CONFIDENTIAL
LO
6
was $950 mn, and the June surplus was $1.39 bn, its second highest level ever.
Giv
the total trade balance of $3.5 bn for January-June (cf $6.2 bn January-June
1986), the maintenance of levels of exports and imports at around the levels of May
and June for the rest of the year would enable the authorities' trade surplus target
for 1987 to be met.
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14 In Mexico, talks with the banks' Advisory Committee on the $11.7 bn in private
debts covered by FICORCA were completed on 10 July. Banks will be allowed to
re-lend any principal payments made by private debtors. Terms are as for the
public sector debt. On 18 June the UK signed its $120 mn bilateral accord under
the 1986 $1.8 bn Paris Club agreement on conventional terms 10 years (5 years'
grace) at LIBOR plus 0.5%. Meanwhile, although domestic demand continues to be
depressed, recent increases in manufacturing output (which was 4.2% higher in March
than in February, but still slightly below its level of March 1986) suggest that
resources are being switched towards exports. However, inflation continues to edge
up (the annual rate was 127% in June). The external accounts continue to show
strength. The January-April current account surplus was $1.9 bn, while the
January-May trade surplus was $3.89 bn. Imports were $4.58 bn, down by 10% from
the corresponding period of 1986, while exports rose by 29% to $8.47 bn, with
non-oil exports rising 24% to $4.93 bn. There were almost $0.5 bn in debt/equity
authorizations in Q1, bringing the total since the start of the scheme in May 1986
to $1.5 bn. The scheme is to be extended to local investors, probably this year.
There are already $1.8 bn in local applications, including one of $0.3 bn, and one
of $0.5 bn. The authorities are wary of monetizing any of the historically high
level of reserves (reported to be $13.1 bn in mid-June, and now possibly over
$14 bn) to boost demand, despite expectations that GDP growth will not exceed 1.5%
this year.
15
The critical mass of commitments to the $1.95 bn new money loan for Argentina
was reportedly achieved by 3 July. Commitments for 94% of the total had been
received by 17 June, in time to qualify for the 3/8% commitment fee. The Advisory
Committee will now be reopening the exit bond scheme (which no bank has so far taken
up), with a revised limit of $30 mn per bank (the limit is currently $5 mn)
providing the total of exit bonds remains within the agreed ceiling of $1.547 bn.
Achievement of the critical mass of commitments for the bank package was to have
opened the way for activation of the SDR 1113 mn SBA, which was approved in
principle in February. However, Argentina was significantly off track under the
existing programme, with the El targets for the fiscal deficit, monetary expansion
and international reserves all missed. A revised letter of intent was therefore
submitted to the Fund, in advance of a Board discussion on 23 July, with the Article
No comments yet.
Private notes are available after approval.