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

February 28, 2002

Transcript of a Press Briefing
by Thomas C. Dawson
External Relations Department
International Monetary Fund
Thursday, February 28, 2002

View this press conference using Media Player

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

First of all, I'd like to acknowledge the presence here of Jacques Polak, the legendary former Director of Research of the IMF, and the father of the financial programming approach that has so captured much of the world, and also an individual whose knowledge in history of the Fund is something that we all can benefit from, although I don't know that he's available for interviews after this briefing.

Tomorrow, March 1st, we will open press registration on our website for the 2002 Spring Meetings of the IMFC and the Development Committee. The meetings will be held on April 20th and 21st at Fund headquarters in Washington. Media Relations has handed out a note on the online registration details, and this note will also be circulated to media outside of Washington. If you have any further questions, please contact Media Relations. The deadline for press registration is April the 12th.

At my last briefing on February 13th, I encouraged everyone to submit a feedback questionnaire on IMF transparency. If you haven't, I'd encourage you to fill out and answer the questionnaire. If you have lost it or haven't received one or want to vote twice, please contact Media Relations. Tomorrow is the deadline for submissions.

My next briefing will be on March the 13th. I'm flagging this now because there will be a bit of a twist. I will be traveling in Europe that week, and the briefing will be held at the Bank of England. The Bank of England has graciously made available a briefing room, and we'll circulate details of the briefing when arrangements are completed. I believe tentatively we were looking at 10:00 a.m. on the 13th of March. So that you don't miss me, we will post a transcript of the press conference for the press here in Washington.

On March 14th at IMF headquarters, Gerd Häusler, Director of the International Capital Markets Department of the Fund, will conduct a press briefing on the department's inaugural Global Financial Stability Report. The International Capital Markets Department will be preparing this report on a quarterly basis, and it succeeds a variety of publications that existed prior to the establishment of the department.

I think that is all I have at this point. I'd be happy to take your questions.

QUESTIONER: As you probably know, the government [of Argentina] has achieved an agreement with the provinces. I want to know the IMF reaction.

MR. DAWSON: We have taken note of that. We have received the text and so on of the agreement, and we have also taken note this morning of Minister Remes Lenicov's indication that he expected a Fund mission to be going down in the near future. Indeed, from our point of view, this is a very welcome sign since we have, in fact, been awaiting a signal from the authorities for a mission to go down. We've been waiting for that sign and that invitation from the authorities. So hopefully this is—that is on track.

Certainly an agreement with the provinces on a sustainable relationship is something to be welcomed. I would note that there are a number of areas that the authorities and we have been working on, where progress has been made, but I would stress that there is a considerable amount of work remaining to be done, not only in terms of fully understanding this particular arrangement with the provinces but the overall fiscal situation as well, the situation in the banking sector, issues regarding the treatment of investors both domestic and foreign. So there is a lot of work to do. It remains a very major challenge. This is going to take a great deal of work, and we had been concerned a bit that perhaps time was passing. Now I think, however, this is a good sign that we will be able to start up the negotiations in Buenos Aires in the near future. But I would again stress there is a lot of work to do, but we are committed to work with the authorities as intensively as we and they possibly can.

QUESTIONER: Just a follow-up on that. You said that this is a good sign, you were waiting for an invitation from the authorities. Do we take that as meaning that they have done sufficient work to send a mission down and you would actually—

MR. DAWSON: No, no. I think you take quite the opposite. There never was a necessary condition for us to agree to a mission. We were waiting for an invitation.

QUESTIONER: Can you be a little bit more specific about the treatment of investors both domestic and foreign? There's been a lot of speculation among investors that there needs to be a certain amount of work done towards restructuring the debt. So if you can provide some kind of general time line, that would be really helpful. And, also, what do you mean by "near future"?

MR. DAWSON: The near future I think was referring to the mission. The Minister, as I understand it, indicated this morning he hoped it would be next week, and we would hope so, too. But that decision is really in the hands of the Argentine authorities. As I indicated, we are and have been for a while ready to send a mission once they indicated they were ready to receive one.

[Going back to the first question] I don't have a time line on that, no. That is a very important issue, but as you well know, debt is one of the more complicated issues in any country program, and this is one of the more complicated country program cases. So I think the idea of setting up a timeline on that is just not realistic. But it is clearly a very important component of what needs to be done as part of an overall program. But there aren't any particularly triggering devices or points that I could identify now in that area that have to be met.

QUESTIONER: There has been the creation of a new Special Operations department at the IMF. I'd like to ask you to tell if you can what kind of focus would that be in relation to Latin America with the situation in Argentina, with the situation in Colombia, and what kind of, if any, new light this could turn to the economy of Brazil, for instance?

MR. DAWSON: Well, first of all, I would note it is not a new department. Anoop Singh, who has been appointed as Director for Special Operations, will have a few people working with him. He will be reporting to Anne Krueger, the First Deputy Managing Director. Also, this new position and new unit is not focused on Latin America in particular. I think it reflects a view that has been developing over time here at the Fund that for critical country cases, such as Argentina, that we need to involve at senior levels a large number of departments, intensive effort, that the somewhat more traditional approach of area department-headed teams has proven to be something that has not worked as smoothly as we would wish. So in this particular case, and potentially in other cases, this Director for Special Operations would have responsibility for coordinating a Fund-wide effort.

In this regard, the Western Hemisphere Department remains critical, in fact, the most critical unit of this effort, because obviously it is Argentina that we are dealing with. But there are other departments, other parts of the Fund that need to be involved. A salmon-colored, U.K.-based publication this morning talks about structural considerations being involved in the establishment of this office, and I think, as we've looked at how to handle critical country cases, I think there's a need for a new approach toward coordination, and that is what this is.

There are no other countries on which there's an expectation that this would be applied at this point, although one of Mr. Singh's tasks will be, as the release last Monday indicated, to make recommendations about enhancing the Fund's capacity in managing critical country situations.

QUESTIONER: Again, with the question of investors, the time frame for the agreement, the eventual agreement with Argentina, it's thought about in a month or a bit more, a bit less. But the question of the treatment of the negotiation of external investors will take longer. So my question is: What's the Fund expecting? I mean, what is to be included in an agreement about the treatment of investors, some general propositions, some principles?

MR. DAWSON: The general approach the Fund has taken in these sorts of cases is that the authorities and investors, if we're talking about debt in particular, that there need to be discussions and negotiations going on in good faith. That's a basic, our basic principle.

I would, however, note that you may have gotten a slightly misleading impression of my comment. My comment was not just about foreign investors. It's also about domestic investors. It's about the general investment climate, which is important to get Argentina back onto a sustainable basis. But if you're thinking in terms of the classic debt negotiation situation, we have an established procedure for the Fund in terms of making decisions on programs in the context of negotiations that may not have been concluded.

QUESTIONER: Two Argentina-related questions. You mentioned the banks as one of the critical issues. Could you elaborate on that? And, specifically, is it quite conceivable that Fund money would be used in a recapitalization exercise? And to come back to this point about the special operations, the salmon-colored publication you mentioned interprets this appointment or this announcement as indicating a rather high degree of dissatisfaction with the Western Hemisphere Department, and, indeed, it seems difficult to interpret it any other way. Since Anoop Singh was put in charge of the Argentina negotiations, I've never seen a situation where someone has been put over an area department in a case like this. Is that not a reasonable interpretation that there is some dissatisfaction with the Western Hemisphere Department? And can you tell us precisely what that dissatisfaction concerned?



MR. DAWSON: On the first part of your question about recapitalization, I think it is too early to answer that question as to whether Fund support, if there is some Fund support, how it would be used. That is a question that obviously comes up in country cases, and it certainly is a case that will come up in the case of Argentina. But recapitalization of the banking sector is obviously an important issue there.

With regard to the establishment of this new unit, it is not a vote or an expression of dissatisfaction with individuals or with the department. I mean, the reality is that the Argentine program is in many senses one of the most complex as well as important ones that the Fund has had.

As time develops, in any organization different management structures develop. We have had, of course, changes in the Fund's management as well, and I think at this point the idea of a unit that would report to management to help coordinate these cases, is, in fact, an idea that has been discussed off and on at the Fund for some time, despite the salmon-colored newspaper quoting someone as saying that people were surprised. The people who didn't know were surprised, but the people who knew that something like this was under consideration were not surprised.

I do regret, of course, that transparency didn't go so far that you all knew about it before the staff. But, in any event, no, we do not view it that way. Claudio [Loser] was held in very high regard by management and by his colleagues, and he continues to be actively involved in the other cases within his remit in the Western Hemisphere Department, which are all of the other countries. And, indeed, there is a great deal of work to be done in those countries, and he continues to be the point person on all of those.

QUESTIONER: Stanley Fischer was described as sort of a battlefield medic. So could we interpret that Mr. Singh would be doing a lot of the flying around that he used to do and fire-putting-outing...

MR. DAWSON: No, I don't think that's really a fair description. I will let Mr. Fischer describe himself, and I'll even let you describe Mr. Fischer. But first of all, Mr. Singh's remit at this point in a country context is a single country. Stan, just as Anne Krueger in her present position, had broad responsibility for the Fund's relationships around the world, particularly with major countries, and I think there will be no change in that regard, although it is certainly expected that Anoop, as being in charge of the Argentine team, will be going to Buenos Aires. So that should be clear. But I don't think it is a transfer of the medical license from one person to the other.

QUESTIONER: Will Anoop Singh be leading the mission?

MR. DAWSON: I would expect that Mr. Singh will be leading the mission, yes.

QUESTIONER: To clarify your answer to my question, will Claudio continue to be involved with Argentina?

MR. DAWSON: I'm sure he will be involved in terms of giving advice and so on. But as we indicated, Mr. Singh will be leading the mission. I have had conversations with Claudio since the decision on Argentina, but the responsibility for the mission is with Anoop Singh, although, as I say, much of the manpower continues to be from the Western Hemisphere Department.

QUESTIONER: I just want to clarify something. You said we were just waiting for an invitation to send a mission.

MR. DAWSON: That is correct.

QUESTIONER: There was no necessary condition.

MR. DAWSON: That is correct.

QUESTIONER: I was under the impression for quite some time that you weren't waiting for an invitation, that there was progress, good progress, and then when you get to good progress then you send a mission.

MR. DAWSON: No, that...

QUESTIONER: It sounds like you're saying we could have gone a month ago if only...

MR. DAWSON: No, I would not say a month ago, but certainly with the visit of Minister Remes Lenicov approximately two weeks ago, at that point we were ready to send a mission, and the indication was that, you know, they would invite us when they were ready to invite us. A month ago you may be correct, but that is not the case for the last couple of weeks.

QUESTIONER: So is it correct to infer that Argentina had this message clear that you guys were just waiting for it and it was...

MR. DAWSON: Yes. I myself discussed it with Mr. Amadeo, so it's been very clear.

QUESTIONER: When will you be resuming the lending to Belarus?

MR. DAWSON: I don't, I don't have any timing on that. Indeed, in particular, I don't have any indication of when there will be another mission there, which would obviously be a prerequisite in that regard.

QUESTIONER: About the recent Board meeting on Belarus, I understand the staff presented a report that was on the pre-monitoring, or whatever you call that. The staff presented a report that was rather critical of the situation of the achievements of the Belarussian government. How would you describe the support for the report at the Board among the Board members?

MR. DAWSON: To be frank, I am aware that there was a discussion. I was not present at the discussion. I don't recall what the report on it was, so we'll get back to you on that.

QUESTIONER: Tom, could you update us on where talks in this new loan for Egypt are at the moment?

MR. DAWSON: Yes. The Egyptian authorities have sought external financing to help them weather the external shocks, including especially in the tourism sector in the wake of September 11. We have had preliminary discussions about possible Fund support for a compensatory financing facility, and we've discussed the policies that would be necessary for such a facility. Those discussions were held I think in late January in Cairo. And the authorities are still considering whether they wish to make such a request in light of both the prospective recovery in tourism, earnings, and other financing options. So I don't have anything up-to-date on that, but that is the status.

QUESTIONER: Moving to Japan, can you update us how the FSAP mission to Tokyo went? I believe they came back about two weeks ago from Japan. And, specifically, does the IMF actually support channeling more public funds into Japanese banks as a way to reinvigorate the country's banking system?

MR. DAWSON: I don't have anything on the FSAP visit. As I recall, this was a fairly preliminary visit in terms of organization, so I don't have any more on that.

I don't have a reaction on the particular budget question. A number of steps have been taken in Japan that are in the right direction, but I think we continue to believe that more action is needed in a range of areas on the fiscal and monetary side. I do not have a particular answer, though, on the question of the supplementary budget.

QUESTION: Can you briefly respond to some of the new suggestions in Indonesia about how to go about regulation? Also, there's been some talk about expanding HIPC going further in part because the prices of some commodities exported by HIPC countries have plummeted to the level where the debt relief has been cancelled out by other economic troubles. And then, finally, if you have anything to say about Soros' suggestion on SDRs, please comment on that, too.

MR. DAWSON: That's a three-part question. I'm not quite sure what your question is about Indonesia, so let me come back to that. Let me do the other two first.

The issue of debt sustainable for HIPC countries is something we keep under constant review, and, indeed, the level of commodity prices is something that has attracted the attention and the concern of a number of observers, and it's something we take quite seriously, and I know this is an issue that is presently under review in the Fund as well as elsewhere. And I think we will be looking at this in the next few months. I would suggest you ask me again as we get closer to the Spring Meetings, but this certainly is a subject that is under review.

With regard to the Soros SDR proposal, we are certainly aware of it. He has been in touch both directly and indirectly with us. It remains an item that is discussed quite actively in the international community, conferences and so on. It is not, however, something that appears to have gathered wide support among the membership. I would note that any SDR allocation requires an 85 percent vote of the membership and any special-purpose allocation in the case of the United States requires an actual affirmative vote of the Congress.

So I think it is an idea that people are looking at, but I don't have any sense that there is the kind of support necessary for it, although I will be at a conference in a couple of weeks where that's going to be discussed. So it's becoming something of a perennial. Now, again, last chance on Indonesia.

QUESTIONER: There's been an announcement that they're going to sort of combine some of the regulatory agencies.

MR. DAWSON: I'm sorry. I don't have anything on that.

QUESTIONER: Going back to Mr. Loser, the fact that Mr. Loser was born in Argentina, did it have any kind of relation to...

MR. DAWSON: It has absolutely nothing to do with it.

QUESTIONER: Is he still participating in other programs in Latin America except for Argentina now?

MR. DAWSON: People are appointed to positions in the Fund without regard to nationality. It's in our Articles of Agreement.

QUESTIONER: Could you update us on the stand-by credit for Ecuador?

MR. DAWSON: A mission is currently in Quito to continue discussions on a new stand-by arrangement. The authorities are seeking a 12-month stand-by through March 2003. The discussions are focusing on establishing an appropriate fiscal target for 2002, and on structural reforms to improve productivity and competitiveness in the now-dollarized economy, and they are also looking at helping to sure a sustainable medium-term fiscal position and debt profile.

It's too early to say whether the discussions will need to be extended after the return of the mission, which is expected early next week. If the necessary agreements can be reached, the staff could conceivably have a Board meeting in late April.

QUESTIONER: Could you update us on the status on Dr. Krueger's bankruptcy proposal, and especially in light of the comments that Treasury Secretary O'Neill has made about it. The U.S. side seems to be rejecting it as too broad and is looking more for specific majority causes and bond contracts and...

MR. DAWSON: I think you're confusing Secretary O'Neill's comment with Undersecretary Taylor's comment in that regard. I believe that Secretary O'Neill's comments have been rather more general, and John Taylor's comments were with regard particularly to the bond covenant issue. I'd also note the G-7 communiqué from Ottawa, which was quite clearly supportive of the idea of the need for such a mechanism, and that was a communiqué, as I say, of the G-7.

With regard to the ideas put forward by Ms. Krueger, there's already been an initial preliminary discussion, a seminar in the Board. We expect that there will be an additional discussion in the near future with the staff having prepared some additional analyses in response both to the reactions from the Board in the first discussion, but also in reaction to comments that we've been getting from outside, from the business community, from other governments, and so on. So I think it's something where we're actually quite impressed with the comments that we've received, even though we have not to date in a formal sense been soliciting comments. But I expect that after the next stage it may well be that Ms. Krueger has an additional speech or we put out in some other fashion additional views so that we can continue what has already become a discussion of this issue. But I think there is a very broad expression of interest in this proposal from around the world.

QUESTIONER: Just on Argentina again, you said you were waiting for an invitation. What Remes Lenicov said today seems to indicate, I mean, is it formalized or are you waiting for him to physically send you a letter...

MR. DAWSON: No, we don't stand on protocol. We don't need letters.

QUESTION: So you've been...

MR. DAWSON: But a phone call, a phone call will do.

QUESTION: So you're waiting but the phone call hasn't arrived yet?

MR. DAWSON: Not to my knowledge. Not certainly as of about 45 minutes ago. Or it can be a fax, it can be a letter.

[End of press briefing.]


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