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Last Updated: Wednesday, 4 June, 2003, 10:31 GMT 11:31 UK
Uruguay gets IMF thumbs up
Uruguayans celebrating after the 1999 election
Economists from the International Monetary Fund (IMF) have ended their latest visit to Uruguay on a high note, government officials said.

The government in Montevideo said the IMF believed things were on the mend, after a rough year of recession and struggles with public debt, following neighbouring Argentina's economic implosion.

After the visit - the third to review a $3bn (1.8bn) loan agreement - the IMF mission dropped its forecasts for inflation to 19% from 27% and said the economy will only contract by 1% rather than 2%.

Another IMF team, meanwhile, is in Argentina to talk about a new debt restructuring accord to replace the current one, which runs out in August.

The talks are likely to be less friendly, since the IMF is insisting that new President Nestor Kirchner veto a recent Congressional vote which gave mortgage holders an extra 90 days to pay arrears.

The government is resisting the demand, but needs a waiver to avoid paying the $4.5bn it is meant to pay the IMF between now and December.

Default

The troubles of Uruguay and Argentina are closely linked.

In December 2001, after struggling for years with the strictures placed on its economy by the IMF and other agencies, Argentina defaulted on its foreign debt of more than $140bn.

That triggered a chain of events including mass unemployment, a fall of three quarters in the peso's value - and a knock-on effect elsewhere in Latin America.

Brazil's debt-ridden economy was seen by some as the next to go, but the huge country weathered the storm and its new left-wing President Lula da Silva is generally judged to be squaring the circle between economic orthodoxy and social justice.

But in Uruguay, the collapse of cross-border trade was devastating.

Despite a long-held reputation as one of the securest places in South America for foreign money, the economy imploded and shrank more than 10% in 2002 alone.

Last month, though, the government managed to restructure almost half of its $11bn foreign debt, pushing the repayment dates back five years.




SEE ALSO:
Uruguay seeks debt restructuring
12 Mar 03  |  Business
Country profile: Uruguay
03 Jan 03  |  Country profiles
IMF breakthrough for Uruguay
21 Feb 03  |  Business
Uruguay's banks face lengthy queues
05 Aug 02  |  Business


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