(Note: Another old story of mine from my days as a reporter/editor with UPI)
Published: Aug. 4, 2002 at 10:49 PM
By CHRIS H. SIEROTY
WASHINGTON, Aug. 4 (UPI) — The Bush administration announced Sunday it was providing an emergency $1.5 billion loan to Uruguay to help the South American nation stabilize its economy.
The decision marked the first time President George W. Bush’s administration has agreed to provide direct support to a country in economic trouble. The problems include the deepening recession in neighboring Argentina, and financial turmoil last week in Brazil.
Treasury Secretary Paul O’Neill said the $1.5 billion temporary loan being provided to Uruguay was in recognition of the strong economic program the country was putting into place to address its problems. O’Neill arrived in Brazil on Sunday for the first stop on a Latin America tour that includes visits to Uruguay and Argentina.
“We are confident that this enhanced program will help Uruguay address the intense external pressures it has faced in recent months,” O’Neill said in a statement that was also released in Washington.
The U.S. assistance will come in the term of a short-term loan that will be repaid in a matter of days once Uruguay receives a new loan package from the International Monetary Fund, the World Bank and the Inter-American Development Bank.
The IMF issued a joint statement with the other two institutions late Sunday.
“I am impressed by the authorities resolve to deal with a very difficult situation,” said IMF Managing Director Horst Koehler. “We see a clear basis for confidence to return.”
Koehler also intends to recommend the acceleration of a disbursement of about $150 million in credit already committed to Uruguay. When combined with the $500 million increase and about $150 million already planned for disbursement to Uruguay in August, total IMF financing immediately amounts to about $800 million, he said.
The IMF earlier this year granted Uruguay a $3 billion credit line, in an effort to protect the country from the economic fallout in Argentina.
“It is essential for the Uruguayan people and business community to have access to these deposits to preserve the payments system in the economy,” O’Neill added.
Earlier in the day, Uruguay’s Congress earlier in the day approved new legislation to assist the nation’s shattered banking industry.
The legislation would block access to $2.2 billion in long-term deposits for three years in the country’s two state banks. Checking and savings accounts would not be affected by the measure, and neither will deposits at private banks.
Meanwhile, Uruguay’s banks will re-open on Monday following last week’s temporary closure due to a panicked run, the Central Bank said Sunday. Uruguay’s government ordered the banks closed on Tuesday.
In a statement, the Central Bank also said it had suspended activity in Banco Comercial, one of the nation’s largest banks, and smaller Banco de Credito. The government has said the financial institutions will remain closed until an injection of liquidity was made by their owners.