Latin American Economic Crisis
This is Steve Ember with the VOA Special English program IN THE NEWS.
The International Monetary Fund has agreed to provide an additional thirty-thousand-million dollars in loans to Brazil. I-M-F Managing Director Horst Koehler announced the agreement Wednesday. Experts say the loan is designed to ease growing concerns about Brazil's financial markets.
The thirty-thousand-million dollar loan is the largest ever given by the I-M-F. Financial experts say it shows the I-M-F's strong support for the economic program that Brazil is following. Brazil already received a fifteen-thousand-million dollar loan from the I-M-F last year.
Brazil is the largest economy in Latin America. But investors and bankers are concerned about Brazil's huge public debt. It is more than two-hundred-fifty-thousand-million dollars. There also is concern about Brazil's presidential election in October. The two main candidates have sharply criticized the current government's support of I-M-F policies aimed at cutting spending, reducing inflation and increasing free trade.
These concerns have weakened financial markets and caused a sharp drop in the value of Brazilian money in recent weeks. The government has been forced to pay interest rates of more than thirty-percent on what it borrows. Many fear that Brazil may not be able to pay its huge debt.
The I-M-F loan agreement requires that Brazil keep its budget at three-point-seventy-five percent of its total economic production. And it must reduce inflation during the next year and a half.
American Treasury Secretary Paul O'Neill visited Brazil, Uruguay and Argentina this week. Uruguay received an emergency loan from the United States Monday of one-and-one-half-thousand-million dollars. The loan was made to help Uruguay re-open its banks. They had been closed to keep people from withdrawing too much money. On Thursday, the I-M-F agreed to extend its line of credit to Uruguay so it could borrow more money.
Argentina, however, did not receive help this week. The American treasury secretary said the Argentine government must complete more economic reforms and improve its banking system before it can receive aid. Argentina has one-hundred-forty-thousand-million dollars in government debt. And it owes large repayments on past loans from the I-M-F and other international lenders.
About twenty-two percent of workers are unemployed in Argentina and more than half the country's thirty-six million people are poor. Until recent years, Argentina was South America's richest nation.
Argentines protested Mr. O'Neill's visit. They accused the United States and the I-M-F of blocking badly needed aid. The United States is the largest and most influential shareholder in the I-M-F.
Mr. O'Neill said he wants to help negotiate an agreement between the I-M-F and Argentina to pull the country out of a four year recession. .
This VOA Special English program IN THE NEWS, was written by Cynthia Kirk. This is Steve Ember.