WASHINGTON – The International Monetary Fund said Tuesday it will offer Argentina an additional $8 billion in loans in an effort to help the country through a severe economic crisis.
The decision will boost the economic resources the IMF will make available to Argentina to $22 billion, up from the current level of $14 billion in support, according to IMF Managing Director Horst Koehler.
Koehler made the announcement on the 12th day of talks Argentine officials were holding in Washington with the IMF.
The discussions had proved difficult because of IMF demands, pursued at the urging of the United States, that Argentina make a greater effort to restructure its huge foreign debt burden.
Treasury Secretary Paul O'Neill, in a statement, praised the new agreement.
"This is an important step as we continue to work toward a sustainable long-term solution to Argentina's economic problems," O'Neill said. "A portion of the new program is specifically dedicated to assisting in a voluntary debt exchange to help make Argentina's fiscal situation more sustainable."
O'Neill last week had complained that the IMF effort needed to be directed more toward finding a way to "create a sustainable Argentina, not just one that continues to consume the money of the plumbers and carpenters in the United States who make $50,000 a year and wonder what in the world we're doing with their money."
The announcement Tuesday marked the latest effort by the IMF to stabilize a severe economic crisis in Argentina, which is struggling to pull out of three years of a steep recession.
Argentina's problems have sent shock waves through financial markets in Brazil and other countries in the region, raising fears of a repeat of the 1997-98 Asian currency crisis.
In a statement, Koehler said that $5 billion would be added to Argentina's emergency credit line immediately upon approval of his recommendation by the IMF's 24-member executive board. Koehler said the other $3 billion would be added later.
Koehler made his announcement after several hours of closed-door talks with the IMF executive board. Because of the way the IMF operates, Koehler would not have made the announcement of increased support if he had not won the go-ahead from the board.
Koehler's statement also said that Argentine authorities were "considering the possibility of a voluntary and market-based operation to increase the viability of Argentina's debt profile."
Koehler did not elaborate in his brief statement on that comment. However, U.S. officials have said that Argentina needed to restructure its $130 billion foreign debt burden to make sure that the country does not have to continually come to the IMF to seek help in repaying the loans.
The Bush administration also succeeded in getting a commitment from Argentina to work to lower trade barriers in the region.
Administration officials have complained that Argentina, by failing to support trade liberalization efforts, was not securing the type of foreign markets it needed to boost exports and help lift the country out of recession.
U.S. Trade Representative Robert Zoellick announced in a statement issued late Tuesday night that as part of the administration's support for the new IMF loans, he would be meeting with the trade ministers from Argentina, Brazil, Paraguay and Uruguay.
"The purpose of the meeting would be to pursue our common interest in free trade as an engine of economic growth globally, regionally and bilaterally," Zoellick said.
Finance Secretary Daniel Marx, who led the Argentine negotiating team in Washington over the past 12 days, told reporters at the IMF that his country would seek to use the additional IMF resources to lower the country's debt-servicing burden.
He did not provide details of how those talks would be conducted. But he stressed that any changes Argentina received from its foreign creditors would be on a voluntary basis.
Argentine President Fernando De la Rua has expressed confidence that his country can meet its debt crisis and pull out of a severe recession that has sent the unemployment rate soaring above 16 percent.
However, a new austerity program he imposed to lower the government's deficit has sparked widespread street protests. Government workers were unhappy with the austerity program's 13 percent cut in their wages.
The $8 billion in new IMF loans was at the high end of the reported $6 billion to $9 billion that the Argentine negotiations had been seeking.