IMF offers Latin America words of support, no cash
Reuters, Thursday, September 03, 1998 at 22:50
(Adds IMF statement, comments from ministers)
By Katherine Trinidad
WASHINGTON, Sept 3 (Reuters) - The International Monetary
Fund (IMF) offered Latin American nations words of support but
no immediate cash on Thursday after key stock markets in the
region spiraled downwards and currencies plummeted.
The IMF said after the first day of a meeting with top
Latin American economic officials that it stood "ready to
recommend the strengthening and broadening" of its existing
support to countries of the region if necessary.
But with little money to lend, the IMF limited itself
mostly to expressing confidence "that most countries in the
region would continue to show positive output growth, and low
or declining inflation."
IMF officials say the lending agency will have just $10
billion available for loans by the end of this year.
Its cash reserves have been drained by huge rescue deals
for Russia and three Asian states, and the U.S. Congress has so
far balked at providing the $18 billion the Clinton
administration is seeking to replenish IMF resources.
Gloom and despondency engulfed most of the region's
financial markets on Thursday as Brazilian stocks closed at a
two-year low, Argentine and Venezuelan shares nose-dived and
the Mexican peso fell to a new record low against the dollar.
Rattled by global economic turmoil and a devaluation of the
Colombian peso that could spark a currency crisis throughout
the region, top officials from nine Latin American nations were
meeting under the auspices of the IMF Thursday and Friday to
discuss ways to defend their economies.
Finance ministers attending the meeting were furious at
U.S. credit agencies who issued critical reports on several
countries in the region as the IMF meeting was being held,
hitting already struggling financial markets hard.
Moody's Investors Service downgraded or put on review the
foreign debt of Mexico, Brazil, Argentina and Venezuela while a
director at Standard & Poor's said Brazil and Venezuela were
the least credit-worthy countries in the region and would be
hurt most by current market turmoil.
Brazil's Finance Minister Pedro Malan called Moody's
downgrade of Brazil's foreign currency debt rating
inexplicable.
"It is something we can't understand. We have not been
invited to comment on their underlying analysis. They have not
been at the central bank. They have not been at the finance
ministry," Malan told reporters.
Following Wednesday's devaluation of the Colombian peso,
there was widespread speculation that Venezuela's bolivar would
be next.
Finance Minister Maritza Izaguirre told reporters at the
IMF that Venezuela planned no big devaluation.
"We are not going to do some macro-devaluation, and we are
not going to change our exchange controls. We are very clear on
that message," she said.
The Latin American officials said they would maintain both
open capital markets and their current exchange rate policies
and regimes.
U.S. Treasury Secretary Robert Rubin lent his support,
lunching with the officials and saying developments in the
region were "profoundly important" to the United States.
Mexico's Finance Minister Jose Angel Gurria complained that
markets were overreacting to world financial problems and
failing to discriminate between emerging economies.
"Everyone is thrown in the same basket, saying they are all
emerging markets," he said.
Gurria denied that Latin American countries were in
Washington to seek IMF funds to ward off financial troubles.
"We have not come to ask for money. We have not come here
to organize a great fund to support Latin America," he said.
Some analysts though said the meeting looked like a kind of
dress rehearsal for a plea for IMF aid later in the year if
regional economic conditions worsen.
Canada's Finance Minister Paul Martin, who also attended,
said Latin America was committed to economic reform and had
taken the right steps so far.
Finance officials from Argentina, Brazil, Chile, Colombia,
Ecuador, Mexico, Peru, Uruguay and Venezuela participated in
the meeting.
While Venezuela, which is Colombia's second largest trade
partner, is considered most vulnerable to devaluation, investor
attention has increasingly focused on Brazil, Latin America's
economic powerhouse, whose gross domestic product of $800
billion is nearly twice that of Mexico's.
President Fernando Henrique Cardoso, seeking reelection
this year, has vowed not to devalue. Economists say a
devaluation could plunge the entire region into a recession.
"Brazil has the resources to react to any emergency,"
Cardoso said in Brasilia on Thursday. "In this moment of
turbulence, we have the conditions to advance."
Copyright 1998, Reuters News Service |
