The deal does not include explicit commitments on issues hitherto held dear by the Fund: a calendar of utility rate adjustments (Argentina plans to renegotiate the contracts with privatised utilities); compensation to banks for losses due to the asymmetric `peso-isation' of deposits and loans; and the privatisation of state-owned banks (there is reference to strengthening them). A primary fiscal surplus target of 3% of GDP is set for 2004; for ensuing years it will depend on performance. This has displeased holders of the US$76bn in bonds Argentina has defaulted on, who see it as a harbinger of a big `haircut' in the restructuring offer expected to be put to them later this month. Economy minister Roberto Lavagna has predicted that creditors will react initially with `long faces', but that `realism' would prevail: `They know,' he said, `that Argentina cannot pay if it doesn't grow.'
BRAZIL | Eletropaulo `renationalisation' saga ends. The long-drawn-out saga of US firm AES's default on obligations with the development bank BNDES has concluded with an agreement whereby the latter buys back 50% of the former's shares in Eletropaulo, the electricity firm serving São Paulo (the biggest of its kind in Latin America). This will be followed by the creation of a new company, Novacom, owned by BNDES and AES, which will include three of the AES power utilities in Brazil: Eletropaulo, AES Tieté and Uruguaiana. AES will have a one-share majority in Novacom. After this, AES's debt with the Brazilian state will be halved, to US$600m. When AES defaulted, the spin put on the situation by some market analysts and financial media was that BNDES intended to `renationalise' the AES power utilities.
URUGUAY | At last, a visible upturn. After four years of recession, in the second quarter Uruguay's GDP grew by 3.3% on the first. This still leaves first-half GDP 6.8% lower that a year earlier. In the inter-annual comparisons, only agriculture is up, by 1.3%.
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