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New York Times: "Aflojando el paso, Estados Unidos ofrece prestamos
a Uruguay"
Easing Its Stance,
U.S. Offers Loans to Uruguay
New York Times. By RICHARD A. OPPEL Jr.
WASHINGTON, Aug. 4 - The Bush administration, softening its stance
against
financial help for struggling countries, said today that it would
grant up
to $1.5 billion in short-term loans to Uruguay, an infusion that should
allow its banks to reopen Monday morning.
The loan, announced after emergency legislation was passed in Uruguay
to
help quell the nation's economic crisis, would be the first of its
sort by
the Bush administration to assist another country directly in a financial
crisis. It is the latest sign that a worsening economic picture in
Latin
America is forcing the administration to reconsider such aid.
Bush officials had long asserted that such assistance - which was
common
during the Clinton administration - is often wasted or unfair to American
taxpayers, and that it makes little sense to lend money to countries
already facing unsustainable debt loads until they take steps to
restructure their finances.
But they said today that they expect that the loan will be repaid
within
days, once Uruguay receives a longer-term package of loans from the
World
Bank, the International Monetary Fund and the Inter-American Development
Bank that will bring total assistance to Uruguay to $3.8 billion.
The announcement in Washington came as Treasury Secretary Paul H.
O'Neill
landed in Brazil on the first leg of a trip aimed at helping to reassure
Latin American officials about the United States' attention to the
troubled regional economy. The financial crisis that enveloped Argentina
early this year - leading the nation to default on $141 billion in
debt -
has spread turmoil to Uruguay, Brazil and other Latin American nations,
causing their currencies to fall in value and raising fears of major
defaults on debt payments, including money owed to United States banks
and
investors.
Mr. O'Neill said tonight that the loan would "help Uruguay address
the
intense external pressures it has faced in recent months" and
that it was
made in recognition of "the extraordinary actions and commitments
by the
Uruguayan authorities to address these pressures."
Mr. O'Neill continued to backtrack from off-the-cuff comments he made
a
week ago in which he suggested that financial assistance to
emerging-markets countries carries the risk that funds would be diverted
by corrupt officials.
"A government that puts in place and follows through on such
strong
economic policies merits the consistent support of the international
financial institutions and the United States," Mr. O'Neill said
tonight.
Administration officials asserted that the package for Uruguay, because
of
its size and duration, is nothing like the much bigger bailouts during
the
Clinton administration, including aid to Asian nations in 1997 and
1998
and to Mexico in 1995. A Treasury spokesman added that officials saw
"no
risk" to the Exchange Stabilization Fund, the account that will
provide
the money.
John B. Taylor, the Treasury under secretary for international affairs,
said tonight that the I.M.F. and the other banks continued to be the
"instruments of choice" for this sort of aid. He said the
Treasury
Department only intervened because "the Uruguayans want to open
their
banking system" on Monday - before the funds from the I.M.F.
and other
banks arrive. Tonight, the I.M.F., World Bank and the Inter-American
Development Bank confirmed that they had asked their boards to approve
the
financing this week.
In 1995, the Clinton administration was attacked by some Congressional
Republicans over its decision to use the Exchange Stabilization Fund
for
the bailout of Mexico. Tonight, Mr. Taylor said Congressional leaders
had
been informed about the Uruguayan financing, though he did not say
who was
contacted or whether the plan was endorsed. The $1.5 billion figure,
he
added, represents the amount needed to back 100 percent of the Uruguayan
deposits that would be available for immediate withdrawal once the
banks
reopen.
While this is the first intervention of this sort by the Bush
administration, Mr. Taylor said "bridge loans" like this
one were common
"all through the 80's into the 90's."
Still, the loan helps to illustrate how the Bush administration has
moved
in a short time to soften its criticism of financial assistance to
struggling economies, as it reacts to the threat of economic contagion
and
political instability in Latin America.
Just last week, Mr. O'Neill roiled financial markets and created a
diplomatic flap when he suggested on the television program "Fox
News
Sunday" that to obtain additional aid, Latin American nations
needed
policies to "assure that, as assistance money comes, that it
does some
good and it doesn't just go out of the country to Swiss bank accounts."
The comments contributed to driving down the value of the Brazilian
currency, the real, by about 14 percent in the next three days, and
helped
lead to a sharp sell-off in Brazilian debt.
But the panic selling abruptly reversed course on Thursday, when Mr.
O'Neill publicly retreated from his earlier comments, saying that
Brazilian economic leaders had "done a remarkable job of maintaining
sound
fiscal and monetary policies." Explicitly signaling support for
additional
aid from the I.M.F. to Brazil - which are in talks now for a
multibillion-dollar package - he added, "I continue to favor
support for
Brazil and other nations that take appropriate steps to build sound,
sustainable and growing economies."
After Mr. O'Neill's about-face, the Brazilian real soared by nearly
10
percent, its largest one-day gain. A sliding currency makes it more
difficult for Brazil to make payments on its more than $250 billion
in
debt, much of which is owed to American financial institutions or
denominated in United States dollars.
Mr. O'Neill arrived today in Rio de Janeiro, and he is scheduled to
meet
with Brazilian officials and then travel to Uruguay and Argentina
to meet
with officials there.
The financing package came after Uruguayan lawmakers approved legislation
that would prevent certain long-term deposits from being withdrawn
for
three years. Uruguay, a country of 3.4 million people tucked between
Argentina and Brazil, has been likened to Switzerland for its relatively
stable financial institutions. But in the growing crisis, most of
the
nation's banking reserves - more than $2 billion - had been depleted
by
nervous depositors before the banks were closed Tuesday.
Gene Sperling, who coordinated economic policy in Clinton administration's
second term, praised the move to aid Uruguay but said it represented
a
clear policy shift for the Bush administration as it faces the threat
of
economic contagion in Latin America.
"This is an appropriate policy shift brought about by economic
reality,"
Mr. Sperling said. "It's one thing to make a categorical statement
during
a campaign denying the existence of contagion," he said. "It's
another
thing to confront contagion like in Uruguay."
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