Rodrigo de Rato y Figaredo
Rodrigo de Rato y Figaredo


Press Release: IMF Executive Board Selects Rodrigo de Rato as IMF Managing Director
May 4, 2004

Argentina and the IMF

Brazil and the IMF

Spain and the IMF

Russian Federation and the IMF

Turkey and the IMF

Lessons from the Crisis in Argentina
October 8, 2003

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Transcript of a Press Briefing by Rodrigo de Rato
Managing Director Designate
International Monetary Fund
Tuesday, May 11, 2004
Washington, D.C.

View this press briefing using Media Player

MR. RATO: Good afternoon. Thank you very much for your presence here. I first of all want to show my goodwill to you all and to the fact that I am having my first few hours at this job. I will be returning to Washington in early June to formally assume my position as Managing Director, but I have been working this morning and afternoon with the management and with the staff in some of the most important issues that are going to come in the next few weeks.

Before I take some of your questions, I want to, once again, as I did in Madrid last week, first of all thank Mr. Horst Köhler for his work in this institution and also for his collaboration with me. I want to thank the Executive Board by the consensus decision in which it chose me as Managing Director. And certainly I personally value this opportunity as extremely important and I am very honored by it. And I certainly look forward to work closely with the representatives of all the member countries, the 184 member countries, as I have the chance to talk with many of them during the last few months.

I think that the Fund, as we are all very aware, is at a very important moment in its history, and it is also at a moment in which we can see that the demand for global institutions that provide guidance and at the same time surveillance to the world economy and to the countries is becoming more and more important.

We are [witnessing] right now an upswing in the world economy, in most of the member countries, but, of course, that does not mean that we do not have some risks that we should follow and analyze, but that we should continue improving the capacity of our member countries to take the chances that have been offered by the world economy to enhance their growth, and through that certainly provide a better present and future for the citizens.

Thank you very much. I am more than glad to take some questions.

QUESTIONER: My question is on Turkey. Now, because of a number of reasons, including the prospects of the Fed raising interest rates, the uncertainty of the Turkish [inaudible] early next year, some internal political developments and a huge current account deficit, there has been a major hot money outflow from Turkey in recent weeks coupled with a de facto devaluation of some 15 percent in the last three weeks, and also with rising interest rates. Do you think the Turkish economy is heading for a fresh financial crisis, or is the program strong enough to absorb the shocks?

MR. RATO: I do not think so at all. I think that the Turkish efforts made in the last three years are fulfilling what was established in the program with the IMF. Right now, as you know, the Turkish government is looking into the possibility, that is up to the Turkish government, to put in force a new program. And either with the program or without it, we will continue working with the Turkish government in what is clearly a better macroeconomic situation in the country and a very impressive set of structural reforms that should continue in the future.

As for the general comment you made regarding change in monetary policy in some of the big countries, I want to say that it is clear that right now monetary authorities in the U.S. are not [seeing] the risk of inflation, and we are not seeing those risks right now in the data of the U.S. economy, even in such an expensive moment of energy prices. And in that respect, I think that the prospect for the future is of an orderly and not at all extreme modification of the monetary stance towards a more neutral situation.

QUESTIONER: I would like to have your assessment on the current Brazilian economic situation, its program with the Fund, and particularly if you could contrast that with the situation of our neighbor to the south, Argentina, and in that regard respond to one additional question, if you agree with what critics say is the abdication by the Fund of the traditional role of arbiter between a member country and creditors in the case of Argentina.

MR. RATO: Regarding Brazil, I didn't exactly get any question.

QUESTIONER: I'd like to have your assessment of the program with the Fund.

MR. RATO: As you know, the program with Brazil is evolving in a very positive way to the fact that the Brazilian government has said that they probably would not continue having a new program in the future. And it is clear that Brazil has established a sound position in the international financial community.

Growth prospects in Brazil are becoming more and more strong, and the Fund is convinced that in a more dynamic environment of the economic situation in Brazil, the government will be able to pursue its policies and its structural changes not only in the economic but also in the social side.

Regarding Argentina, we do have a program with Argentina that is aimed at restructuring the situation of Argentina in international markets and giving the Argentinean government the chance to come back to the international markets, and to do that, of course, it has to re-establish its relationship with its creditors.

It's up to the Argentinean government and the creditors to arrive to their compromises. The Fund is following those negotiations in a very close way because they certainly affect the sustainability of the debt and the credibility of the Argentinean government. And those two issues are of capital importance for the future of the evolution, the positive evolution of the Argentinean economy.

I do not have any impression that the Fund has abdicated any of its responsibilities. To the contrary, I think that we have been extremely useful at moments when Argentina was in the worst of the situation, with no communication with the rest of the financial world. Right now, as we see things, we hope that the Argentinean government and its creditors will arrive to a compromise that would be beneficial for both. But it's up to them to arrive to that compromise.

QUESTIONER [Interpreted from Spanish]: Mr. Rato, your election, like previous elections, was not absent of controversy, particularly given the stances taken by rich and poor countries. My question is: What guarantee can you give to the less developed countries that you will act not only as a bridge for communication between rich and poor countries, but also that you will vigorously defend the interests of poor countries, especially as there is a perception that many policies in the Fund are established by the rich countries?

MR. RATO [Interpreted from Spanish]: First of all I would like to say that I feel pleased not only for having obtained the consensus of the whole Board, but also for being publicly supported by many finance ministers from member countries, not only European countries. And if my memory is correct, the first public support I received did not come exactly from what you call rich countries. So, in that sense, I must say I have that satisfaction.

The position of Managing Director of this institution requires me to work in the interest of all 184 member countries, with particular attention to those who have the greatest difficulties and lower income levels. There are other multilateral institutions with which we collaborate and which have specific mandates. Macroeconomic stability is an indispensable requirement for economic growth, and growth is a guarantee for poverty reduction. And I believe that the work done by my predecessors and Fund staff guarantee this.

And, lastly, I would like to say that Fund recommendations on macroeconomic policy and structural reforms derive from the work undertaken by the staff. And in this regard, I think it is fair to say that the Fund's staff is the most valued from the point view of its ability in economics, among other national or international institutions.

QUESTIONER: Do you expect to travel to the Sea Island summit to represent the IMF? And if so, what do you expect from this meeting with the world leaders? And, also, you referred to an energy crisis. Could you comment on the statement today by the Indonesian Chairman of OPEC that OPEC is not to blame for the high oil prices and that the prices will continue, and maybe what Russia could do to lessen the crisis?

MR. RATO: First of all, there is going to be a meeting of Ministers of the G-8 in New York by the middle of May, and I intend to attend that meeting, at least part of it, so I would certainly have the chance there to collaborate with those countries. Second, I do not think I have used the word "crisis." I have used the word "prices." And "prices" is not necessarily "crisis." It depends if you buy or you sell. So the evolution of prices in energy have been very abrupt in recent weeks, and that is probably producing disruptions in the market, and it's something that we are following very closely. But it is, nevertheless, true that in the last two years we have seen a constant pressure of oil prices even above the original target by the producing countries.

The Fund considers that the announcement yesterday by Saudi Arabia to propose to the rest of the producing countries an increase in the production is a good step to satisfy what is clearly a strong demand. And, well, we could say the same for Russia. The Russian government says the same.

QUESTIONER [Interpreted from Spanish]: Mr. Rato, you are starting to measure the size of the bull you are fighting, the enormous apparatus. Tell us a bit about your feelings. I know that you are not fond of discussing your feelings, but could you give us a hint on what makes you nervous? What kind of feelings does facing this big structure generate in you?

MR. RATO [Interpreted from Spanish]: Well, I have no sense of nervousness at this point in time. You are suggesting a conversation that should be dealt with on another occasion.

QUESTIONER: Mr. Managing Director, could you comment on your views about the approach that the Fund ought to take to financial crises generally, and specifically how strict the Fund should be in maintaining normal access? And in that regard, are there any of the rescues or bailouts, or whatever you want to call them, of the past, major ones--Mexico, Korea, Russia, Brazil, and so forth--in the past few years that you feel were not handled well, what about them you did not like, any that you particularly did like?

MR. RATO: I think that my predecessor answered this question for me. He said that the IMF is a learning institution, and I think that that reflects that this is a human institution that is learning from the past, from success and from mistakes.

There is a very good paper by the staff of this institution called "Lessons from Argentina" that I think is very interesting to be read by all who want to see how things were decided or seen at a certain moment in time and if time has proven right or wrong some decisions.

I want to say that certainly the prevention of crisis, of financial crisis, is the main objective of this institution. We have certain tools for that. Surveillance is one. And our programs are the other. I think that, overall, the work of this institution has been very good for the world economy and for countries in particular. If you look at most of the countries who have had problems in recent years and had programs with the IMF, most of them are clearly in a much better position today. And that, of course, is nothing to say that is only a [concern] of the IMF. It is especially a [concern] of the people of those countries who have made important efforts and of the governments of the countries who have laid out sound economic policies and, of course, of institutions like this one who are helping them.

Then, of course, we will follow, and we are following with a lot of interest, the evolution not only of the world economy but of the countries that are working with us with special programs, even if the case of some of them who came out this morning, this afternoon here that have stressed that they are not willing or might not be willing to continue having financial programs with the Fund.

QUESTIONER: Sorry, on the question of exceptional access, do you have any particular views on how strict the Fund ought to be in limiting its programs to the normal amount, the 100 percent of quota and 300 percent of quota and so forth, the normal limits?

MR. RATO: I think that exceptional questions, of course, have to be put to the Board and have to respond to exceptional circumstances. But the question is to solve problems, and if the Board finds that the proposition of management to solve exceptional problems is worthwhile, I think it ought to act. Of course, we have very good, sound analysis by the staff who provides us with clear guidelines regarding that.

QUESTIONER: As you undertake the job, what are the major problems and opportunities that you see? And, also, what's your general approach to Asia? Have you been to that continent, and do you propose to go there?

MR. RATO: I think that, as I tried to say at the beginning, the world economy is clearly in an upswing; the year 2004 looks... the World Economic Outlook by the IMF has already expressed that it is going to be a better year for most countries than the year 2003, and certainly much better than the year 2002. So we are in a situation in which the world economy is moving ahead.

Some of the consequences we may see in a more neutral monetary position in one of the big economies shows that the [recovery] is underway. And I think that the possibilities of avoiding some of the risks are going to be one of the questions on which we will concentrate our efforts. As we have already expressed, we look forward for the U.S. economy to reduce its public deficit as the primary source of more stability in this economy, of the European Union to establish more dynamic growth that will allow not only for the growth of its economies but also for the contribution of the European to a more balanced world economy, and in that sense reduce some of the tensions in the external deficit of the U.S.; and certainly in Asia to increase its structural reforms, the opening of its markets, and the more flexible functioning of the financial institutions.

As regarding visiting Asia, I have not yet closed my agenda, but I think that that would be one of my first trips in the next few weeks.

QUESTIONER: Do you think that the markets are falling because of the stronger possibility of the higher rates here, interest rates here in the U.S.? Do you think that could and will affect the Brazilian economic situation? Do you think that would force Brazil to renegotiate the program? And have you ever had a caipirinha with Lula?

MR. RATO: First of all, I think that what the U.S. monetary authorities are telling us is that they don't see an inflationary risk in the U.S. economy, and the analysis of the Fund is equal in that respect. So we are not facing an abrupt change of monetary policy, but we are facing the normal evolution toward a more neutral stance of monetary policy at a moment in which the U.S. economy is already growing at almost 5 percent. So, in that respect, I think that reactions in the market, expecting big changes in monetary policy maybe are a little extreme. Of course, it would be very good for the world economy that there are no changes, abrupt changes in monetary policy that we do not envision right now, and also that the relationship between currencies does not change abruptly and represents clearly the underlying forces in each of the economies.

And as far as caipirinha and President Lula, I have to say that I have had café with President Lula and caipirinha by myself. But there is nothing against mixing.

QUESTIONER: [inaudible].

MR. RATO: I want to express once again that right now the services of the Fund are not envisioning abrupt changes in interest rates.

QUESTIONER: I would like an IMF assessment about the energy crisis in Argentina, and if the IMF is going to help in some way about this or take any particular measure. I don't know if you made any contact with President Kirchner or are going to make in the next weeks.

MR. RATO: First of all, energy markets, national energy markets are very important for the evolution of national economies, and any economy who has any problems with the energy market should face it on both sides, demand and supply. And we, of course, follow with a lot of attention any situation, energy situation in any of our member countries.

The Argentinean authorities are working on their energy policy, and we hope that, of course, they will advance an energy market that will be from both points of view, demand and supply, flexible enough to respond to the Argentinean needs of growth and flexible energy markets.

And regarding my relationship with the Argentinean government, I have a very good and fluent relationship with the Argentinean government, with Mr. Lavagna, I have known him for a few years. And I will keep that relationship and be in touch with them along the next few weeks, taking into consideration that we have an important program with Argentina.

QUESTIONER: You're new in the job today, so not responsible for past actions. The Argentina lending into arrears in the absence of a multi-year fiscal adjustment path, do you see that as a new model for the IMF in this kind of situation, or is it something you are not comfortable with? And supplementary to that, is it inevitable that in such situations lending will be dictated by the political interests of the creditor countries, or is that not the model?

MR. RATO: I think that the decision taken by the management of the Fund and the Board regarding lending into arrears in Argentina was based on the situation in which the Fund had to work for the best possible outcome. And certainly as we see a [recovery] of the Argentinean economy, as we see the negotiations between Argentina and its creditors, and we hope that those two, the growth of the Argentinean economy and the resumption of the Argentinean in the world financial markets will be re-established. I think that that will prove that the Fund was right in its policies to support at some moment the possibility that Argentina could re-establish its economy and get a fair and stable agreement with its creditors and embrace itself in a new policy of growth and prosperity for its citizens.

QUESTIONER: [Inaudible] ...take this opportunity of improved growth to enhance its own growth, what specifically do you have in mind for the major economies of Western Europe? What should they be doing to seize this opportunity to make their economies grow faster?

MR. RATO: I think that we all agree that the European Union has a very important and ambitious program of structural reform before it that gives the European economies more flexibility and more capacity of growth. I think that is what is shared by members of the Ecofin. I have been a member of that institution for eight years, so I know that very well. And I think that will be the best contribution that Europe can provide or can do to the rest of the world economy and to increasing the stability of the world economy.

MR. DAWSON: Thank you very much.


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