Argentina and the IMF
Turkey and the IMF
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Transcript of a Press Briefing by Thomas C. Dawson|
Director, External Relations Department
International Monetary Fund
Wednesday, March 10, 2004
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MR. DAWSON: Good morning, everyone. Thank you for observing a slightly later time for our regular press conference. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings. For planning purposes, there will be more briefings before the Spring Meetings scheduled April 24th and 25th; let's try to take questions on the Spring Meetings at later press briefings. Media Relations Division will be issuing press guidance on the Spring Meetings in coming weeks about particular events and so on, and as you should know by now, press registration for the Spring Meetings started on March 1st. If you haven't registered, please visit the online registration on the Fund's website.
Now I'm sure you do have questions, so as usual, please identify yourself and your affiliation, and a transcript of this briefing will be published on the Fund website later today.
QUESTIONER: I want to know if you can give us any details of the agreement reached yesterday in Buenos Aires, and also if you believe that the Argentinean government is negotiating in good faith with the creditors.
MR. DAWSON: Well, I think the press release, which you have there, addresses some of those questions. I would note, as a matter of clarification, that the Letter of Intent was signed in Buenos Aires just a few minutes ago, I think within the last 15 or 20 minutes. And the elements of the agreement are in the press release. They, of course, build on the agreement reached last September in Dubai, and so we are continuing. This would be the second review of the stand-by arrangement.
I would also anticipate some of you may have the question of whether the Fund in fact received the payments that were due, and indeed we have received the full payments that were due. In terms of details beyond what is in this release, I think I would in part direct you toward the authorities. I believe the authorities will be making the Letter of Intent available at some point reasonably soon. Our protocol is that this is a decision of the authorities to make. Once it is released, then we can help you get a copy of it. But it's the authorities' document, not ours.
In terms of the particular question that you asked having to do with the negotiations with creditors, I think if you look at the last paragraph of the press release, and when you get the understanding of what's actually in the Letter of Intent, you will see that there is a pretty specific course of action laid out, including particular groups of creditors that will be included in the meetings and at least a tentative timetable for negotiations.
QUESTIONER: The conversation between the Argentinean President and Ms. Krueger. Could you characterize a little bit more if you can in terms of details, and as well as in terms of the nature of it? It's not very common that this happens.
MR. DAWSON: It was indeed, as has been characterized by the Argentine authorities, a cordial conversation. It is, in fact, not unusual when approaching the conclusion of negotiations in an important program like this with a great deal riding on the agreement that there is contact between the management of the Fund and the head of state. I mean, there are a number of occasions where that has taken place, and indeed normally it becomes public in one fashion or another. So I would not characterize it as unusual. Indeed, I know that the Managing Director who recently retired had on occasion at particular times conversations with the head of state in Argentina. So I don't think it is in that sense of the word unusual. It's rather an indication of the importance that both sides attach to reaching an agreement, and I think we should all be satisfied that a mutually agreeable agreement was reached.
QUESTIONER: I'm told that one of the problems [inaudible] was the word "negotiations," that the Argentinean government didn't want to use the word "negotiations," and apparently the Fund insisted that the word "negotiations" with the creditors was included in the Letter of Intent. I want to know if this is true, and, second, why was it so terrible to put it or not put it, the word.
MR. DAWSON: I think the negotiations over the Letter of Intent are, in fact, negotiations, and what comes out in the end is what comes out in the end. I don't think we want to provide a blow-by-blow of what went on in the negotiations over the Letter of Intent, including over the word "negotiations."
I would note, however, that in the release that you have with you, you will see there is a reference in particular to the meaningful negotiations, and when you see the Letter of Intent, you will see what it says.
QUESTIONER: Is it the Fund's interpretation that "meaningful negotiations" means that the Argentine authorities are expected to be flexible in the terms of repayment? And a related question, I see nothing in the press release concerning another matter that was a big bone of contention about the threshold of acceptance that the authorities will hopefully aim for. Can you enlighten us at all on how that was resolved and how the Fund interprets what the Letter of Intent says on that matter?
MR. DAWSON: Once you see the Letter of Intent, you will see what's in the Letter of Intent. I would guide you away from assuming that all of the reports in terms of what was being discussed with regard to threshold were completely accurate. In other words, the importance of a threshold to be met to get a broad acceptance is clearly understood by all. There was a lot of focus earlier on particular numbers and so on. I think that focus was misplaced. The point is to get a consensus; the focus on numbers is misplaced. Now, the first part of your question again?
QUESTIONER: I understand you don't want to give us the Letter of Intent right now or something, but the word "meaningful negotiations" is right here in the press release, and it...
MR. DAWSON: "Meaningful negotiations" means sitting in the room with the group of creditors, and there's no one group of creditors that has exclusive right of representation. It is an inclusion of a broad group of creditors and groups that represent groups of creditors. And that process is reasonably well understood. And I would just leave it at that. Again, the Letter of Intent has rather more specific language, but it is clearly, in answer to the earlier question, the authorities and the creditors are interested and have made it clear to us they're both interested in negotiations, and that's good.
I will repeat, to avoid having to answer too many times follow-up questions, we are not a party to those negotiations, but we are happy that they prospectively are going forward.
QUESTIONER: But, sorry, just to try to pin you down on this question of does "meaningful negotiations" imply, in the Fund's view, flexibility?
MR. DAWSON: It is up to the two parties --with the creditors being in this context one party; obviously there are lots of different creditors-- to negotiate, and they will determine what is a successful process of negotiation. We are not dictating to either the authorities or to the government what the outcome of the process is in terms of what changes and what doesn't change. This is up to the negotiators.
QUESTIONER: Now, the question has to do with something you just mentioned on the role of the IMF in the bank's negotiations. Ted Truman, that has some years of experience in this business, told me yesterday that one of the problems of this is that, in his words, the Fund, in the case of Argentina, has abdicated its traditional role as an arbiter of what is possible in negotiations between countries and international creditors. And he sees this as a problem. You just mentioned that you continue not to be part of those negotiations. Is there any reassessment of the role of the Fund in the negotiations between Argentina and the creditors?
MR. DAWSON: Yes, okay. Ted Truman reflects one of a number of competing views of what the role of the Fund should be. He, of course, was in the United States government, Federal Reserve System, and has his particular views. And there have been points in history where the Fund has been more involved in the process of negotiations and points in history where the Fund has been less so, and at times it even varies from country to country within a particular time frame.
Our concept at this point is clearly that, in the case of Argentina and more broadly, the negotiations are best conducted by the authorities within a framework that the Fund may set, for example, the macro framework for the country program and so on, but that we are not in the process of dictating or arbitrating--because arbitrating might sound kind of neutral, but arbitrating also can be binding, so let's watch what that word means. I mean, you might say we're an arbiter if we're just sort of in a non-binding sense trying to help. But if you're a binding arbiter, that's something very, very different. I don't want to get pinned down, to be frank, on that, but I will certainly acknowledge that there is a difference of view as to how the institution acts in these situations. But we have been very clear in this context how we view our role at the moment.
QUESTIONER: To follow up, in terms of the Letter of Intent, is the Fund satisfied that the fiscal surplus of Argentina next year will be one that will make the negotiations between Argentina and the bond holders successful?
MR. DAWSON: I think you should look at what's in the Letter of Intent. But we certainly are satisfied with the Letter of Intent.
QUESTIONER: In the Letter of Intent, is the timetable such that there are actions expected on the Argentine government before the second review? Or is the timetable much longer than that?
MR. DAWSON: There are various timetables that are set forth. Before the second review? This is the second review.
QUESTIONER: I mean, in the next coming weeks, actions with the creditors to start things off.
MR. DAWSON: I believe there may be one or two things that haven't quite happened but I would expect in the next few days. But in regard to creditors, you have to wait to see the Letter of Intent. Nothing that I think is considered to be not likely to be achieved rather quickly. It's not as if there are --not in the traditional Fund prior action sense of the word. I mean, there are some things that haven't quite been accomplished, but they're expected to be accomplished pretty quickly.
QUESTIONER: Just to clear up, when will the Letter of Intent be made public?
MR. DAWSON: That question needs to be directed to the Argentine authorities. It's their judgment.
QUESTIONER: Just following up on an earlier question, does this Letter of Intent include a fiscal target for 2005?
MR. DAWSON: I don't have everything here, so I would have to follow up on that. There certainly is a framework that goes on to the out-years, but I don't have it. What I have here is still 2004. It would be too early to be doing 2005, anyway.
QUESTIONER: I want to switch to the other big story, the selection of the new MD. The last time around, it was a rather controversial process. What will be different this time?
MR. DAWSON: We certainly are hoping for a consensual process that goes forward with both deliberation but with an understanding that needs to be accomplished. Remember, we're only five days after the announcement of the departure of the former Managing Director. As we noted in the press release announcing that, the responsibility for selecting a new Managing Director falls to the Executive Board. The Board has had a brief opportunity to talk among themselves already. The process that goes forward is that the Board, both formally and informally, hold meetings and consultations, and that process, you know, will be going forward in the weeks ahead.
Certainly, I think there is plenty of opportunity for members of the press to be speculating on succession issues and so on. I've certainly seen a lot of that already. I remember well the experience four years ago in that; you are all free to speculate and I think there will be lots of that. At this point, we certainly hope to have a smooth process, but I think people are still to some degree adjusting to what the news was. And now I sense you have a follow-up.
QUESTIONER: Yeah, do you have any sort of time frame? Do you want this completed, say, by the Annual Meetings this fall or...
MR. DAWSON: I can use a phrase I used with Argentina. It's better that it be done correctly and smoothly than it be done too quickly. And better that it not be done too slowly, either. Like our porridge, it should be just right.
QUESTIONER: I don't know how to phrase this, but the role of traditions in the selection of a candidate, the geographical representation, has it been revalued in the approach of the IMF to the...
MR. DAWSON: This is ultimately a judgment for the membership to make as it goes through the Executive Board. Certainly if you look at the result last time, there were candidates from multiple regions. Whether there will be that this time I think only time will tell, and as time goes on you will be hearing more from a number of regions, and what they come up with they come up with. We are passive observers of this process. We are mere humble IMF staff waiting to find our new leadership, but at the moment are under the very capable leadership of the Acting Managing Director and her two colleagues.
QUESTIONER: In history, has there [inaudible] Acting Managing Director as Managing Director?
MR. DAWSON: No, there could not have been because since the creation of the Deputy Managing Director position, the Deputy Managing Director position has always been an American, and to date, every Managing Director has always been a non-American. Therefore, it's never been the case.
QUESTIONER: Did the Board already discuss the kind of advisory group it has to create? And when do you think the advisory group would be...
MR. DAWSON: No, I believe the Board had an initial meeting simply to reflect on the fact that this was an issue they were going to have to be dealing with. So, in that sense of the word, it was a preliminary meeting. As the Board goes forward in its deliberations, we will be working on an approach to keep you informed in terms of their deliberations. But it has been just barely organizational at this point.
QUESTIONER: But the Board [inaudible] stay with the procedure the Board suggested and the IMF approved three years ago?
MR. DAWSON: You're talking about the working group report. The Board certainly has that as a document that was prepared, both the Fund and Bank Boards prepared it, and it's available on the website. Precisely how they go forward is still to be determined.
QUESTIONER: Another problem country, Turkey.
MR. DAWSON: It's not a problem; it's an opportunity.
QUESTIONER: The IMF team is presently in Turkey for the seventh review. The government's early decision for high pay raises has caused a financing gap, and the IMF has already asked the Turkish Government to cover that. There is already a package to cover that financing gap. Are you happy with that? Do we have a time frame when the review could end? And, lastly, the program is to end at the end of this year or early next year. Do you have anything on your mind about how the Turkish-IMF relationship could continue after that?
MR. DAWSON: The answer to your last question, it's very much up to the Turkish authorities as to how they wish to proceed when the program ends. As I have said on a number of occasions, it has been a very successful program. When there have been issues such as in the present context, the need to make further fiscal adjustments or in other contexts structural adjustments, the authorities have always acted with dispatch and efficiency to achieve the program targets. That is exactly what the present mission is looking at, the steps needed to achieve the 6.5-percent primary fiscal target for 2004, as well as discussing some of the structural reform agenda.
So the mission has been there for a week or a little bit more and is expected to go through the end of this week. And as far as I know, we are on track. As is traditional in the context of Turkey, I expect that Mr. Moghadam, who is the mission leader, will be doing a press statement at the conclusion of the mission. But as far as I know, everything is on track.
QUESTIONER: Just back to Argentina. You characterized this latest Letter of Intent as building on the original agreement. I wonder if you could elaborate on what exactly has changed in the requirements of the authorities today other than a few words. And is there a specific mention of the Global Committee of Argentine Bondholders in this new Letter of Intent?
MR. DAWSON: It is not for me to say what words are or are not in the Letter of Intent. That will become clear when the Letter of Intent is out there. I think as you can tell clearly from the press release, the authorities are committed to negotiating with broad groups of creditors, and that certainly does include the GCAB. But in terms of what actual words are in the agreement, that is for when the Letter of Intent becomes public.
The first part of your question is actually a very good question because I think this is something occasionally we need to be reminded of. The original program was agreed back in September, and there was a Letter of Intent there. It set forth a notional schedule for reviews, including timing, and it set forth the length of the overall program agreement and basically a path.
When you have reviews, there are subsequent Letters of Intent. Every Fund program works this way. And every Letter of Intent within a program is building on what was in the previous Letter of Intent or the original Letter of Intent. In that sense of the word, in a program in one sense nothing is new, and in another sense things are constantly changed because a framework is set up at the beginning of, as in this context, a multi-year agreement. And then every time you have a review, you are reviewing the progress on it; some things are achieved, some things may not be achieved. So deadlines slip and so on. There is the idea that something new is added to a program; it's a little hard to define what new is because elements of a fiscal target or of a monetary target or financial restructuring or of the utilities issue or negotiations with creditors, every one of those was in the original Letter of Intent. What comes on in subsequent Letter of Intents, as it were, is an updating of where we are from the original Letter of Intent.
So, yes, some of it's numbers, although in the case of Argentina it's quite clear that the numbers have been very good. Clearly, as the press release notes, the growth, inflation, balance of payments, reserves progress in Argentina has far exceeded the Fund's expectations, and I think probably even the authorities' expectations. But yes, it is just words, but words matter. I hope you all recognize that, too.
QUESTIONER: You said that in the discussion about the percentage of participation of the creditors in the negotiation there was never mentioned a number, that the Fund never...
MR. DAWSON: No, I didn't quite say that. What I said was I think there has been a lot of focus on numbers. I don't think there is any magic number. You can see how that issue is dealt with when the Letter of Intent is available.
QUESTION: But there was never...
MR. DAWSON: There's always been a lot of talk about this or that number. I think the key is to get an agreement, which needs an adequate threshold. But there is no magic threshold that anyone can specify with precision.
QUESTIONER: So the 80 percent that was mentioned...
MR. DAWSON: You'll see what we come up with, or what the authorities have put into the Letter of Intent when it comes out.
QUESTIONER: By "meaningful negotiations" one could assume this means no impasse between Argentina and the creditors. Who will be the arbiter, how the arbitration is going to work for this no impasse to be arrived at?
MR. DAWSON: Well, first of all, there can be impasses in negotiations. This is part of negotiations. There can be an impasse, and impasses can be resolved. That's part of the give-and-take process. And it's quite natural that one side presents something, and the other side says no, and then they come back and forth. So it is a back-and-forth process. I will go back to the previous one. There is not an arbiter in this process. I mean, this is between the creditors and the government of Argentina.
QUESTIONER: I want to ask about the possibility that in the process of restructuring Argentina's debt the Fund itself might accept some sort of restructuring. There are quite a number of people, as I'm sure you're aware, who are not particularly hostile toward the institution as an institution, but who nonetheless feel that the loan that the Fund made, particularly in August of 2001, in retrospect was extremely ill advised and that this saddled Argentina with a substantial amount of debt that became even more substantial after their currency was devaluated, and that in the process of restructuring the country's debt that the Fund ought to in some way either accept some responsibility for that or help the restructuring process by taking some sort of writedown. My question is: Has that idea been considered or discussed at all at the Board level? And if not, why hasn't it or why shouldn't it be considered?
MR. DAWSON: The concept of the Fund as a preferred creditor is fundamental to the institution. The issue you raise as well as our role as a preferred creditor is always something that comes up.
You noted August of 2001. That was a point at which the markets were, in fact, not in a position to lend to Argentina, and the Fund played its traditional role of lending when others won't lend. That's one of the reasons why we have a preferred creditor status. We have 184 member countries, and to my knowledge, there is virtually unanimous support for the role of the Fund as a preferred creditor.
There is nothing wrong with this debate taking place, and I'm well aware of and I think I'm a former colleague of some of the people who have raised this concept there. And they are certainly free to express their views. But the institution's traditional position as a preferred creditor is valued by the international financial community, and we continue at this point in time to provide substantial assistance to Argentina, including in the context of the present stand-by arrangement. So the Board is not unmindful of these views. The management and the staff are not unmindful of these views. But we are operating under an approach, a philosophy that has served the institution and the financial community well over the years and that I think enjoys broad support of our membership.
QUESTIONER: I want to switch countries for a minute. It's on Ecuador. As you know, the Ecuadoran Finance Minister was in town last week talking to the IMF. I understand the Ecuadoran government is proposing to the IMF to extend at least for a year the current program with the IMF. Is the IMF in a mood to accept the Ecuadoran proposal?
MR. DAWSON: To give a little more context to your question, which is well founded, correct, and leading in the right direction, there was, in fact, a delegation last week here headed by the Minister of Economy and Finance, Interior Minister, and Central Bank President. This week, I'm sorry. This week. They were here Monday and Tuesday morning.
The authorities met with staff and with Ms. Krueger, and, in fact, in view of the short time remaining under the 2003 stand-by arrangement, the authorities indicated their preference to begin negotiations on a program for 2004 that could be supported by a new 12-month stand-by arrangement. And management and staff have agreed with the authorities to start these negotiations as soon as possible, and a mission to begin discussions on the elements, principal elements of the new program, is planned to visit Quito shortly.
QUESTIONER: When is this new credit of 3.1 billion, when is that amount going to be released [to Argentina]? Does that depend on the Executive Board?
MR. DAWSON: Yes, with the signing of the Letter of Intent, it is then transmitted by management to the Executive Board, a staff report is prepared, and the Board will meet to consider the second review, to conclude the second review. That meeting is expected later this month, and when we have a date, we will let you know. And the money gets disbursed at that point.
QUESTIONER: I want to know if in the negotiation with Argentina there was set a deadline to go higher with the lending into arrears policy. And the second is when the IMF is going to make the next payment to Argentina and how much. And the third is if the IMF is rethinking the way of lending in countries that have a big exposure like Argentina.
MR. DAWSON: The second question I think I just answered. The first question, I'm not quite sure what it was. About rethinking the lending into arrears policy?
QUESTION: Yes, go higher with that, to put any deadline that Argentina must negotiate...
MR. DAWSON: Oh, okay. When you see the Letter of Intent, you will see the framework for the discussions with creditors in the Letter of Intent. And then the last question again?
QUESTIONER: If it's planned to rethink the way of lending in countries with big exposure.
MR. DAWSON: It is our job to assist member countries in difficulty who are trying to resolve problems, and there is no doubt that in some cases these are countries that are potentially systemically important or large countries that require significant amounts of financing, and that is our role.
The overall philosophy on so-called exceptional access, which is Fund-speak for large programs, is one that the Board and our membership have regularly under review. But we operate to serve our member countries, and we have a track record of pretty good experience of assisting them. And I would just at random note that two other large programs that at times have come under criticism, present large programs that have come under criticism, of Brazil and of Turkey, are working quite well. And we have, in fact, implicitly in the question earlier, the prospect perhaps of Turkey moving off of a borrowing program. The present Brazilian program is a precautionary program, so the large programs get big headlines, but sometimes when the programs are successful and wound down, no one notices it. I do recall the former First Deputy Managing Director saying the definition of a successful IMF program is when nobody called it an IMF program.
Thank you very much.
IMF EXTERNAL RELATIONS DEPARTMENT