Thomas C. Dawson
Thomas C. Dawson

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Argentina and the IMF

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Transcript of a Press Briefing by Thomas Dawson
Director
External Relations Department
International Monetary Fund
Thursday, December 6, 2001
Washington, D.C.

View or listen to this press conference using Media Player

MR. DAWSON: Good morning, everyone. My name is Tom Dawson, Director of External Relations at the Fund. Welcome to the latest of our regular press briefings.

We are not in our normal gathering place of the auditorium. It's been set up for the children's Christmas party. It has a piano on the stage, and I was terrified you would ask me to perform—

[Laughter.]

MR. DAWSON: —in a fashion to which I'm not accustomed.

This morning, joining me on my left is Montek Singh Ahluwalia, the Director of the Fund's new Independent Evaluation Office, and on my right, David Goldsbrough, the Deputy Director of the Office.

As I think you are aware, this is a recently established office. We had a discussion on the Board just a couple of days ago on the work program of the office, and I thought this might be a good opportunity to introduce you to Mr. Ahluwalia and Mr. Goldsbrough. Perhaps they have a few words about what their activities will be.

And we would be happy to arrange briefings for you, maybe a session. In fact, we're thinking even possibly a session tomorrow, if there is any interest of you, to get a sense of what the office is doing. If you are interested, please contact one of the press officers, and we'll try to set something up. But I wanted to have Montek and David here today, in part, because they will be off on various travel over the next week or so and didn't want to wait until the new year.

So I thought, at this point, we'll ask Mr. Ahluwalia to make a few comments. If you have questions, that is fine, and then we might excuse them, although they're welcome to stick around to watch the fun because I suspect you might have some country or policy questions later on.

It is not true that the work program of the Evaluation Office is to monitor my performance at the press conferences, but I suspect they will get to that at some point.

MR. AHLUWALIA: Thanks, Tom. Thank you for inviting us.

Well, we have a press note, which is available, and the program is also available on the Web, and a copy is available outside. I would just like to say that we are almost completely staffed up. The Board has approved our budget. The Board does not approve our work program, consistent with the independence of the office. That is essentially decided by the director in consultation with a very wide range of interested parties.

The only statement I'd like to make, at this point, elaborating on what has already been distributed, is that we are going through a very extensive process of consultation, not only in order to determine the work program, but also, in some sense, in the way the work program will be implemented.

I mean, basically, as the note says, we undertook extensive consultations and identified a list of about 40 topics. That has now been reduced to three topics which we are going to study immediately and another 12 which we will do in the next 2 years after fiscal year 2003.

It's a flexible program beyond the first year. Perceptions of priorities may change, and we will, of course, reflect that. For each of these topics, we will follow a very participative process to get inputs from outside on how the study should be conducted. So we are going to have issues papers prepared which are sort of issues papers or draft terms of reference. We will put them on the Web, we will invite comments. And for each subject, once the terms of reference have been determined, we will also invite input from outside on making substantive contributions to the individual points and the terms of reference.

We hope to have the first three projects complete—

[Tape blank.]

MR. AHLUWALIA: —the year that begins on the 1st of May. So this will be finished by May of 2003. Since it's a three-country project, the project that will be completed before the annual meeting is the repeat use of IMF resources, which is an examination of the phenomenon which has worried a lot of people, that there are many countries which appear to go through a large number of IMF programs one after the other. We hope that that will be done by the annual meeting.

QUESTIONER: Those studies that you are going to undertake, are going also to include ongoing programs or are they going to be a matter of looking at the past?

MR. AHLUWALIA: Well, no, we are not going to cover ongoing programs. The terms of reference of the Evaluation Office explicitly state—

[Tape blank.]

QUESTIONER: —repeat borrowers, like Argentina and Turkey, and I don't quite understand how you would not look at ongoing programs, since they're in ongoing programs.

MR. AHLUWALIA: Well, the actual choice of the countries under the repeat category is in the process now of being made. So we're not in a position to indicate that—

[Tape blank.]

MR. AHLUWALIA: Thank you all.

[Pause.]

MR. DAWSON: I don't have any additional opening comments, so we can proceed with any questions that there might be.

QUESTIONER: Yesterday we had an announcement from the Fund saying that the mission in Argentina has been suspended based on the information that the mission had gathered in Argentina. I would like to know if you could elaborate a little bit about what this information was.

MR. DAWSON: Well, I'm not sure I would agree with the word "suspended." We had indicated the likely timeframe for the mission from the beginning, and the mission has, indeed, is just returning. The rest of the mission is just returning this morning, so we had expected that the mission would be concluding at around this time, and we'd indicated originally that the mission would report to headquarters, to management, and to the Board what its findings were.

Now, in terms of what we indicated last evening, is we did indicate that the mission has reported back to management, and has consulted with management, and management has come to the view that we are, that management is unable, at this stage, to recommend completion of the review of the program. This is—I think we'll see how your follow-up questions work, but I think that is reasonably straightforward.

We remain in close contact with the authorities, and the issue that the mission was looking at was the performance for the 2001 program, as well as agreeing on a program for 2002. The issues that have been of concern are clearly on the fiscal side and to see how the authorities have met the goals that they have set for themselves, that the Fund is supporting, on the fiscal side. I think it would be incorrect to draw any broader conclusions as to what either was the subject matter of the mission or what the conclusions of the mission were.

QUESTIONER: The first question is what's going on? The mission will be back in Argentina this month or next month. This month, we do not have the money, we do not have the money in January and February. What's the situation?

MR. DAWSON: Well, I think the situation is, again, that at this stage management is unable to recommend concluding the review. The discussions continue. I cannot say when the next mission would take place. It could take place; there's no particular timing set up, but if it looks like it's worthwhile to have such a mission, it would take place.

So what is going on is that we're unable to find the program that meets sort of their own objectives, the authorities' own objectives, and so, therefore, we're unable to go ahead with the review. This happens, not always with perhaps quite the same publicity, but this is not an unusual occurrence in a Fund program. I mean, the program does continue in the sense that it's a multi-year program. And if and when the conditions are correct for the completion of the review, management would recommend to the Board such a review.

QUESTIONER: Is the IMF at all concerned at the rather contradictory messages that seem to be coming out of the Argentine government at the moment? We even had Cavallo yesterday saying that the talks with the mission went fine or very well, at the same time that you're saying that you can't recommend completion of it. That, to my mind, doesn't exactly represent a very well sort of scenario.

But, more broadly, are you concerned about the contradictory nature of what seems to be coming out of the Argentine government?

MR. DAWSON: I don't think that cited quote is contradictory. I mean, the reality was that they had a good discussion. They were discussing, as I indicated, the discussion was focused on the fiscal side. I think there is broad agreement on the nature of the challenge, but the reality is that we don't, that we don't see, at this point, the program achieving the goals that the authorities set for the program, which is why the management cannot recommend the review.

The definition of good talks is not an agreement, so I guess I would fall back on that.

QUESTIONER: What would you like to see in Argentina, to default or not to pay the debt?

[Laughter.]

MR. DAWSON: We have a program with Argentina, and we are looking forward to seeing how we can work with the authorities to achieve the goals under their program.

There has been speculation recently that there were some broader issues that were being discussed or had been raised. That is simply not the case. I mean, we, indeed, are focusing on how to implement the program. I would cite, to have the second quote of Minister Cavallo for the day, I will cite Minister Cavallo noting on the issue of exchange rates that the Fund has been very respectful of Argentina's ability to make sovereign decisions.

This is another way of saying that has not been one of the issues under discussion. We have been discussing the program. The program is one that has a very heavy, a very difficult objective on the fiscal side, and that's what we and the authorities have been working on to attempt to resolve.

QUESTIONER: Tom, is the real focus at this point the 2002 budget? If they are able to demonstrate, by passing a budget that would set Argentina on a course to meet the zero-deficit law, do you see the program getting back on track?

And, secondly, I would just like to ask what's the latest on the interim WEO? When do you expect it to come out and what kind of briefings or events could we expect around it?

MR. DAWSON: Let me deal with the latter question first. We do expect the interim WEO to be out the middle to the late-middle part of this month, in the low teens, in terms of days. We're not sure, at this point, the nature of the briefing that will take place. We will let you know.

With regard to the state of play, I think, I will commend you for having listened accurately or having reflected accurately what I thought I said, which is that this is a discussion that is focused heavily on the fiscal side.

And, broadly speaking, the 2002 budget is the, I guess we would say, the biggest number item involved, but we still do have time to go into fiscal 2001, and so there is a review of the state of play there and whether anything more can be done in terms of achieving their own goals for 2001.

Obviously, since we have less than a month to go for 2001, the large numbers are in 2002.

QUESTIONER: This morning Mr. Cavallo said that Argentina is going to seek to renegotiate its debts with international organizations, presumably the IMF is one of those. One imagines that the least that that would involve would at least be putting off payments or repayments to the IMF. Have you any idea about what that would involve and whether the IMF is willing to negotiate on that?

MR. DAWSON: I am familiar with that statement. I am aware of that story. I have heard that same story for at least 30 countries at points of crisis in the past, and what it typically means is that the country intends to work with the international organizations on solving their debt problem, not having the international organizations enter into debt relief of one sort or another. That is, typically, and I would say I'll go back to 1982, working on Brazil, Argentina, and Mexico, at that point, I can remember very similar statements at that time. I think that's typically the interpretation that I have found.

So we will see, as we get perhaps later on, when we get more details of what he said, but we have had a number of cases where careful reflection on what was actually said perhaps reduces the perceived headline value of the statement.

QUESTIONER: While you said there aren't any other issues involved beyond the fiscal measures—

MR. DAWSON: There are other issues, but what I was steering at is heavily fiscal, and it is not—repeat—not exchange rate regime issues.

QUESTIONER: Well, then on the exchange rate regime, back in I think it was April, Claudio Loser pointedly said that the currency paper was the right system for Argentina at the moment. Is that still the IMF's position?

MR. DAWSON: I think I would turn back to the quote that I just had of Minister Cavallo. The government has made a very strong commitment to this regime. The regime has provided, I think, great benefit to Argentina over the last decade, and that's the framework in which we are operating. We are operating in a very practical framework on dealing with this program. This is not the time to be looking at those other more cosmic questions.

QUESTIONER: According to what you just said, at this stage, these negotiations or review of the program cannot go forward, but at the next stage, yes, it could go forward. That next stage, could it occur within the next few days, in other words, is there a time element here, or any time?

Second question: Apparently, Mr. Reichman came back for consultations, and these consultations were going to be, it was thought, on the recent measures made by the Argentine government this weekend. You have said nothing about that. Does the Fund have any opinion about that? Is it an opinion that's favorable, negative, indifferent or is it like the opinion of the Treasury expressed on Monday?

MR. DAWSON: On the first question, I may have to ask you to come back to repeat part of the question because you had quite a lot there.

On the first part of the question, in terms of timing, the reality is that the Fund and operating in countries, and certainly in this particular situation, there is a sort of asymmetric process. When a review is concluded, it's concluded. There's a date certain. When a review is not concluded, that doesn't mean that there's another date by which something has to happen. So, therefore, it is difficult to say what that would be.

In terms of what could move the process forward, is indeed further clarification and elaboration of the fiscal measures that are being considered for the program. That kind of a discussion can take place in a remote sense, and we do of course have a resident representative in Buenos Aires, or it could involve sending people back down or a mission back down. You will recall, in the last month or so, we had a couple of sort of mini missions down there.

So I cannot tell you what the timing would be. I, certainly, at this point, do not expect one in the very near future. In other words, I am not aware of anyone planning on going down over the weekend or anything like that, so I think that's where I would leave that.

QUESTIONER: The other question was, in regard to there were certain measures taken by the Argentine government this weekend.

MR. DAWSON: Right.

QUESTIONER: Certain governments, say, the U.S. government, in terms of the Treasury Secretary, made comments that seem to be favorable towards those measures. The Fund has said nothing. It appeared that Mr. Reichman returned here in order to have consultations on those measures, in part, so it was said—

MR. DAWSON: Right.

QUESTIONER: —and not denied. Now my question is does the Fund have an opinion, favorable, negative, indifferent or it does not want to give it?

MR. DAWSON: Well, in terms of the reasons for his return, when you reformulated the question, I think you got to be 100-percent right. You were half right to begin with. Indeed, when he did come back, he did come back and report on the measures that were implemented Friday through the weekend, but he also was reporting on the state of discussions on the program, which is obviously on the fiscal side. So he was, indeed, reporting back on both.

With regard to the measures that the authorities took over the weekend, I think we could characterize them as measures that the, I mean, it's obvious the authorities, the situation there has been very, very grave, the authorities announced a package of measures. These are measures that, generally speaking, neither the authorities, nor the Fund, nor other authorities like to be able to take, but they are measures that are taken when there's a belief that they're in difficulty and they have few authorities.

The authorities, it would appear, have attempted to design the measures in a fashion to be as unthreatening, in the sense of the word, trying to design to accomplish the task and not overcompensate or overreact, but I don't think I can give a view as to—there is no Fund staff view on the subject, other than, clearly, there was an understanding that they felt they needed to do it, and that they tried to do it in the least-disruptive fashion that they could.

I would also note, however, that this is something of a work in progress, as well, and that you will see, if you haven't looked in the last couple of hours, the measures continue to be refined and clarified, in terms of withdrawal limits and so on.

So I think, as I say, that is a bit of a work in progress.

QUESTIONER: I'm sorry. Just a follow-up. So their decision has nothing to do with those measures?

MR. DAWSON: The decision, no. The decision had to do with the fiscal, the inability to close the fiscal measures, but I would not say that he did not come back in order to report on those measures, as well. He did.

QUESTIONER: Just a follow-up on what you just said. Are you saying that the IMF accepts, under certain circumstances like these that Argentina faces, that foreign exchange controls and banking controls are an acceptable policy step? Are you saying that—you're not rejecting the use of these altogether, whether or not—without necessarily condoning the exact measures?

MR. DAWSON: I don't think I would go there. We're not accepting, in any legal sense of the word. We recognize they felt they had to do something, and I think I've characterized it, but it's not something that is—I mean, it's a regrettable measure, and the authorities know it's a regrettable measure. So I don't think I would get into the position of responding to that.

QUESTIONER: Sorry. That was just to clarify your last answer. I'm sorry.

MR. DAWSON: Oh, I thought that was a question.

QUESTIONER: No, that was a follow-up. I'm sorry.

In many cases when IMF programs go off-track or face delays or the borrowing country has to take new economic measures, the Fund program needs to be renegotiated. Is there any chance of that being needed with Argentina at this stage?

MR. DAWSON: The authorities have made clear their commitment to try to continue in the present framework, and that's exactly, as I've said from the beginning, that's the framework we're looking at is to see how they can accomplish the goals set under the present program which, in terms of shorthand, is working around the zero deficit law.

QUESTIONER: To follow up on Argentina—

[Laughter.]

MR. DAWSON: Golly, I was hoping for Ukrainian sunflower seeds to make a recovery.

QUESTIONER: We'll get to that one after we finish with Argentina. But in terms of lessons learned and unlearned, do you see any parallels with what was happening in Russia in the summer of '98 that led to the partial default? And if you do, then who didn't learn the lessons? Was it Argentina, the Argentineans, was the Fund, is it something just inevitable, is it the stuff that you are studying now with the repeat offenders that the gentleman has just described to us?

MR. DAWSON: I think I will wait for Mr. Ahluwalia to refer to the capital account one, and then I'll figure out how to go forward.

QUESTIONER: Since I have the mike—

[Laughter.]

QUESTIONER: So, anyway, a question on Russia. Can you give us an update on what the mission with Mr. Belanger accomplished in Moscow? How does the Russian draft budget look to you, as compared to Argentina?

MR. DAWSON: No, no, I'm not going to make that linkage.

I think the mission is still there. I mean, my understanding was the mission was supposed to be ending toward the end of this week, I believe—no, I'm sorry—the middle of next week, and it's discussing both the Article IV and the post-program monitoring, as well as a discussion on the FSAP, the Financial Sector Assessment Program.

I think our views have not changed on the state of play in Russia since the Managing Director's visit there a few weeks ago. Clearly, the macroeconomic performance has been very strong. The budget performance has been strong. People are looking out at the impact of lower oil prices on the fiscal situation, but it is our view and assessment at this point, that it is not at a stage where it would cause us to change our view that the Russian fiscal and external situation over the next couple of years is sustainable, without need for recourse to the Fund or other forms of external support.

QUESTIONER: Maybe one more. One little one. The Russians have been also saying that by the end of the year they will go under the 100 percent of their quota, and that means that they shouldn't be post-program monitoring, but I understand that this decision is not automatic. This is a decision of the MD, right, about the post-program monitoring being canceled?

MR. DAWSON: I'd have to get back to you on that, but I certainly think the understanding is that once it's under 100 percent of quota, that typically post-program monitoring does not continue. But I think that's perhaps focusing a little too much on instruments than on the relationship, and I think the relationship between the Fund and the Russian authorities is, in fact, a very close one, and the authorities have made it clear that they value a close and continuing relationship with the Fund.

I've had the opportunity to accompany both the Managing Director, and then earlier in the spring or summer, Mr. Fischer, and I think the President and Prime Minister on down indicated a desire to maintain a very close relationship with the Fund, and I think that will continue without regard to what the nature of the particular mechanism. Of course, we do have Article IV consultations.

QUESTIONER: An IMF mission is currently in Turkey for standby talks, and the Turkish government on Monday announced a number of measures to cut public spending for next year, and that includes forcing nearly 40,000 public workers into retirement next year.

Are you happy with those measures or are you basically more interested in agreeing on targets, fiscal targets with governments and leaving the specific measures to them?

MR. DAWSON: I think you have been reading our position papers quite well, in terms of we do, indeed, worry on the broader framework and the broader targets, and are not engaging in micromanagement in programs.

The mission is presently there. We expect it to be returning in a week or so and would hope to have a staff paper and Board discussion in January.

I don't have much additional information beyond that, but it is certainly my understanding that the discussions are going well.

Maybe two more questions.

QUESTIONER: Tom, there is a pretty broad consensus in the market among the economies, and I understand even in discussions inside here, the Fund, that the Currency Board is over, is no longer operational in Argentina. Actually, the regrettable measures that you mentioned are maybe seen as a way of trying to preserve something that no longer exists. They have four currencies right now and nothing is convertible. It's not working.

This situation is getting Argentina deeper into a recession, which makes it almost impossible to deal with the fiscal side that you think is at the center, you say is at the center of the discussions.

So I think it would be very surprising if the Fund is not looking to the cosmic questions that you mentioned. If you are not, you are not doing your job.

[Laughter.]

QUESTIONER: And so what's next? Argentina goes to—Argentina has to do one of two things. It has to float or to dollarize. What is the opinion of the Fund? And if the Fund doesn't give out this opinion, this advice, why not? This is what you are paid to do.

MR. DAWSON: Well, first of all, I am not paid to—actually, I am paid to answer your questions, but I am not paid to answer that question.

[Laughter.]

MR. DAWSON: I mean, we are discussing the state of play of the negotiations of the Fund on the program. That's where we are. I don't deny that there are broader questions, and I used the word earlier "cosmic questions." That is not the nature of the discussions going on with the authorities at this point.

There are reports in the markets about what markets are thinking, what private-sector economists are thinking. There are reports about what's going on among considerations on the official side. Some are correct; some are incorrect, but we are not unmindful of the broader questions, but we have a particular issue right now which is assisting Argentina in this time of difficulty, and that is where we are, and that is one reason why we remain in close contact with the authorities.

But their priority at this point is to attempt to resolve the issues that are arising under the context of their present program, and that is what our first priority is.

Last question.

QUESTIONER: A little bit of follow-up, but with another subject, not a cosmic subject, but a very practical subject because Cavallo intends to do it next, which is the restructuring of the debt.

MR. DAWSON: The external debt.

QUESTIONER: The external debt, yes. As you can imagine, without the disbursement of the $1.3 billion, this becomes a little bit more difficult to do it in an orderly way because, apparently, if we don't have the money, on December 19th, we go to default. Has this been taken into account in the discussions of the deficit?

MR. DAWSON: Well, I'm not sure I would agree with the linkage between the need to conclude an external debt agreement, and the disbursement of the next tranche as being linked to that. It, obviously, could be—

QUESTIONER: In an orderly way.

MR. DAWSON: In an orderly way. I'm not quite sure what that linkage is. The external debt process is I think expected to take some time to negotiate. I don't think it was expected to be done by the end of the month under any circumstances.

You mentioned a specific date. Again, not to make myself sound, like I'm being too cynical, I've often seen dates cited as inevitable dates for particular actions to happen, and they have typically not proven out.

Our view is clearly that our ability to support the Argentine authorities, and we would like to support the authorities, is in the context of a program where we see it as being financeable and sustainable, as our statement last evening talked about a sustainable program. So that's sort of what our goal is, and I think that's where I would leave it at this point.

I will not wish you happy holidays, not because you haven't been polite, but I do expect there to be another briefing prior to Christmas. And as developments occur in Argentina or elsewhere, we will be, as we have always been, keeping you informed on a timely basis.

Thank you very much.

[Whereupon, the press briefing was concluded.]