Wall St. Journal: "USA presta $1.5B para ayudar a Uruguay en problemas"

U.S. Grants $1.5 Billion Loan To Aid Struggling Uruguay

By MIRIAM JORDAN and MICHAEL M. PHILLIPS
Staff Reporters of THE WALL STREET JOURNAL

A REGION IN TURMOIL


The U.S. and international-lending institutions agreed to boost a
financial rescue package for Uruguay, a tiny country buffeted by fiscal
turmoil in neighboring Brazil and Argentina, as the region's money
troubles began to strike at Brazil's economic fundamentals.

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Washington agreed to provide a $1.5 billion short-term loan, to be
replaced by funding from the International Monetary Fund, the World Bank
and the Inter-American Development Bank. The move will increase the
existing emergency international-aid package for Uruguay from $3 billion
to $3.8 billion, funds intended to restore confidence in the country's
banking system -- sapped largely by withdrawals by Argentines desperately
taking home money they thought would be safe in stable Uruguay.

Bush administration officials said they expect the U.S. loan to allow
Uruguayan banks, closed Tuesday to cut off a run on deposits, to reopen
Monday.

The decision signals a remarkable about-face by the Bush administration,
which came into office questioning the wisdom of large financial bailouts
of developing countries and is now providing help to Uruguay and
expressing support for aid to embattled Brazil. Perhaps most striking is
that instead of relying solely on the IMF and its funds, as he had earlier
promised to do in such cases, Treasury Secretary Paul O'Neill is offering
U.S. money to tide the Uruguayans over.

Furthermore, Mr. O'Neill, who arrived last night in Brazil and will visit
Uruguay and Argentina this week, is tapping the Exchange Stabilization
Fund, a pool of resources available to the Treasury secretary to stabilize
foreign-exchange rates. When President Clinton's Treasury secretary,
Robert Rubin, drew on the fund to rescue Mexico in 1995, congressional
Republicans called hearings and questioned the legality of the move.

Mr. O'Neill said his decision was "consistent with past use" of the
special fund. Treasury cited a dozen examples and said the U.S. money
would be repaid within days.

As part of an effort to secure the IMF money, Uruguay's Senate Sunday
approved a request by the economy minister to restrict withdrawals of
deposits linked to the U.S. dollar for three years, with the lower house
expected to meet Sunday to consider the legislation.

The IMF is in negotiations with Brazil, South America's biggest economy,
over an increase in its own credit line, which now totals $15 billion.
When Brazil's currency, the real, entered a downward spiral in May over
worries about the government's ability to meet payments on its $264
billion net public debt and concern that a left-wing politician might be
elected president, government officials assured investors that the
turbulence didn't reflect the nation's strong economic fundamentals.

But the financial-market mayhem is seeping ever more deeply into the real
economy, as risk-averse banks tighten once-untouchable credit lines,
borrowing costs rise and companies are squeezed between stingy suppliers
and delinquent buyers. Foreign banks, already burned by Argentina's crisis
and facing global uncertainty, have pared exposure to Brazil. Their
retreat culminated in the recent curtailment of export credit, which is
usually immune to local-currency turmoil because it finances
dollar-denominated deals.

Thanks to a record harvest, for example, Brazilian coffee traders such as
Jorge Esteve were bullish about exports this year. Then banks started
turning him down for export finance -- a rebuff he hadn't experienced in
22 years in business. "At a critical moment, we are having serious
problems obtaining lines of credit," said Mr. Esteve, of Esteve SA, a
large coffee dealer. "Some exporters are simply dropping out of the
market."

Jose Tadeu Alves, president of Brazil's unit of the U.S. drug makers Merck
& Co., projects that pharmaceutical companies will see a 12% to 13% drop
in profit if the real stabilizes at 3.30 to the dollar. After reaching a
historic low of 3.47 Wednesday, the real closed at 3.01 Friday.

Financial uncertainty adds to the troubles of Brazil's massive auto
industry, already overextended by new General Motors Corp. and Ford Motor
Co. plants and the recent entry by French and Asian players. Today, with a
weak real raising costs and reducing revenue, says Volker Barth, president
of the Brazilian unit of auto parts maker Delphi Corp., "we're trying to
turn two minuses into a plus."