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August 5, 2002
WASHINGTON -- The Bush administration announced Sunday it was providing an emergency $1.5-billion loan to Uruguay to help stabilize the small South American nation rocked by financial troubles in the region.
It marked the first time the Bush administration has provided direct economic support to a country in financial crisis. The action served to underscore the administration's growing concern about the widening economic troubles in Latin America.
Those problems include financial market turmoil last week in Brazil, Latin America's biggest economy, and a deepening recession following a record government debt default in December by Argentina.
Treasury Secretary Paul O'Neill, who arrived Sunday in Brazil for the first stop on a swing that includes visits to Uruguay and Argentina, said the $1.5-billion temporary loan being provided to Uruguay was in recognition of the strong economic program the country was putting in place to address its problems.
"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 form of a temporary bridge loan that will be repaid in a matter of days once the South American nation 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 announcing the additional support after Uruguay's Congress earlier in the day enacted new legislation to shore up the country's battered banking sector.
"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."
The Bush administration took office pledging to oppose the type of direct financial assistance and big bailouts the Clinton administration used during the 1997-98 Asian currency crisis. But the deepening economic woes in Latin America have prompted a reconsideration of that stance.
Deputy Treasury Secretary John Taylor, traveling with O'Neill, told reporters in a conference call Sunday that the administration believed the temporary U.S. loan was justified because it would allow the country to reopen its banks today without waiting for the IMF loan to be processed.
He said the type of bridge loan Uruguay is receiving had been provided to a number of other countries by the United States during the 1980s and was different from the long-term assistance the Clinton administration provided.
The administration will tap the Treasury's Exchange Stabilization Fund for the loan to Uruguay and Taylor said members of Congress were consulted about use of the fund.
During the Clinton years, Republicans in Congress criticized the use of the stabilization fund, which was created during the 1930s to support the value of the dollar, to loan billions of dollars to Mexico.