- The Washington Times - Monday, January 6, 2003

RIO DE JANEIRO, Brazil, Jan. 6 (UPI) — Despite a strong signal from the International Monetary Fund that a new loan deal may soon be clinched, many Argentine officials remain guardedly cautious, aware that similar moments of hope have fallen through.

"There is still an irrational attitude of the (IMF) staff toward Argentina," an unidentified Economy Ministry official told the Argentine newspaper La Nacion Monday. "I don't yet subscribe to the theory that an agreement is sealed."

Such pessimism is understandable, given the grueling and often disappointing negotiations Argentina's officials have undergone since having a $22 billion loan package suspended in December 2001.

But the most recent bout of optimism from the IMF is the most promising yet in regard to the finalization of a transitional aid package soon.

On Friday, the IMF released a statement indicating its executive board will meet Wednesday to examine Argentina's economic progress.

"Following that discussion, a fund mission is expected to travel to Buenos Aires to pursue discussions with the authorities on their request for a short-term program with the IMF," spokesman David Hawley said in a statement.

The fund and Argentina have been creeping closer to a deal in the past month, not in small part because the country has a $1 billion debt payment due to the IMF on Jan. 17.

The IMF allowed Argentina to delay most of its debt payments in 2002, but Fund rules don't allow for such leeway in two consecutive years.

La Nacion, reporting on its Web site Monday that the IMF team will definitely arrive in Argentina this Thursday, highlighted the lingering pessimism of Argentina's leaders on any deal being reached soon.

The newspaper also quoted the IMF's First Deputy Managing Director Anne Krueger Monday as saying she wasn't "confident" that an accord can be reached this month.

Yet John Taylor, the U.S. Treasury's undersecretary for international affairs, told reporters in Washington during the weekend that it was "certainly possible" that an IMF deal will be clinched before mid-January.

"We would like it to be done expeditiously," Taylor said Saturday at an American Economics Association conference.

Taylor noted, though, that the U.S. government isn't concerned about particular deadlines, but rather has "focused on getting the program and the policies right."

Whether an IMF negotiating team will discover later this week that Argentina is now on the right course isn't a given, and from all accounts there certainly isn't consensus within the Fund itself.

For instance, rumors are circulating in the country's media that John Thornton, a top Fund official in the Argentina talks, would drop the case if it looks like Argentina will be awarded an aid package soon.

"That would be great news because Thornton is one of the hardest (negotiators), and he has been continuously wrong in regard to the economic situation," the unnamed Economy Ministry source told La Nacion.

Reading mixed signals from the IMF and the U.S. government has become an art of sort for the team around Argentine President Eduardo Duhalde, as they balance the demands for reforms from the IMF with the political viability of tough new economic measures in the country itself.

It was on Dec. 20 that the IMF released a statement indicating it was seriously considering an Argentine suggestion that a smaller, transitional loan package be reached to see the country through its April presidential elections and the months following.

Such a deal — probably good for one year — would give the country just enough money to meet its debt payments with multilateral lenders.

In recent weeks, Argentina has defaulted on loans from the World Bank and from the Inter-American Development Bank.

While no panacea to economic and political ills in Argentina, an IMF loan package — even if disappointingly small — would give the country relief, a private economic think-tank reports.

An agreement would prolong the present monetary stability Argentina has witnessed, La Fundacion Capital said in a report this weekend. But if the country's leaders don't hammer out the IMF deal soon, the respite of the past few months would soon disappear.

"If we continue as we have until now — without support and extending the defaults — the dynamics of the foreign exchange will give us an unpleasant surprise," the Argentine think-tank wrote.

Despite behind-the-scenes grumbling about the likelihood of an IMF deal soon, Argentina's foreign minister was publicly upbeat Monday.

"I have explained personally (to world leaders) that Argentina has made important structural changes," said Carlos Ruckauf. "I hope that we will have results in the short term."

In early afternoon trading Monday, Argentina's peso gained 0.15 percent at 3.3 against the dollar. The Merval, the country's leading stock index, was up 2.6 percent at 544, largely on optimism about an IMF deal.

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