Global Policy Forum

Larry Rohter

The Argentine economy minister announced today that his country would no longer use its diminishing foreign reserves to pay back loans from the International Monetary Fund and other multilateral lenders and would thus miss at least one payment due next month, a move that pushes Argentina closer to a formal break with those bodies. Meeting with foreign reporters in Buenos Aires, the economy minister, Roberto Lavagna, also said that while Argentina hoped to reach a new accord with the I.M.F., it was "not going to sign just any old agreement." The government of Eduardo Duhalde, he said, "will not renounce its policy of social assistance," even if it means further delaying negotiations that have been bogged down for months.

"There are two priorities which we will not abandon," Mr. Lavagna said. "We will maintain social programs and ensure the financing of provincial economies."

Mr. Lavagna's remarks were the latest in a series of official statements indicating that Argentina was growing impatient with the demands of the multilateral lending bodies that are virtually its only source of foreign credit. Commercial banks have been treating the country as a pariah since the government defaulted on most of its $141 billion of public debt late last year.

Last week, shortly after the I.M.F.'s first deputy director, Anne O. Krueger, indicated that Argentina must take further steps to meet the fund's requirements for a rescue package, the interior minister, Jorge Matzkin, said, "There are opinions on the part of the International Monetary Fund that have left even the most patient and pliable of us fed up."

Also last week, the fund's managing director, Horst Kí¶hler, sent a letter to Mr. Duhalde, asking him to speed efforts to break the deadlock. According to Argentine news accounts, Mr. Duhalde promptly phoned Mr. Kí¶hler to tell him that "Argentina can only use its reserves to meet future obligations if the country is under the umbrella of an accord" with multilateral lenders.

Hoping to reach an agreement with the fund, Argentina has already moved to a floating exchange rate for the peso and has repealed legislation that could have been used to penalize foreign banks whose behavior during the crisis has been criticized. But Argentine officials said that I.M.F. negotiators were demanding additional steps that included deeper cuts in government spending and an end to court rulings that allow depositors greater access to frozen bank accounts.

In remarks published in Argentine newspapers today, Mr. Kí¶hler said that "we want to reach a deal with President Duhalde" but need "a minimum amount of public consensus, including with institutions like the judicial system and Congress."

Mr. Duhalde, however, announced in July that he would be leaving office nine months early and calling early elections, and the main candidates to replace him are shying away from any commitments to the I.M.F.

"It seems ill advised to me that the fund has expressed its opinion about social plans," Alfredo Atanasof, Mr. Duhalde's cabinet chief, told reporters today. "Kí¶hler and Krueger ought to know that if the enormous network of social containment wasn't working, this country would have gone up in flames."

Argentina has $2.25 billion in loans that it is required to repay to multilateral lenders like the I.M.F., the World Bank and the Inter-American Development Bank the last three months of this year, and an additional $14.6 billion is scheduled to fall due in 2003. But Argentina's central bank reserves have fallen nearly 50 percent this year, to about $9.5 billion.

Today's decision does not affect $329 million that is due this month, which Argentina said it planned to pay. "Argentina is going to fulfill all of its obligations, but what has to be decided is when and how," said Mr. Lavagna, who is scheduled to go to Washington later this week to attend the fund's annual meeting.

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