Weekly Report - 20 January 2004

ARGENTINA | Putting pressure on the IMF. President Néstor Kirchner has served notice that if the IMF does not approve Argentina's compliance with agreed targets by 9 March, when a new payment of US$3.06bn to the Fund falls due, Argentina will not dip into its international reserves to make the payment. On 10 January the IMF approved compliance with targets in the first quarterly review, almost a month after it had been expected to do so - and then only after considerable pressure by the US. The IMF is also under pressure, in the opposite direction, from the banks. Charles Dallara, director of the IFI, the international banks' think-tank, last week accused the IMF of breaking its own rules by continuing to lend to a country in default and failing to coax Argentina into expediting a deal with its creditors.

ARGENTINA | Industrial downturn. Industrial output in Argentina fell by 2.7% between November and December, paring down the improvement over the whole year to 16.3%. It must be kept in mind that in 2002 the country's industrial output shrank by 10.6%.
Over the year as a whole the most dynamic branches of industry were textiles and mechanical products (excluding cars). The only branch to register a decline was that of dairy products (down 9%).

BRAZIL | Expectations up, modestly. According to a survey by the Fundação Getúlio Vargas, 42% of industrialists expect to increase their production this quarter, as against 27% who expect a decline. A slim majority expect the jobs situation to remain unchanged: 21% expect to employ more people, while 18% say they'll employ fewer. This roughly matches another mix: 20% say the business outlook is good for this time of year, while 12% say it is `weak'. This is the most optimistic reading of the situation since April 2001.