Weekly Report - 1 July 2003

On 24 June, during a visit to Buenos Aires, IMF managing director Horst Köhler confirmed what we anticipated last week: that the IMF and Argentina had agreed that the next step should be a medium-term agreement.

According to Köhler, the proposed deal will not represent a continuation of the existing arrangement, which expires at the end of August, nor will it be a long-term debt solution. Rather, it will be 'a clear programme for both parties [...] of medium length, or three years.'

A three-year programme would just about cover the remainder of President Néstor Kirchner's term of office.

Köhler said the Fund had underestimated the vigour of Argentina's recovery, then warned that its slowing pace over recent months was a reminder that means had to be found to strengthen that growth and consolidate it.

He said his visit had given him a better understanding of Argentina's present situation and admitted that the IMF should have listened more carefully to the Argentines -only to qualify this by saying that the Fund should not be made the scapegoat for situations the Argentines themselves had created.

This went down very badly at a meeting with NGOs which had been intended as a public-relations exercise.

Köhler promised that he would 'design' a programme that will be 'clear' to both sides. The usual line is that it is the member country that designs the programme; the IMF only 'helps'.

After Köhler's departure, President Néstor Kirchner called for the IMF to conduct a 'healthy self-criticism' of the policies it had recommended in the past, and warned that Argentina would not accept impositions. 'From now on,' he said, 'the time is over when they could come and tell us off.'

Prime minister Alberto Fernández said that Kirchner had told the IMF chief that the only possibility of reaching a medium- or long-term agreement 'entailed ensuring first a process of development of the Argentine economy.'