Argentina and the IMF
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Transcript of a Press Briefing by Thomas C. Dawson
MR. DAWSON: [In progress] — the IMF, and this is another of our regular press briefings. As usual, the briefing will be embargoed until approximately 15 minutes after its conclusion, and we'll set a precise time at that point. I'd like to make a few brief announcements, comments, before I take your questions.
We expect the Managing Director will be holding a press briefing here in about two weeks, toward the end of the year. I don't have a precise date. I would say around the 15th. I think this is a—we've decided perhaps it would be useful to have a year-end review, and that sort of fits in between our fall and spring meetings. Whether this becomes a quarterly thing I think will be up to the Managing Director and my successor to decide, but I think that the next press briefing will have a different face in front of the primary microphone with the Managing Director here. Then, of course, we will be going on the holiday, and we'll let you know what our expectations for January briefings are. But I expect we will have a couple in January.
As you probably know, the Fund's work program through the spring meetings is available under embargo on the IMF's Media Briefing Center. It will be released and posted on the external website at 11:00 a.m. today, and I believe Media Relations has embargoed hard copies for you here as well.
The visit of First Deputy Managing Director Anne Krueger to Brazil is underway. Today, Ms. Krueger will deliver a speech at the Colégio Brasileiro de Cirurgiões entitled "Mutual Enforcement: Economic Policy Reform and Financial Market Strength"—I think the English is harder than the Portuguese—and is meeting with the authorities. In fact, she has just within the last hour or so met with President Lula da Silva, and I believe we have a press release that has been issued. Certainly—do we have it here, too? It has been issued from Brasilia on her meetings, and she did have a brief opportunity at the end of that part of the visit to talk with the press as well.I saw a brief wire service story on that.
Deputy Managing Director Agustín Carstens will visit the Eastern Caribbean Currency Union region during December 5 through 9. The trip includes visits to four countries in the region: Antigua and Barbuda, St. Kitt's and Nevis, Dominica, and Grenada, as well as to the Eastern Caribbean central bank. Mr. Carstens is expected to meet Prime Ministers and other senior officials and members of civil society in each country. And Prakash Loungani, one of our most versatile economists [inaudible] back here will be [inaudible] both as the mission leader for Grenada but also as external relations support.
Continuing with Media Relations, I have, I think, three announcements to make today. First, Jeff Hayden, who's sitting back next to Olga, will be leaving—I guess you have left—as of midnight last night to return to his day job in editorial, but he's been filling in for the last year or so as a media relations officer, continuing, however, to function as what we call, I think, the systems officer here who makes sure that our tech equipment works and our tech planning works as well.
The second announcement is Connie Lotze is welcomed back to the Media Relation Division. For the last year, she has been working in the Current Publications Division on the IMF survey, but has decided to come back to Media Relations, and we welcome her back.
The third announcement is that press officer—and this is of relevance to those of you who have sort of somewhat more global interests—press officer responsibilities for countries in the Middle East region have been reassigned from Bill Murray to Olga Stankova. Olga will retain her press responsibilities for CIS countries as well. We thank Bill for his work on the Middle East and, Olga, welcome to work on the Middle East. And we will, I'm sure, keep Bill fully employed on other issues. Certainly the Media Relations Office will be busy in the six-nine months ahead with the Annual Meeting taking place out of Washington in Singapore.
I will now be happy to take your questions, but I would like to ask press—I'm sorry, welcome the press watching by the Media Briefing Center webcast. We already have a couple of questions that have been submitted, so I will try to fit them in. But if I cannot fit them all in, someone from the Media Relations staff will follow up on any questions that are submitted online.
And now I'd be happy to take your questions, but as usual, would you please identify yourself and your institutional affiliation.
QUESTIONER: [inaudible] our Minister of Economy has left. Mr. Lavagna has been replaced by Felisa Miceli. So first of all, I want to know the reaction of the IMF to this change. And, second, if Mr. Rato has been—we know that he has been in contact with Mr. Lavagna, but if he had any contact with Mrs. Miceli.
MR. DAWSON: Thank you. We certainly expect to maintain an active dialogue with the new Minister, Ms. Miceli, and her team, both via headquarters-based staff and our resident representative office in Buenos Aires. I certainly confirm that the Managing Director did telephone former Minister Lavagna to wish him well in his future endeavors and congratulated him for the service that he rendered to Argentina.
In addition, the Managing Director has indeed written to Minister Miceli to congratulate her on her appointment.
On the broader relationship with the Argentine authorities, I would note there haven't been any specific new developments in our discussions with the authorities since my last briefing, but to repeat, as with any Fund member, we have normal relations with Argentina and will respond to any request from the authorities.
QUESTIONER: Does the IMF have any comment on the decision of the European Central Bank?
MR. DAWSON: To raise interest rates by 25 basis points? Yes. Yes, this was, of course, I think reasonably well anticipated by the markets. Their action is understandable, as headline inflation has risen above their own set 2-percent benchmark.
However, the rise in inflation is on the back of higher energy prices and, in our view, underlying inflationary pressures remain contained. Therefore, while the case for a gradual withdrawal of monetary accommodation is building, it has not yet materialized. And absent untoward news on underlying inflation, further steps should [inaudible] solid evidence that the incipient recover is becoming self-sustaining. While we have indeed some evidence of some [inaudible] growth, the key to its sustainability, of course, lies in the implementation of comprehensive strategies of fiscal consolidation and reform, structural reform.
QUESTIONER: I would like to have your comment on the recent data of contraction of the GDP, especially with regard to the overvaluation of the currency and high interest rates that have been blamed for the reduction of exports and the contraction of the—
MR. DAWSON: I think I really would be best off referring you to the statement that Anne Krueger just recently made in Brasilia just literally a few minutes ago, including addressing in particular the question regarding the most recent growth numbers. I'm afraid I have to leave it at that since I—if I have a member of management who has spoken on the subject within the last hour, I don't think it's appropriate for me to add anything. [inaudible] your question.
QUESTIONER: Two things. What's the game plan about Turkey? It seems [inaudible] close to accomplishing of the Third Review or it's going to be a combination of the First and Second Reviews.
And, secondly, the government the other day announced plans for major corporate tax cuts, which would lose—which would cause some drop in the budget [inaudible] next year. What's your reaction and are you confident that the loss could be compensated by some other ways?
MR. DAWSON: As you probably know, given the way you asked the first part of the question, the Executive Board is tentatively scheduled to meet on December 9th to consider completion of the First and Second Reviews under Turkey's stand-by arrangement. The supplementary letter of intent which has been submitted by the authorities—let me...which has been submitted by the authorities covers a number of areas, including the 2006 budget, targeting of primary surplus of 6.5 percent, tax reforms, progress in integrating social security institutions, and implementation of the new banking law.
Given the time needed to allow for further consultation domestically, more time has been allowed for the approval of the social security reform law.
With regard to future—possible impact in the future on the budget, I think that is something that will be addressed as we get to the program reviews at that point in time.
If I might at this point then take one of the questions from the Media Briefing Center, from the Bucharest Daily News: Does the Fund have any intention to resume the stand-by agreement with Romania next year? And if so, how could the two parties resolve their differences regarding macroeconomic policies?
The authorities and Fund staff held discussions on the Second and Third Reviews under the precautionary stand-by arrangement in October. Discussions focused on the need to reduce excessive demand pressure in the economy and to advance the structural reform agenda. Despite extensive negotiations, no agreement was reached and the agreement--the arrangement, rather, is now off track. We will continue our policy dialogue with the authorities, and a mission will return to Bucharest early next year to conduct the Article IV consultations.
A follow-up on Romania?
QUESTIONER: [inaudible] your—the last part of your response, you declined to comment on the—
MR. DAWSON: Yeah, I mean, for 2006 we have the target and the structure—and the measures there, and so that's the basis on which we're acting, and I don't have any comments on the additional—the tax cuts that you referred to. I believe that the proper time probably to deal with that is the next time we have a mission.
QUESTIONER: Okay. Also, you said just December 9 and tentatively. Is that right?
MR. DAWSON: Yes, yes.
QUESTIONER: And does it depend on the submission of the new social security reform law to the parliament?
MR. DAWSON: Submission? I'll have to get back to you on that. You say "submission." I'm not sure whether it's that or whether it's tentative because everything on our Board agenda is tentative until we actually meet.
QUESTIONER: I mean, are you waiting for something—
MR. DAWSON: I'm not—I'm not certain of it. We'll have to get back to you. The 9th is, of course, a week from tomorrow.
QUESTIONER: Argentina. Yesterday, the World Bank highlighted the necessity of more investment in Argentina. Does the IMF follow these kind of things? Does it have any kind of comment to be held about this, of investments in Argentina?
MR. DAWSON: Well, I mean, I think the importance of an attractive investment environment, both for domestic and foreign investors, is important in any country, and we have indeed commented in the past that it's important in the context of Argentina. I saw those remarks by the Bank staff, and I don't think we have any—I have anything to add to them, and I don't think we have any disagreement with them in that regard.
I have a question from the Nestor Ikeda, Associated Press. Do you have a readout on Ecuador and/or the Dominican Republic? Indeed, we will have to get back to him on those questions. Actually, I believe in the context of Ecuador, we had some regular staff visits with the Ecuadoreans, including, I believe, most recently a couple of weeks ago and continuing in close contact with them, and I don't have anything this morning on the Dominican Republic, but we will get back to Nestor and any of the rest of you who are interested.
QUESTIONER: [inaudible] U.S. Treasury, do you agree with the Chinese—with the IMF's role in the Chinese exchange question?
MR. DAWSON: I think I'm going to ask you to explain your question a little more before I try to deal with it.
QUESTIONER: There was a statement last week from the Treasury to the Congress about the exchange rate of China [inaudible] rather cryptic response to that. Would you explain that response?
MR. DAWSON: Well, certainly the U.S. Treasury did release last week their semiannual exchange rate report, I think is what it's commonly referred to. Under the terms of U.S. law, the Treasury does consult with the Fund and report in this report under consultations with the Fund. And that is reflected in that particular--in their report. It's a quite extensive report. It, of course, has been published, and you may wish to take a look at it on their website, including the appendix.
In terms of our views on the Chinese exchange rate regime, I think they are very well known, and despite the temptation, I will not repeat them again here, but we have—I believe I was asked at the last press briefing on this, and we have certainly supported China's move this summer in moving to a more flexible exchange rate system and have encouraged and continue to encourage them to take full advantage of the flexibility afforded them by this new system. And I think I would leave it at that, although you have a follow-up.
QUESTIONER: Yes. Are there any differences between your views and the Treasury's?
MR. DAWSON: Their report is there. To the extent that the report comments on the Fund, they express an agreement that China does not—they express a belief that China does not meet the requirements under the relevant U.S. legislation. That's a judgment that we--you know, we gave them our views on the Chinese exchange rate system, and on that particular issue there is an agreement. I don't think it's appropriate for me to talk about what we agree or don't agree on unless you can find something specific to ask me. I mean, I think we have a view that is, you know, consistent that we think the Chinese have made progress in terms of this new regime and it's appropriate and we urge them to take advantage of it.
QUESTIONER: Yep, that's me. Tom, coming back to the exchange rate, could you maybe just explain to us how the Fund could possibly accommodate any sort of greater—accommodate the U.S. request in its surveillance, in the IMF surveillance. How would that possibly work? I mean, we know that they've discussed—they've asked for a paper on this from the MD. How soon can we expect something like that?
MR. DAWSON: I'm not sure—I think you better go back and take a look at their statements in terms of what they have asked. I think I would—and you should ask them perhaps, you know, if you have any questions on what they've asked.
In terms of the Fund, we have a surveillance role with all 184 of our members, and we believe that we are fulfilling that role. Obviously, the issue of exchange rates is an important issue with almost all of our member countries, and the issue of exchange rates in Asia generally and in China in particular has gotten a fair amount of attention. And we will continue to examine, reflect, and report in a variety of fora and formats on our views on that subject.
So I don't—I think—we have a major surveillance responsibility, and we think that we will be fulfilling it, and I think to follow up on part of your question, it really is better addressed to the Treasury authorities.
QUESTIONER: Yeah, I would like to know—as you know, in Argentina they are trying to fight inflation through the control of prices and [inaudible]. I would like to know the view of the IMF on that, and related to the subject that we were just talking about, exchange rate and interest rate.
MR. DAWSON: Well, I mean, certainly I've indicated in a couple of the previous briefings here that the increase in inflation in Argentina is something that bears watching, and we know the authorities are concerned, I think appropriately, about it and they—you know, we will certainly be in touch with them on this and other issues. And as they seek our advice, technical assistance or whatever, we will be happy to provide that. And I don't think I should get into anything beyond that.
Just a couple more questions, although I think [inaudible].
QUESTIONER: Going back to the issue of this new economic team in Argentina, I wonder, I mean, how much does the fact to have somebody new in front of the team change the dynamic of the contact between the IMF and the Argentinean Government. Do you expect to have the same relationship that you have been having so far? I don't know how do you—actually I don't know how would you characterize that relationship.
MR. DAWSON: Well, I don't think I wish to—I mean, we certainly have an active relationship with the Argentine authorities. We have a resident representative office there. We are in regular contact with the authorities from headquarters as well. The Argentines, as it happens, have an Executive Director representing that constituency. It's an Argentine national at this point. So there are lots of contacts.
The fact that the Minister has changed obviously indicates that we will be dealing with a new Minister, but this is not at all unusual. We have 184 members, and I have to tell you that we quite regularly get announcements that are circulated at the Board about the selection of a new Minister or central bank Governor because typically one or the other of them is the Governor for the Fund, and that requires a legal notification. So it is something that is a matter of the ebb and flow of work and I'm sure will be accommodated. And when the new Minister indicates an interest in meeting and discussing with us in whatever format, as I've indicated, we will be happy to accommodate.
I think we're—go ahead. Sorry.
QUESTIONER: I wonder if you may have some comment on the Japanese monetary policy. Do you agree with the Japanese that inflationary pressure is almost [inaudible], and as you know, it is a big controversial matter whether the Bank of Japan should change the present framework of the Japanese monetary policy. So I need your comment, please.
MR. DAWSON: Well, I mean, I think we're certainly aware of that discussion going on in Japan, and our view has been that monetary policy needs to remain accommodative until inflation and inflationary expectations have been eliminated, and that as the Bank of Japan has indicated, the transition to a more conventional policy of targeting interest rates will need to be managed transparently and flexible with clear communications.
So I think—everyone I think is pleased with the developments on that front in Japan, and I think the authorities have a clear understanding, and I think they have a clear understanding of our views as to how to go forward, and I think there's a good—a very warm and good relationship.
Maybe two more questions. You're quite animated this morning.
QUESTIONER: You just said that you are watching the increase in inflation in Argentina, and you would be happy to give some advice to the Argentine authorities given that inflation and some other issues.
MR. DAWSON: [inaudible] won't accept your characterization. We certainly are watching it, and I have indicated that before. I also indicated that if the authorities wish to consult with us and ask our views, we will do that. It's predicated on the authorities. We are a member-driven organization.
QUESTIONER: Let me—I'll just mention that it would be about inflation and some other issues.
MR. DAWSON: Whatever issues the authorities are interested in discussing.
QUESTIONER: Would you be glad to give some advice about some—
MR. DAWSON: Whatever issues are that are within our mandate, and you can check Article I of the Fund Articles of Agreement to check what our mandate is.
QUESTIONER: Could you please remind me the amount of money to be released to Turkey at the completion of the First and—
MR. DAWSON: There is absolutely no way I can remind you, but I'm sure one of my staff will be happy to tell you.
QUESTIONER: It's a question about the way Argentina is fighting inflation. How does the IMF evaluate the effectiveness of using the targeting of money supply instead of the inflationary target?
MR. DAWSON: I think I will just—I will pass on that. Obviously it is an issue where we need to have, you know—you know, we are looking at it, the authorities are looking at it, and I don't think I want to talk at this point. It is obviously an issue that has come up, as I've indicated previously.
The last two questions here. Leslie gets the last question. I get the last word.
QUESTIONER: Okay. So I have the question before—
MR. DAWSON: Yes.
QUESTIONER: I have a follow-up on the Chinese exchange rate, and I guess a point of order or a request. The question is: Do you consider Mr. Bush's mission in China and the Treasury document useful steps to improve the exchange rate, Chinese exchange rate situation? The—
MR. DAWSON: I think I have a point of order on your question, but anyhow, go ahead.
QUESTIONER: The request is often you are telling us that you already made your—the IMF already made its position clear of something. When you are using this phrase, could you be more explicit on the position? Because sometimes it's difficult to have—
MR. DAWSON: Surely. When I refer to, for example, on the issue of the Chinese exchange rate regime, I have on a number of occasions, I think virtually every briefing for the last several months, had a question on China and given an answer, which has changed to a degree over time, but it's been a consistent answer. And I was in that context referring back.
When I make other references, for example, the question with regard to Brazil growth figures this morning, I referred back explicitly to Anne Krueger's statement of just a few minutes ago in Brazil because that's the appropriate reference.
But I take your point in that regard, and I don't think it is—I have already commented with regard to the U.S. Treasury's exchange rate report. I don't think it is appropriate for me to comment on the visit of a head of state to another country.
Leslie, last question.
QUESTIONER: My question is on Iraq. The Treasury said yesterday it was likely to come before the Board before the Christmas break. Is that your feeling as well? And how are talks—well, Treasury also said formal negotiations were over and it was just up to Iraqis to approve the 2006 budget. Is that your reading as well?
MR. DAWSON: Basically, we—I think we had already indicated that we hoped—and I will reiterate that we hope to bring the Iraq Stand-By Agreement to the Fund Board before the end of this month, December, which, because of our schedule, means before Christmas, which I think, therefore, indicates that it's consistent with what Bob Kimmitt said at his briefing yesterday. And that information I've just given you is updated as of this morning, so that is still the state of play.
Okay. Thank you very much, and we will lift the embargo at 15 minutes of 11:00, 10:45 Washington time.
IMF EXTERNAL RELATIONS DEPARTMENT