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CNN: "Ayuda de $1,5B de los Estados Unidos a Uruguay"
U.S. $1.5bn aid deal for Uruguay
August 5, 2002
WASHINGTON (Reuters) -- The United States has approved a $1.5 billion
emergency loan to troubled Uruguay aimed at keeping its financial
system
from collapsing and to enable its banks to reopen on Monday.
It was the first time the administration of President George W. Bush
has
provided direct aid to a country in economic peril and reflected growing
concern that economic woes in Argentina threatened to spread into
neighboring Latin American economies.
In a so-called "swap" deal, the U.S. Treasury will lend
$1.5 billion to
Uruguay through the International Monetary Fund which in turn is expected
to repay the U.S. government as soon as an agreement is reached with
Uruguay.
As a condition for receiving the financial package, the Uruguayan
parliament voted earlier on Sunday to freeze certain fixed-term deposits
in state banks -- which contain roughly 35 percent of total deposits
in
the financial system -- for up to three years.
Uruguayan lawmakers' decision to do so came after panicked runs on
banks
last week and looting of supermarkets in some areas, which served
as a
bleak reminder of neighboring Argentina's economic meltdown.
"We are confident that this enhanced program will help Uruguay
address the
intense external pressures it has faced in recent months," U.S.
Treasury
Secretary Paul O'Neill said in a statement.
'Switzerland of South America'
Uruguay has been hard-hit by Argentina's downfall and by grim prospects
for Brazil's economy, the region's largest.
Since the beginning of the year, Uruguay, referred to as the Switzerland
of South America because of its reputation as a banking haven, has
lost
half of its bank deposits and 80 percent of its foreign reserves,
according to finance minister Alejandro Atchurry.
Foreign depositors, many of them Argentines, pulled back from Uruguayan
banks on fears that the government might freeze deposits, as Argentina
did
in December.
Uruguay's partial deposit freeze, however, is less comprehensive than
the
one implemented in Argentina, where the bank curbs sparked deadly
riots
that forced two presidents to resign in rapid succession last year.
The new loan brings foreign aid to Uruguay up to $3.8 billion. In
March,
the IMF approved a precautionary $800 million loan to the Latin American
nation, which it then topped by an additional $1.5 billion credit
as the
financial crisis deepened.
The Bush administration came into office pledging not to carry on
with
high-cost bailouts of the type that were practiced by the former
administration of Bill Clinton during the crisis that swept Asia in
the
late 1990s.
But spillover from Argentina's debt default, long downplayed by the
United
States and lenders, is lapping over into other countries in the region,
sparing not even large economies such as Brazil.
The decision to step in directly and swiftly to help Uruguay suggested
the
Treasury may be rethinking its past resistance to such direct assistance.
The department's undersecretary, when asked whether the Treasury expected
criticism for dipping into funds usually reserved to smooth fluctuations
in the currency markets, said such bridge lending had been "very
common"
in the past.
The announcement coincided with O'Neill's arrival in Brazil to begin
a
tour of Latin America that will include visits to Uruguay and Argentina.
In a separate statement, the IMF's managing director, Horst Koehler,
said
he would recommend an existing stand-by credit agreement with Uruguay
be
boosted by $500 million, as a sign the international community is
determined to avoiding a repeat of the Argentine crisis.
The loan hike will be presented before the board on August 8, the
IMF
said.
Treasury and the IMF praised the Uruguayan for implementing sound
policies
and for showing determination in dealing with the country's financial
upsets.
"President (Jorge) Batlle's administration has made courageous
commitments
to ensure that Uruguay remains a strong financial center," O'Neill
said,
adding it had taken "difficult but necessary steps" including
closing weak
banks and strengthening regulation.
Koehler also praised Uruguayan authorities in their determination
to find
"a solution to the banking crisis," and voiced his optimism
for the
economy's future, now that the emergency loan addresses liquidity
needs.
"We see a clear basis for confidence to return," he said
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