be there until the end of the week. The mission has focused on the fiscal and financial situation during 2002 and is attempting to work--or is working with the authorities to help develop projections for 2003. The mission is also expected to meet with the transition team of President-elect Gutierrez before returning to Washington.

As far as Uruguay goes, I do not have an update in terms of when we would be able to go forward.

QUESTIONER: So just on Ecuador, are they working, are they negotiating? Are they going to start--

MR. DAWSON: No, we are re reviewing the 2002 performance and trying to get together on the prospects for 2003. In Argentina you have what you call the pre-election phase. I do not know whether I call this the pre-negotiation phase. It is obviously with a view toward seeing how we can assist them going forward, but with the new government not having taken place, I wouldn't call it negotiations in that sense. But that is certainly--the context in which it is taking place is the context in which we can assist the authorities.

QUESTIONER: Can you list again or repeat again at this moment the main obstacles to an agreement with Argentina?

MR. DAWSON: I really do not think that is particularly productive or necessary. I mean, you can go back to our earlier statements. We are focusing on how we can help them. We recognize that it continues to be a difficult situation. They understand, I think--and you certainly can ask them--that we are truly trying to help them and seeing whether we can work something out. I just would leave it at that.

That is one reason why I did not particularly like the idea of there being a two and a half billion dollar gap as sort of an issue. The reality is we are trying--on a wide range trying to see how we can reach an agreement, what kind of an agreement it might be. And I think it is a little too sort of false specifics to focus on individual measures. And clearly we are looking at our core issues of fiscal and monetary to see how the program fits together. We obviously need to have a sustainable fiscal situation as well as a workable monetary anchor. And that is obviously--that is what we are focusing on.

QUESTIONER: Is there any problem for an eight months or seven months agreement?

MR. DAWSON: I do not think we have technical menus. I do not believe there is any restriction on terms of length of agreements, no.

QUESTIONER: As I understand it, the major issue that is outstanding with Argentina are the "emparos". Is that the major issue, and how do you think you can solve it?

MR. DAWSON: Again, I steer away from saying "major," you know, there is "the major issue." When I talk about a workable monetary anchor, the emparos are clearly involved in that, yes. But I specifically, in a general sense, focused on both the fiscal situation and the monetary anchor. The emparo fits into that. But I would steer you away from focusing on individual, you know, deal-breaker issues. Rather, we are trying to see how we can work out and if we can work out an arrangement. So the emparos are certainly a concern to us, have been for some time, but I certainly would not describe them as the issue. And they are an issue that exists in a broader context of monetary anchor.

Thank you very much.

[Whereupon, the press briefing was concluded.]




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