IMF did help Argentina -- A Letter to the Editor by Thomas C. Dawson, Director, External Relations Department, IMF

February 25, 2002

A Letter to the Editor
By Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
The Daily Yomiuri
February 25, 2002

For Makoto Utsumi to assert that the IMF "refused to extend a helping hand" to Argentina ("IMF must help guide Argentina to recovery", Daily Yomiuri, February 15, 2002) suggests that he is not in touch with the facts of the situation.

For much of the 1990s, Argentina implemented home-grown policies, with IMF support and advice, and succeeded in overcoming near-hyperinflation and getting a stagnant economy growing. Its instrument of choice was a currency board, a regime that demands exceptionally disciplined budgetary policies. Argentina continually struggled with this challenge. When new fiscal measures were taken in August 2001, many urged the IMF to withhold any further support. In fact, the IMF—and the international community—decided that this was a sufficiently credible package and continued its lending.

Argentina's experience shows that—no matter what currency regime is adopted, no matter how much external support is forthcoming, and no matter how strong the personalities are —ultimately it is the confidence of the people and the markets in the underlying strength of national policies that really counts.

Mr. Utsumi is right in one respect. It would be alarming if countries were to revert to the inward-looking policies of the past. But there is no sign of that happening. Latin America has no desire to return to the "lost decade" of the 1980s. It is showing a remarkable commitment to maintain open economies, stronger banking systems, and sound economic policies. And as Mr. Utsumi should be well aware, the IMF and the entire international community has done a very great deal in the past five years to strengthen the global financial system.

These are reasons why Latin America was able to withstand contagion from the crises in Asia and Russia. It is why Argentina's crisis has not had a significant impact on countries elsewhere in the world. And it points to how countries elsewhere, including Japan, could revive stagnant economies.

Far from adopting a "wait-and-see attitude," the IMF is in continuous contact with the Argentinean authorities during these exceptionally difficult days as the new authorities consider the right course of action.


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