Argentina and the IMF
Brazil and the IMF
Chile and the IMF
Colombia and the IMF
Ecuador and the IMF
Honduras and the IMF
Paraguay and the IMF
Proposals for a Sovereign Debt Restructuring Mechanism (SDRM) -- A Factsheet
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Press Briefing by Thomas C. Dawson|
Director, External Relations Department
Thursday, December 5, 2002
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MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings. This is also the next-to-last briefing of 2002. As you know, Managing Director Horst Köhler will be departing this evening for Brasilia for meetings with the current and future leadership of the nation. I'll accompany them, along with Anoop Singh and other Fund staff. On the trip, the Managing Director will also visit Colombia and Chile. We issued a news brief yesterday, which noted that this is the second visit to the region by Mr. Köhler as Managing Director of the IMF. I do expect that we will have press conferences in each of the three countries during the trip.
Before I open the floor to questions, I should also note that a week from today the Fund will be releasing its latest global financial stability report. And now, I would be happy to take any questions you may have.
QUESTIONER: Inflation is again a serious concern in Brazil. The latest figures are very worrisome. I would like to know, in view of those latest numbers, if the IMF still continues to maintain its analysis about the situation, which was sort of hopeful about the capacity of the country to get a positive agreement in terms of the debt. And in view of that, what should we expect from the Managing Director's meeting with the president-elect in Brazil on Saturday? What we should not expect? What kind of demands, or what kind of reassurances is he looking for?
MR. DAWSON: I think you should not expect demands, and you should expect reassurances. In terms of the present economic conjuncture, market conjuncture in Brazil, I think it is pretty well-known that market reactions subsequent to the election have, in general, been positive, which spreads down, the currency having stabilized and, indeed, having strengthened. It is true that some of the indications on the inflation front are less positive, but I think that we are taking a more measured approach, not responding to daily or even weekly data. I think that the course that was set out for the program as approved in August is pretty much on track and, in the prospect of a review taking place in a couple of weeks by the board for the second disbursement under the program. So I would say, in that sense, we continue in a... I think you used the word "hopeful," and I think that's a word we would use as well.
In terms of the visit itself, as I think you understand, we will be meeting with the present government and with the transition team. And then on Saturday, as you indicated, we will be meeting with the president-elect. This is an opportunity, as we indicated in the news brief that we released yesterday, for the Managing Director to meet the president-elect, to offer him the support of the Fund, of the international financial community, as he works to formulate a program for the new government, for Brazil going forward into the year 2003 and beyond. So in that sense of the word, it is a listening session very much, from our point of view. We're happy to answer any questions he may have in terms of the Fund's approach and the Fund's program. So I think it is certainly not a negotiating visit; this is a chance to get acquainted, as indicated. The program is on track, and we expect that the Fund board will have a positive assessment in approximately two weeks when it meets.
QUESTIONER: From the previous visit with the mission that went there, the review mission, that had contacts with the transition team, is the Fund reassured about the ownership of the agreement by the incoming administration?
MR. DAWSON: Certainly the candidates, including the president-elect, had indicated a support for the parameters of the program when it was approved in August of this year. And as I indicated, we're going forth on that process. And certainly every indication we have, including from the recent mission, is that the president-elect's team and president-elect are committed to pursuing and operating on that basis.
Obviously, with the new government coming in to authority on January 1st, I believe it is, they will be naturally taking a look at their program, at their needs, at how they see the needs for the Brazilian economy, the challenges facing the government. And we look forward to working with them in that context.
The initial design of this program, I think it is well-known, was to provide a strong indication of support for whatever government that was elected that indicated a willingness to work with the Fund and the international financial community. And that's very much the track that we are on. And I think we will be, and you will be, in a position to hear that same message when we have the meeting with the president-elect, which, as you know, will be on Saturday around midday.
QUESTIONER: On Argentina, why did the Managing Director decide not to include Argentina on his visit? Did he not think that it would be helpful in the negotiating process for him and his team to just have further discussions with the authorities? And also, Mr. Lavagna said several times that the issue remaining to reach an agreement is now a political one, not a policy one. Would you respond to that?
MR. DAWSON: In terms of the first aspect, we are, as I've indicated, in continuing contact with the Argentine authorities in the context of a process that has been going on for some time. As I indicated in my last briefing, there's virtually daily contact telephonically and quite regular contact in person. And as you know, Minister Lavagna has been up here several times. Mr. Nielsen has been up here as well. So that is a process well underway. In this particular trip, given that there's a new government coming in to power in Brazil, it seemed the appropriate thing to meet with the new team. And as well, in terms of the Colombian and Chilean visits, these are countries the Managing Director has not had a chance to visit with before.
In terms of the status of the discussions with the Argentine authorities, I think I can continue on what I indicated two weeks ago in our briefing, that there do remain unresolved issues, but I think that what we should really be focusing on is implementation. If we take a look at either last April's or the more recent statement on the part of the government in terms of what their policy intentions are, I think that implementation is the key of what we are looking at. And when the minister talks about issues being political, I think implementation is itself a political issue as well. So I'm not sure I would draw as stark a distinction as perhaps the question might have implied. But there certainly are issues on which we have not reached a full agreement. And that's where I would leave it. But I should note, I should stress, that since two weeks ago, we have continued in contact. And the discussions continue to be quite cordial. But as I've indicated on a number of occasions, it is a very difficult situation, and I think it's fair to say that both we and the authorities are working as hard as we think we can.
QUESTIONER: If I could just clarify really quickly, he said specifically that it was an issue that required the political support of the G-7 countries. He was differentiating from a political implementation within Argentina.
MR. DAWSON: Well, that question is best addressed toward the individual governments. I think he met in Europe with at least two, I think, of the G-7 countries. But that question should be addressed toward them. I mean, the Fund management staff do work to try to reach agreements, and agreements do need to be supported, of course, by the Executive Board, of which the G-7 are seven of the 24 members.
QUESTIONER: Just to follow up on that, you said certainly there were issues where we haven't reached full agreement. Could you reiterate for us what those main issues are? And could you give us an indication as to whether, in the last two weeks, there has been any agreement on some issues that we may not know about?
MR. DAWSON: There's a range of issues that need to be addressed. They relate to the monetary anchor. They relate to the fiscal situation. They relate to some degree of certainty with regard to the legal framework. I indicated also, I believe, the last time the concerns in the area of utility pricing, not only the view that we have that an adjustment was needed, but the need for a framework for dealing with utility pricing. So those are all areas in which there continue to be discussions. There has been movement in some areas. I think it's known that the government did make an adjustment in utility prices, but we do continue to think that that needs to be looked at also in the context of the need for a framework for addressing these sorts of issues. So it's on a wide range of issues. And it's, frankly, an area in which, in some cases, there can be steps forward and then steps back in the intervening period, because it is a very fluid situation, in terms of the situation within Buenos Aires with the government, in terms of relations with governors, congress, the executive branch. So it's something we're continuing to work on. I certainly would not characterize it as there having been any significant setbacks. But it continues to be a difficult process, and we're continuing to work as hard as we possibly can.
QUESTIONER: President Duhalde, Minister Lavagna and other government officials have recently talked about reactivation of the Argentine economy. Do you agree with that assessment?
MR. DAWSON: There certainly are some indications that activity in a number of sectors has, at the very least, stabilized. And there are some indications in some sectors of some growth. On the other hand, it does continue to be a very difficult situation and one that has elements of fragility as well. So certainly, there have been elements of stabilization. That certainly is recognized. But we're hoping for more than just that. And I'm sure the aspirations of the people are for more than just that.
QUESTIONER: I'd like to ask about the ECB rate cut this morning. Do you think the Europeans are behind the curve in addressing the softness in the euro area economy? Or do you think that this was just the right medicine for the sluggish outlook for growth in that area?
MR. DAWSON: We welcome the action taken by the ECB this morning, which is in line with what we have indicated and recommended, given what we see as both receding inflation prospects and a weaker economy. So I think it's clearly something we welcome, and I think I would just prefer to leave it at that.
QUESTIONER: I have two quick questions on two small countries in Latin America, and that is Honduras and Ecuador. As you know, there was a mission, an IMF mission, visiting Honduras last month. Would you please give us a readout about the finding of the mission? And on Ecuador, the president-elect has announced that an IMF mission is visiting next week, starting Monday. We need a readout about that.
MR. DAWSON: First of all, with regard to Honduras, I would direct you, before I give a specific answer to this question, to the statement that the mission put out on November the 16th, concluding the visit. The mission did visit Tegucigalpa from November 4th to the 15th to conduct the Article IV consultations and initiate work on a possible new agreement. Unfortunately, the fiscal position has continued to deteriorate in 2002, because of both a continued increase in the government wage bill and weak tax collection. The authorities are working to develop a strategy to address the fiscal situation through a social pact involving the parties, the political parties, labor unions, private sector and civil society. A mission could visit Honduras once this fiscal strategy is completed. I don't have a time for that meeting, but it certainly would not be until several months into next year.
With regard to Ecuador, yes, indeed, a staff team will visit Quito next week. The main tasks will be to get a better understanding of the current macroeconomic situation, including assessment of the potential impact of recent government initiatives to improve the fiscal position in 2003. The mission will work jointly with the current administration and the transition team of President-elect Gutiérrez to make this diagnosis and to discuss policy options. The staff would like to complete the long overdue Article IV consultation as soon as possible, before going on to work on the negotiations on the possible new stand-by. So this is indeed part of the process, but I would not call this part of the negotiations. It is, however, something necessary prior to the negotiations going forward.
QUESTIONER: Going back to the Managing Director's trip to South America, what about the rest of the trip, Chile and Colombia? Why those two countries? What are some of the issues he will discuss in those two countries? What are some of his goals?
MR. DAWSON: First of all, I should have mentioned if I had not, that he has not had the opportunity previously to visit Colombia and Chile. In both cases, the authorities had indicated a desire for the Managing Director's visit. In some cases, this was a desire that's existed for some time, so we were able to put this together, in that sense, as a bit of a package. In the context of Colombia, of course, we do have an arrangement with them, a precautionary arrangement. We have a very good relationship with the new government. And this is an opportunity for us to go down and get an assessment of the situation there. With regard to Chile, this is of course another important country in the region, important member, one with whom we've had a good dialogue on a number of important policy issues. It is not, of course, a program country. The economic performance in Chile has been very, very strong. And I think the Managing Director is looking forward to the visit to Chile in part to look at some of the lessons that can be drawn from the very positive Chilean economic experience.
So in each of the countries, we were invited. That's always a good reason for going. In the case of two of them, they were countries where the MD had been unable previously to visit. This will be an opportunity to meet in both countries with a wide range of government officials, parliamentarians, civil society, private sector, and so on. And I would just add that the visit in Brazil I think is a little more sketched out because it has been known in Brazil for some time as well.
QUESTIONER: Another question on Argentina. Could you tell us whether the IMF supports the move to remove the restrictions on the bank accounts? And what's your assessment of the reaction in the markets to date?
MR. DAWSON: The markets seem relatively calm at this point, but I think we continue to view this as a difficult and sensitive situation. We view the issue in a somewhat broader context, which is a need to make sure that we have a monetary anchor that can serve as a degree of assurance if adverse developments were to occur, so that our view continues to be that we need to have a monetary anchor and a greater sense of clarity in the financial system in order to be able to go forward. I'm not going to give a particular reaction to particular measures, because we look at this as a whole and measures need to be looked at in this broader context.
QUESTIONER: I would like to ask a question on Paraguay. Last week, the chief of the mission of the IMF to Paraguay, Jeffrey Franks, said the IMF was very worried that next year Paraguay could default on its debt or otherwise not be able to pay the salaries to public employees. So I would like to know what the situation there is, and what are the probabilities for the IMF to sign an agreement next year with Paraguay?
MR. DAWSON: The situation is difficult. The Paraguayan congress was unable to complete actions on some important measures of legislation, in both the fiscal reform and banking areas, that were part of the program that had been negotiated last July. Under these circumstances, it is not possible at this point to go ahead with submitting an agreement to the board. We continue to closely monitor economic developments and will be holding discussions with the new economic team. I should note that the finance minister and Central Bank governor had resigned at that point. And we hope to have new discussions with a new economic team on their strategy for dealing with the challenges facing Paraguay. However, we have no plans, at this point, for entering into new program negotiations. I think we will have to wait for the discussion with the new economic team.
QUESTIONER: U.S. Treasury Undersecretary Taylor is giving a speech in New York today, trying to build some momentum on the collective action clauses in bond contracts. Can you give us a status report on how the wider effort that the IMF is pursuing is proceeding, what's happening on that?
MR. DAWSON: Certainly. We are continuing to pursue the two-track approach, looking at both how to make collective action clauses more workable in difficult debt situations as well as the other track of pursuing a Sovereign Debt Restructuring Mechanism (SDRM). I expect the Executive Board will be discussing some aspects of the SDRM proposal prior to Christmas. And we will, as we go on into next year, be continuing that. We've been having consultations with both private sector as well as with other governments on SDRM, as well as continuing work on collective action clauses. So this continues to be a two-track process with the goal, with regard to the SDRM in particular, as requested by the IMFC to present possible language and supporting argumentation on SDRM by the spring meetings, in the middle of April, I believe April 12th for our spring IMFC meetings. I have not had an opportunity to see John Taylor's speech at this point, but of course we are aware, and in fact, Treasury had indicated to us that he would giving this speech.
QUESTIONER: Yesterday an economic envoy of Mr. Menem, met for the fourth time in six months with a team of the Western Hemisphere Department. I would like to know which is the nature of this dialogue, what are you talking about? And is it usual for the IMF to get engaged with pre-candidates in other countries, or even in Argentina, at this intensive level?
MR. DAWSON: I was not aware of that meeting. I am aware that there have been a number of Argentines interested in discussing the program, both, you might say, either official or former officials, who have talked with Fund staff, as have ordinary Argentine citizens, parliamentarians, and so on. So that is not at all unusual, the idea of the Fund meeting with different political parties, in either a pre-electoral or a post-electoral context is also not unusual.
QUESTIONER: You said at the beginning that the last board meeting was December 20th, and you would expect it to be a very...
MR. DAWSON: Full week, yes.
QUESTIONER: So besides the review of Brazil, what other things can we look for that week?
MR. DAWSON: Well, let's see. There are 20 agenda items between now and December 20th. So I think almost all of those will be ones for which we will have releases. I know we're expecting an SDRM discussion of the board prior to that point.
QUESTIONER: I just wanted to double-check one thing. On the Brazil review in a couple weeks, that will be for approximately $3 billion in disbursements?
MR. DAWSON: In dollars; that is correct. And the last I understood it, our expectation is the meeting would be December 19th. But it could go one day either way.
Thank you very much. See you in two weeks.
IMF EXTERNAL RELATIONS DEPARTMENT