- The Washington Times - Saturday, December 29, 2001

The violent protests that brought down Argentina's government last week may force the International Monetary Fund to re-examine its multibillion-dollar rescue packages.
The IMF and its major shareholder, the United States, are beginning to look at new options after loans and belt-tightening measures failed to revive South America's second-largest economy.
Policy-makers also are considering whether the Washington-based lending agency's warnings about the deteriorating situation in Argentina were strong enough.
Did it wait too long to call a halt to lending that clearly was not pulling the country out of a four-year recession and an 18 percent joblessness rate? And what happens the next time a government goes bankrupt and can't pay its debts?
Allan H. Meltzer, chairman of an advisory panel that delivered a highly critical report on the IMF and its sister institution, the World Bank, said the Argentine crisis should give the IMF a "greater sense of realism on what it can and cannot do."
He said the lending institution needs to do a better job of crisis prevention by getting governments "to make economic reforms up front and provide incentives to stay on course" so that bailouts become unnecessary.
C. Fred Bergsten, head of the International Institute of Economics, a Washington think tank, said there will be some soul searching at the IMF over how it handled loans to Argentina.
"The IMF is often accused of being too tough in its economic prescriptions, but in this case it was too soft," he said, in going ahead with an $8 billion installment to Argentina in August that "clearly was a mistake." Last December, the IMF provided the government with $14 billion.
President Bush said yesterday in Crawford, Texas, that the United States is "willing to offer technical assistance through the IMF" to help Argentina develop "a plan that sustains economic growth.
He said he had discussed the Argentine situation in recent calls to the leaders of Mexico, Uruguay, Chile and Brazil.
The interim government of Adolfo Rodriguez Saa took office in Buenos Aires Sunday and promptly announced the suspension of payments on around $50 billion in debt held by foreigners the biggest government default ever.
The interim government, which will remain in power until elections are held in early March, also announced plans Wednesday to create a "third currency," which some analysts regard as the first step toward a devaluation of the peso, pegged one-to-one with the dollar.
On Thursday, Mr. Rodriguez Saa told the Argentine television station America that he hoped to start "necessary" talks with the IMF in January.
Mr. Rodriguez Saa said he had spoken by telephone Thursday with the IMF's No. 2 official, Anne Krueger, and asked her for the organization's understanding and patience.
He said the decision to suspend debt payments "does not signal a break with the world, but a request for understanding from the world."
Critics of the IMF say it pushed Argentina over the edge Dec. 5 by denying it a $1.26 billion loan installment after budget targets were not met by the fallen government of President Fernando de la Rua, who resigned last week after violent protests over his economic policies.
His government kept asking the country's 36 million people for short-term sacrifices in exchange for promises of long-term stability.
After Mr. de la Rua left office, Peru's Finance Minister Pedro Pablo Kuczynski said, "The IMF is partly to blame because it didn't sound the alarm in time and then took a tough stance at a moment when things got extremely difficult."
There was also criticism of the Bush administration for remaining on the sidelines and letting the IMF take the lead in the crisis. The Clinton administration was actively engaged in managing bailouts in the 1990s for Mexico, Russia and Asian countries.
Treasury Secretary Paul H. O'Neill has said it was up to the Argentine government, working with the IMF, to come up with sound economic policies. "It's not something that can be imposed from outside," he said.
Last week, the IMF's chief spokesman, Thomas Dawson, said discussions with Argentina over a stalled $22 billion loan package would resume with a new government.
He also made it clear that no new money would be released until Buenos Aires adopted acceptable economic policies.
"Our aim has been to help Argentina develop on their own a program that can be sustained both economically and politically, and that remains our goal," he said.

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