Weekly Report - 16 March 2004

ARGENTINA | IMF gets nod towards `flexibility'. In yet another exercise in brinkmanship, Argentine president Néstor Kirchner blinked first, abandoning his earlier stance that he would not dip into reserves to meet an IMF payment deadline if the Fund did not first approve the quarterly performance test on the current standby arrangement. What the Fund got was a formal assurance that Argentina will `work with the assistance of investment banks to establish a timetable and process that will ensure meaningful negotiations with all representative creditor groups.' 

Hitherto, Argentina only countenanced `discussions', not negotiations, and it refused to recognise the Global Committee of Argentina Bondholders (GCAB), which represents investors holding about US$37bn of defaulted Argentine bonds.

On 9 March Argentina paid the US$3.1bn due; the following day the IMF announced agreement on the Argentine letter of intent, clearing the way for a disbursement that covers Argentina's outlay. The bondholders' association has accepted an invitation from economy minister Roberto Lavagna to go to Buenos Aires towards the end of March, to get started on `meaningful' talks.

ARGENTINA | Narrow jobless rate down. Just-released figures show that Argentina's official rate of open unemployment at end-2003 was 14.5%, two points lower than at the end of the previous quarter and almost 10 points lower than at the trough of the recent crisis, in the second quarter of 2002. Not classified as unemployed are the 1.8m beneficiaries of the `heads of household' subsidy scheme; if they were included, the jobless rate would be 19.7%.

BRAZIL | Industrial output inching upwards. Industrial production in Brazil in January was 0.8% greater than in December, which took the 12-month increase up to 1.7%. In calendar 2003, industrial output increased by a mere 0.3%. The official statistical institute, Ibge, has tried to find some comfort in that January was the fifth consecutive month of industrial growth, however minimal.