Transcript of a Press Briefing by Thomas C. Dawson, Director, External Relations Department, IMF

February 13, 2002

External Relations Department
International Monetary Fund
Wednesday, February 13, 2002

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MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the IMF, and welcome to the latest of our regular press briefings.

Knowing that there is interest in the visit of the Argentine Minister and his team, I should start by noting that visit. They were here yesterday. We expect to see them again this afternoon. They were seeing other institutions, as well as the U.S. authorities. Today, the talks have gone well, and we look forward to meeting with them again this afternoon, and I would expect that we would have a statement at the conclusion of the meetings today. And so I would go out, and I think I'd like to leave that at that point.

I would also note that yesterday, I believe, David Hawley and his staff distributed the correspondence, a feedback questionnaire on IMF transparency, which I encourage you all to fill out and answer. I have to say I am somewhat hurt, however. In reading the questions asked, at no place are you asked what you think about the press briefings. I am assured by Mr. Hawley this is an oversight, though I'm a little skeptical about that explanation.

MR. HAWLEY: No comment.


MR. DAWSON: Anyhow, I'd be happy to take questions at this point.

QUESTIONER: What is your impression of the atmosphere surrounding the meetings with the Argentine officials?

MR. DAWSON: The meetings have been quite friendly and warm and a good dialogue. It is, of course, the first chance for the Argentine authorities to have met with the management of the IMF, as well as with the other institutions and governments around Washington. So the talks I think have been quite positive and quite cordial, and as I say, we'll have more to say this afternoon after they come back from the wrap-up session at the Fund this afternoon.

QUESTIONER: When you say that the talks have been cordial, can the Argentine public infer that things are showing a way of being resolved or it's just the normal dance of—

MR. DAWSON: No, I mean, clearly, the purpose of the entire process, and in particular of this mission, although the personal contact is important, is to work with the authorities and their efforts to help develop a comprehensive and sustainable program. So that is what our goal is, and that is the process that we're engaged in.

I do not mean to leave the impression that it is simply nice, in Portuguese bate-papo, but that we are, in fact, discussing the elements of the program and what needs to be done to be able to go forward, but, again, I say we'll have more this afternoon.

This is not—I think the presidential spokesman, Mr. Amadeo, I think did quite an effective job prior to leaving Buenos Aires, as well as when he arrived here in Washington, of indicating that this is a process that is going to take some time and that the purpose of this trip is not to reach dramatic agreements of any sort, and that should not be the expectation.

QUESTIONER: Would you say then that negotiations have begun, and is there a date for mission?

MR. DAWSON: There is, with regard to the latter question, there is not. We don't have a date for mission at this point. If you want to be a literally minded person, officially, negotiations have not begun because that's not the state of it, but obviously what we're talking about is a process that would lead to having a negotiating mission, for example. But we have no date or anything at this point. So that is not to say they are not discussing issues, but I think negotiating is not what is going on.

QUESTIONER: Can you explain a little bit more the difference between what they are discussing and what a mission would discuss? Because if they are discussing the program in a way, the mission [inaudible] to discuss the program. So why is not formally a negotiation?

MR. DAWSON: Missions go down and discuss targets, performance criteria, funding amounts and so on. This is more a context of looking at the program and getting to understand it better, but also asking questions and they are explaining it. So there is, clearly, a difference, but it is also on a continual, and there is a point at which negotiations clearly take place, and that is typically when there is a mission that goes down.

Clearly, the purpose of the discussions is to see whether we can get to a point where they have a program that can be supported by the Fund and by the international community. So that is clearly the goal, but I think we're playing semantic games, and trying to say when negotiations start is I think not—I mean, we clearly are in a process that hopefully moves in that direction and, indeed, is moving in that direction.

QUESTIONER: The longer we wait, the worse it is, in terms of confidence in the markets. One of the points that are being discussed, as we understand, from the IMF is exactly confidence, and what is Argentina doing in terms of that, but then you're saying it's a long process. So it becomes this whole issue that for a long time it has been a vicious cycle. So will Argentina have to wait until all of the points are agreed upon or will the IMF actually take a stand and say, okay, we're going to trust that things are going to happen. Because, if not, it's a vicious cycle, right?

MR. DAWSON: Well, your premise is fundamentally wrong. Confidence comes when the markets judge that progress is being made. If their judgment is that the discussions themselves constitute progress, they do. So I think people focus too much on dramatic announcements and so on. If progress is being made, the markets evaluate that. So I think operating, you know, the implication of that sort of a question is that we should be on a time table. I think that is fundamentally wrong. It is more important to do it right than to do it quickly.

QUESTIONER: Over the past couple of days, the peso has been floating, for the first time freely, and the value has held up fairly well. Is this some sign that what you were just saying about market confidence perhaps—the markets have perhaps interpreted the budget and monetary framework laid out by Argentina with some sense of confidence?

MR. DAWSON: Well, I think certainly the reopening, as we indicated previously, the reopening of the markets was something to be welcomed. This is now actually the third day in which markets are open, but I do think it is fair to say these are still early days, and we do, of course, have, as a general policy, not just in newly opened markets, which is clearly what this is, but in markets, generally, not to talk about day-to-day fluctuations.

QUESTIONER: Mr. Amadeo said yesterday or implied yesterday that there is some reluctance to trust Argentina at this time when he said that for 16 years Argentina has been saying one thing and doing another. So, taking that into account, my question is how difficult is it going to be this time to reach an agreement, you know, taking those words into account?

MR. DAWSON: I've had two or three opportunities myself to talk with Mr. Amadeo in the last days, and I'm not sure that I think that's what he intended the implication, as you say it, to be. Implications can be conjured up easily.

I think, clearly, Argentina is in a very difficult situation. The history of the Fund involvement is extensive, which is added impetus for what I indicated in answer to a recently previous question. That's why it's important to get it done right and not necessarily quickly. And I think the attitude and the approach which the delegation is taking I think evidences clearly that understanding.

QUESTIONER: For a long time, you and the Treasury Department were requesting Argentina to submit a sustainable plan. At this point, do you think Argentina has the plan?

MR. DAWSON: I take some exception to the characterization of that as being the U.S. Treasury and the IMF. I would note the G-7 communique indicated that, the Spanish authorities and others have all indicated that. This is, I think, what the international community wants, which is a comprehensive and sustainable program, and that's the basis on which we are working is to develop that, and obviously we think there's a basis on which to be having the discussions.

But, again, it's important to get this done correctly and not necessarily to get this done quickly. Faster is better than slower, but correct is the most important.

QUESTIONER: Have you been discussing whether or not you think that 15 percent is viable as an inflation rate this year in Argentina or can you comment on that?

MR. DAWSON: I'm not going to be discussing those kinds of issues, and you know better than that.

QUESTIONER: Okay. And then, parenthetically, you can continue talking about Argentina later, but is there any reaction yet from the IMF to what's happened in Venezuela with the exchange market there and the response to the market?

MR. DAWSON: Yes. With regard to Venezuela, we have taken note of the floating bolivar. And the authorities had informed Fund management about the general objectives of the measures over the weekend, and we certainly do believe that the measure go in the right direction, but we do need to evaluate them as more details become available. But this is, as I say, a step or measures that go in the right direction, and we stand ready to provide them whatever advice they may wish.

QUESTIONER: On Argentina, I wanted to know if you can elaborate a little bit more about the elements you are discussing of the economic program. You didn't really answer if you think it's sustainable or not, as it is now the program.

MR. DAWSON: There are still many elements of the program that are still being developed. If you go down and look, you will see there are regulations that haven't been published, there are various measures that are still being worked out. There are, clearly, as a budget is developed the budget has to be, you know, specified in greater detail.

So I think it is not possible to say, I mean, that's the context in which this is not in negotiation, because it is still a matter of fleshing out what the program is, but I think we clearly share the same objective which is to develop what we call, and the authorities call, a sustainable program. So I think there's a little too much effort to rush that, at this point. We are engaged in intensive discussions with them, so it's not a case of things not going on in as an intensive basis as possible.

Is it going to be possible to get a question on another country? No? Okay.


QUESTIONER: The Deputy Economy Minister of Argentina mentioned that Argentina needs $22 to $23 billion this morning. Is it just way too premature to be talking about numbers of money, and have there been any discussions?

MR. DAWSON: Yes, it is certainly premature to be talking about numbers. There is no package or set of numbers that are on the table. I don't know the basis. I've actually seen several accounts of that particular number. And, indeed, in the fuller accounts, the quote is also made that this is not something that is actually being discussed. So I can confirm that. That is not something being discussed. And I understand that is also the view of the Argentine team that is up here. We are not at the point of discussing packages or numbers.

I would recall for you—I can't get the precise date of the press conference—but there was a point about 18 months ago I think in one of these press conferences, where questions were asked that came out of Buenos Aires about sizes of packages and so on, with great deals of specificity, and I would just note that they wound up not being what ultimately happened, even though, indeed, in that case a program went forward.

QUESTIONER: Could you clarify that? You said that it's not really something that's being discussed. Is it that specific figure that's not being discussed or any figures at all—

MR. DAWSON: We are not discussing numbers at this point. This is not the point at which numbers are being discussed. It is premature.

QUESTIONER: Can you just clarify the amount that is left over in the old loan, and what exactly has to happen to that? I mean, do you basically have a whole new arrangement or you fold old money into the new money?

MR. DAWSON: There is approximately $8 billion remaining to be disbursed, approximately $8 billion under the old program. We can check the precise numbers, $8 to $9 billion maybe, I'm not sure. Closer to $9 billion. It fluctuates with the exchange rates. You can get it off of the Web. For that to become available, requires the program either to be modified or a new program to be instituted, with the money, in one fashion or another, rolled into a new program. I thought it was $8, but it's closer to $9 billion remaining. It's available on the web.

QUESTIONER: I'd like to ask you about the Republic of Mongolia, but I will not turn this into a carnival. On Argentina, Mr. Amadeo acknowledged yesterday that Argentina has a problem of credibility. He said the task here is to rebuild credibility. As you move in those discussion and further into negotiations, is it reasonable to expect that Argentina will have not only to adopt, but to implement some parts of the policy in order for this whole process to come to a positive conclusion?

MR. DAWSON: Is the question will there be any prior actions? To strip the question down.


MR. DAWSON: There are very few programs in which there aren't some prior actions. So I can't imagine that there would be a program without prior actions, but I don't believe anyone has gotten to the point where they're saying this needs to be done, you know, by "X" date or by "X" point in the process, and this can wait for 3 months and that can wait for 8 months. We're not at that point.

QUESTIONER: Does the IMF think that the Japanese authorities are taking the necessary measures to strengthen their financial system?

MR. DAWSON: Of the various questions I was expecting, other than Argentina, that wasn't necessarily the one that was going to be first on my list.


MR. DAWSON: But, as you know, the concern about the financial system in Japan is well known. The Fund has been, at the invitation of Japanese authorities, are getting ready to embark on a financial sector assessment program. We have been in consultation with their authorities through the Article IV process and staff visits. I think everyone recognizes the difficulty of their situation and the constraints that they are operating under.

So I think I would just leave it at that point. You will have the opportunity, before too much longer, to ask Mr. Rogoff, perhaps, that question when we have him teed up for you, at the latest, by the time of the WEO press conference.

QUESTIONER: I have a question about Enron. For years, the international community and the IMF have been emphasizing to Russia the importance of corporate transparency. Now some of my Russian friends are looking at the case of Enron, and basically they are saying, "Look, it's true that the corporate giants in the U.S. are not following these same procedures." I'd like you to respond to this, if you can.


QUESTION: And the particular question, also, is the IMF involved in any way in discussions with the American authorities on the situation surrounding Enron?

MR. DAWSON: We, typically, do not get involved in situations involving individual companies in a situation like this. Clearly, much of the work at the Fund in recent years in the area of transparency, standards and codes is directed at encouraging countries, institutions to provide enough confidence information that can be relied upon.

I think your question as to what the failure was in this case is better directed to those who have more of a formal responsibility for looking at that. But, clearly, the importance of strong sustainable financial systems, disclosure systems and so on, is a universal need. It is not simply a need that applies to just a particular class of countries or, for that matter, of companies.

QUESTION: But do you think that other countries may be involved in a similar sort of case?

MR. DAWSON: I don't think it's appropriate for me to answer that question. I think that we agree of the need for transparency and credibility in financial disclosure systems, and I think I'll leave it at that.

QUESTIONER: One of the points of the conversation between the Argentine officials and the Fund is the expenditures at the provincial level, and the Fund has been concerned about this for a very long time. My question is does the Fund believe that any budget projection could be credible or realistic if it doesn't include the provinces or if it doesn't limit the transfer of the federal government to the provinces?

MR. DAWSON: Well, I think, certainly, when we look at a fiscal situation, it has to include all levels of government. So that, clearly, goes to the first—the first aspect of your question was, clearly, yes. I mean, that is obviously part of the discussions. It doesn't make much sense to focus on just the federal level and not to take a look at state and local or, in the case of Argentina, provincial. That is the approach we take with every country. There is nothing unique to the case of Argentina.

QUESTIONER: Last week the Turkish lira lost about 7 percent of its value due to concerns that the United States could hit Iraq, and it recovered much of the loss this week. But, anyway, my question is do you think Turkey's IMF-backed program could resist an external shock that could be caused a possible military campaign in Iraq?

MR. DAWSON: I don't think I want to go there. Clearly, first of all, we do believe the Turkish authorities have made very impressive progress under their program, and I think things are going well. You correctly described the exchange rate movements of last week and this week.

And I will go back to a portion of my earlier answer on the fluctuations or the stability of the Argentine peso in the last 3 days is that we don't comment on day-to-day exchange movements.

QUESTIONER: On Mexico, do you have anything new on the talks for this contingency credit line? I understand that Mexican authorities say that they won't have anything firm until the budget was passed by Congress. Now I don't know if you have anything new on that.

MR. DAWSON: I'm unaware of that particular statement by the Mexican authorities, and we certainly are aware that there has been an interest in possibly looking at the CCL, but I don't have any updated news on that. I believe that is still the case that there is interest, but in terms of timing, I don't have anything which may indicate that your information may be correct. I just don't happen to know.

QUESTIONER: Can you update us on what's going on with money laundering efforts within the Fund, you know, what's happened since November in the meeting?

MR. DAWSON: Well, I think you can take note of what was in the G-7 communique this last weekend, as well, where they did certainly urge the Fund to continue its efforts. We are, of course, at heart, not a law enforcement agency, but we do have a role to play in strengthening financial systems and assisting our members in the fight against natural terrorism and money laundering.

This is an issue that I am sure we will be coming—not I'm sure—I know will be coming up again for discussion around the time of the spring meetings. I don't have an expectation of anything prior to that point being published, but I'll get back to you on that.

But, certainly, this remains an issue of great importance to the international community, as reflected in the G-7 communique over the weekend.

QUESTIONER: A follow-up. I mean, what activities, what actions have—

MR. DAWSON: We are working with our members in terms of helping them strengthen their financial sectors, their reporting systems, disclosure systems. This is done through the Article IV process. This is done, in some cases, through the country, I mean, to programs, if the countries are in programs, but it's also being done as a specific response to the interests of the international community in having the Fund take a look at this.

This is, in particular, done by the Monetary Affairs and Exchange—the MAE-Department and I think that's sort of where the focus of activity is, technical specialty, but it's being done on a systematic basis with a very wide range of our membership. As our membership has made clear to us, they would like us to be so involved.

QUESTIONER: I believe Mr. Köhler met yesterday with President Musharraf of Pakistan. What were they talking about, and do you have anything you can—

MR. DAWSON: Well, certainly, the Fund-supported program was in discussion, is under discussion. The program has gone actually quite well. This is a program that traces its history really almost a couple of years now, and progress over the last year, in particular, has been quite solid.

There is a review process underway right now. I don't believe we have an announcement on an actual agreement right now, but it could be coming quite shortly. When we do have one, we will let you know, but it's my understanding that they are very close to agreement. I know that there have been conversations as well with Minister Aziz, and Fund management and staff.

QUESTIONER: What do you mean by agreement? A review?

MR. DAWSON: There's a program review for the PRGF, yes. In other words, we are on track and we will shortly be in a position to conclude the review or to conclude the review at a point at which it would be able to come back to the Board.

QUESTIONER: Is that this week?

MR. DAWSON: Quite possibly, yes.

QUESTIONER:To the Board?

MR. DAWSON: No, no, no, the agreement.

QUESTIONER: Tom, one subject of intense discussion right now in Europe is adherence to the civility and growth pack target of a 3 percent deficit. I'm sure you won't want to comment on Germany, specifically, although please do so, if you do have a comment. But I'm wondering how you assess the relative importance of fiscal targets that are designed to boost confidence over the long term versus having flexibility in implementing fiscal policy at times of recession or economic slump.

MR. DAWSON: They are both important.

QUESTIONER: But how would you assess the relative importance?

MR. DAWSON: I think, to go back to what's underlying your—it's hard to. You do it on a case-by-case basis, based on the situation that you're facing. And with regard to the particular circumstance of earlier this week, I think the approach taken by the Ministers was, I think, a very practical approach, and I think one that is understandable to recognizing that, yes, there's a fiscal issue, but also that things are well understood by all parties.

QUESTIONER: The Fund has been making real nice comments about Brazil recently. So the question is not directly on Argentina, but will Brazil or has Brazil become, for example, a symbol of success in its program and is the Brazilian program, or some aspects of it, being used as a model for emerging markets like Argentina, for example?

MR. DAWSON: First of all, I think you have to ask governments what their models and so on are. Certainly, everyone I think has been impressed with the determination, and perseverance and success of the Brazilian authorities. And I think that, I am sure, is reflected, in part, by the fact that, for example, as I understand it, Arminio Fraga was being consulted by the Argentine authorities for some aspects of their present situation. So, yes, I think Brazil has clearly demonstrated substantial ability to deal with its difficulties. We're not issuing report cards, however.

One last question.

QUESTIONER:May I go back to Argentina, please?

MR. DAWSON: No, no, no. I'm sorry. Thank you very much. Thank you.


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