The Washington Post
Friday, September 12, 2003; Page A21

Argentine Leader Extols Benefits of a New IMF Deal

By Jon Jeter
Washington Post Foreign Service

BUENOS AIRES, Sept. 11 -- President Nestor Kirchner today heralded the benefits of Argentina's new three-year agreement with the International Monetary
Fund and other lenders that reschedules payment on debt of nearly $21 billion.

"It's a good deal," Kirchner told reporters today, discussing the accord announced late Wednesday, "but not a panacea."

The pact is widely considered a political victory for Kirchner, whose four-month-old administration has adopted a defiant stance toward the IMF and blamed
lenders' policies for much of Argentina's financial problems.

The restructuring is the first long-term accord between Argentina and the IMF since the country defaulted in December 2001 on most of its $141 billion foreign debt,
the largest government default in history. Many economists said the agreement could provide a pivotal boost to Argentina's halting efforts to recover from its worst
financial crisis.

The agreement will not only enable Argentina to refinance nearly $21 billion in defaulted loans owed to international lenders such as the IMF, but also will allow the
country to reopen international lines of credit that have been frozen for more than a year. With an IMF accord in hand, the country can now begin to restructure
more than $90 billion in defaulted debt owed to other creditors worldwide.

Kirchner has repeatedly said he would not sign any deal with the IMF that would slow Argentina's economic growth. Political analysts agree that his negotiating
position was strengthened by his overwhelming political support and an economy that has grown faster than that of any country in Latin America this year, even
without help from the IMF or other international lenders that have frozen Argentina's credit.

Simultaneously, political analysts and economists said, the IMF was in a much weaker position than usual. Argentina is the fund's third-largest debtor, after Brazil and
Turkey. Its role in helping developing countries could have been questioned further had it failed to reach an agreement with Argentina.

The accord requires that Argentina maintain a budget surplus equivalent to 3 percent of its gross domestic product. Kirchner had insisted on a surplus of no more
than 3 percent to allow the country to invest in public works and anti-poverty programs; the IMF had initially proposed a 4 percent surplus.

The pact does not require Argentina to either compensate privately owned banks that lost money following last year's devaluation or allow private utility companies
to increase rates frozen for more than a year. The IMF had initially insisted on both as a condition for extending credit to Argentina.

"This really does show that the IMF needed this agreement more than Argentina did," said Alan Cibils, a Buenos Aires-based economist for the Center for
Economic and Policy Research in Washington. "Kirchner really got everything he wanted. If Argentina didn't reach an agreement, how much worse could things get?
The worst has already happened. But for the IMF, failing to reach an agreement leaves them exposed financially, but also calls into question the whole basis of their

The agreement came only a day after the government defaulted on a $3 billion loan payment to the IMF, the largest missed payment in the fund's history.

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