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Argentina sees IMF pact within weeks

BUENOS AIRES: Argentina said on Monday it expected a new "long-term" International Monetary Fund accord within weeks and began to push Congress for anti-recession reforms likely to be a condition for any new pact.

Argentina, Latin America's No. 3 economy, wants extra IMF funds to ensure it can get its debt-dependent economy through a tricky recovery after an 18-month recession. The IMF is expected to demand Argentine structural reforms to cut debt and increase business competitivity before signing for further funds, debt analysts say.

"We think that in the next weeks we are going to be able to get an accord with the Fund," Economy Minister Jose Luis Machinea said in a prepared statement. "We are negotiating a long-term programme."

Machinea spent the weekend in Washington where he met with IMF First Deputy Managing Director Stanley Fischer and U.S. Treasury Secretary Lawrence Summers.

An IMF spokesman in Washington said Sunday's discussions with Fischer had been framework talks -- "a general discussion on possibilities." IMF negotiators are expected in Buenos Aires Wednesday to begin hammering out final terms.

DEAL COULD TAKE FORM OF NEW LONG-TERM STANDBY PACKAGE

A deal could take the form of a new long-term standby package to replace the $2.8 billion, three-year accord Argentina already has. It could also be a larger contingency credit deal -- like that Mexico took to see it through 2000 elections -- or an unlimited, and yet untried contingency-credit-line designed for sound economies going through temporary troubles

Argentina needs to borrow $17.5 billion in 2000 to repay debt, cover deficit and meet other needs. Investors have lent the nation around $25 billion over the last two years. They want to see it can pay that back before loaning more cash.

Argentina would prefer to finance 2000 with private credit -- using IMF cash can smack of desperation to some investors who see multilateral agencies as lenders of last resort. It may have to use IMF cash if commercial credit remains tight.

To get access to IMF standby funds, Argentina must hit deficit targets it consistently missed in 1999 as it fought through its worst recession in a decade.

NEW IMF DEFICIT TARGET TO BE DISCUSSED

Argentina will have to discuss a new IMF deficit target -- the difference between what it earns and what it spends -- to get access to more cash. It will have to show ways to stop foreign financial shocks throwing its tightly-controlled economy into recessions like that after devaluations by Mexico in December 1994 and Brazil in January 1999, debt analysts say.

The Alliance government of President Fernando de la Rua on Monday sent Congress an "economic emergency" law -- a package of structural reforms aimed primarily at making Argentine business more competitive and increasing government income.

The top measures are labour reforms to allow salary negotiations to go through employers rather than unions. The package also shrinks government retirement plans and calls for stiffer laws against tax evasion.

All this is expected to help create economic growth of at least four percent in 2000 and upwards of five percent in 2001 -- compared with an expected three percent contraction in 1999 gross domestic product -- the government has said.

But De la Rua still faces opposition in Congress. While his party holds sway in the lower house the opposition Peronists control the Senate. Peronists have already stated their opposition to certain labour reforms.

The Peronists also fiercely defend current provincial funding levels -- another sore spot with investors and the IMF who want to see reforms made to the way revenue is distributed to the regions by the central government.-Reuters