ARGENTINA AND BRAZIL PAY OFF DEBTS TO INTERNATIONAL MONETARY FUND TO GAIN GREATER ECONOMIC AUTONOMY.
Within days of one another, the governments of Brazil and Argentina said they would be paying off their debts to the International Monetary Fund (IMF). Brazil made the announcement on Dec. 13 and Argentina followed on Dec. 15, paying a combined sum of about US$25 billion. The governments of Presidents Luiz Inacio Lula da Silva and Nestor Kirchner have been increasingly distancing themselves from the fund. Argentina's Kirchner was particularly adamant in his condemnations of the conditions the IMF had imposed on his country's government and the damage those policies had wrought. Some Argentine social sectors, however, criticized his decision and called on the government to direct the nearly US$10 billion toward social spending, a call echoed by some Brazilian social sectors.
Argentina spends US$10 billion to save US$1 billion
Argentina cleared its US$9.8 billion debt with the IMF the first week of January, using central bank (Banco Central de la Republica Argentina) reserves to fully repay its once-crushing debt load. President Kirchner set the payment for Jan. 3 when US financial markets reopened after the long New Year weekend.
The decision to repay the IMF debt ahead of schedule earned Kirchner applause at home though financial markets in December responded by temporarily driving down the value of the Argentine peso. Although payments were scheduled to the IMF through 2008, repaying ahead of time saved Argentina about US$1 billion in interest.
The early repayment is Kirchner's second major achievement in a year of paying down Argentina's debt. Early in 2005, Argentina renegotiated US$100 billion in private debt with more than 70% of its creditors, reducing the amount owed by 75% (see NotiSur, 2005-03-11).
The Argentine Congress has approved the repayment, which was made from the central bank's foreign currency reserves, which had reached about US$28 billion.
In 2001, Argentina defaulted on a record US$100 billion in debts (see NotiSur, 2001-05-11, 2002-11-22, and 2002-12-20), blocking its ability to trade on international debt markets. It was the largest default in IMF history. After Brazil and Turkey, Argentina was the fund's third-largest debtor.
The January payment, which drew the central bank reserves down to US$18.5 billion, was one of the first major acts of newly appointed Economy Minister Felisa Miceli (see NotiSur, 2006-01-06). Former economy minister Roberto Lavagna pointed out, however, that most of the planning for the payment was done under his management. Lavagna had announced shortly before he was relieved of his post that he intended to enter talks with the IMF regarding a new agreement.
Speaking after the announcement of the planned payoff to business and union leaders, military representatives, and human rights activists, Kirchner said the IMF had "acted towards our country as a promoter of and a vehicle for policies that caused poverty and pain among the Argentine people." He has long complained of the "meddling and demands" from the fund, which boosts his popularity with voters.
Rodrigo Rato, IMF managing director...
Para continuar leyendo
Solicita tu pruebaCOPYRIGHT GALE, Cengage Learning. All rights reserved.
