Washington Post: " USA presta U$1.5B a Uruguay"

U.S. to Lend Uruguay $1.5 Billion
Advance From Treasury Is a Bridge for IMF, Global Loans

By Paul Blustein
Washington Post Staff Writer
Sunday, August 4, 2002; Page A25


Uruguay will receive a $1.5 billion in emergency loans in a few days from
the International Monetary Fund and other international lenders, and the
U.S. Treasury will advance the money immediately so the South American
nation's banks can reopen tomorrow, U.S. and Uruguayan officials said late
yesterday.

The extraordinary speed with which the loan was marshaled, and the direct
involvement of the Treasury Department, reflects Uruguay's dramatically
sudden descent into financial crisis amid severe turmoil in neighboring
Brazil.

Uruguay, with a population of 3.4 million, has long been one of Latin
America's most stable economies. Stemming the crisis there is crucial to
an international effort to keep the rest of the region from following
Argentina into default and economic ruin. Brazil, for example, the
region's largest economy, is seeking a large increase in its $15 billion
IMF loan program.

"This is essential for Uruguay now, so they can open their banks on Monday
and get their payment system working," said John B. Taylor, Treasury
undersecretary for international affairs.

The Bush administration has balked at contributing U.S. taxpayer money
directly to international rescue packages, saying it wanted to move away
from the Clinton administration's policy of supporting large bailouts.
Treasury officials asserted that the U.S. funding being advanced to
Uruguay does not conflict with the administration's stance because it is a
bridge loan that will be repaid in a matter of days -- as soon as the
boards of the IMF, the World Bank and the Inter-American Development Bank
formally approve the longer-term loans they intend to provide.

Treasury Secretary Paul H. O'Neill is visiting Brazil, Uruguay and
Argentina this week. Although he sparked a furor in Brazil last week by
raising concerns about how bailout money might be wasted, he has since
voiced support for the country. The Treasury's willingness to help Uruguay
directly may also improve the atmosphere surrounding his trip.

Uruguay, called the "Switzerland of Latin America" because its banks
attract funds from across the region, had a solid credit rating at the
beginning of this year. But cash-strapped Argentine depositors have been
withdrawing money steadily, and panic conditions struck Uruguay in recent
weeks as Brazilian financial markets suffered a battering. Brazil's
currency, the real, has lost about a quarter of its value against the U.S.
dollar because of investor fears about a leftist victory in the October
presidential election.

The Uruguayan government last Tuesday closed the banks after a run by
depositors left some institutions unable to meet obligations. Rioters
later looted stores in the capital, Montevideo.

A formal announcement of the loan package is expected today. IMF officials
declined to comment yesterday, but Uruguayan Economy Minister Alejandro
Atchugarry disclosed the main elements to the press in Montevideo. The
government is to propose laws to freeze some fixed-term deposits to
prevent the banking system from collapsing, Atchugarry said, according to
Bloomberg News.

Explaining the $1.5 billion package, sources familiar with the plan said
Uruguay, which has already received commitments for $3 billion in IMF
loans, is to get commitments for an extra $800 million, and some of the
previously committed money will be disbursed earlier than scheduled.

Taylor said the bridge loan is "not a departure" from the department's
aversion to direct funding. "This is different from the kind of large
scale bilateral financing that we have suggested is better handled by the
international financial institutions, and is in fact being handled by them
in this case," he said.