Paraguay and the IMF: the negotiation goes on
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Source: IFIs Latin American Monitor
Mon Mar 20 2006

Following long months of negotiation, the government of Paraguay and the International Monetary Fund (IMF) continue to work on a new Stand-By agreement. After the last IMF technical mission, both parties have failed to reach an agreement on the conditions of the new programme. The institution lays emphasis on the reform of state-owned companies.

The problem lies in the measures to be adopted by the government in some state-owned companies: communications (COPACO), water services (ESSAP) and oil (PETROPAR), among others; which according to the IMF should be opened to private capital. The previous agreement signed in December 2003 and extended until last November, already provided for external audits to be carried out in major state-owned companies as well as for a definition of a new management plan. However, as the process was not concluded the IMF is insisting on this point.

Until now, it has been said that the future programme will involve a public sector reform, budget adjustments and a financial sector reform, particularly in the central banking system. On the other hand, it has been made public that the government would like the agreement to be for two years, coinciding with the end of President Duarte’s term in office, in August 2008.

Both the government and IMF representatives are moving within a context of strong secrecy with regards to the details of the agreement. Being aware of this, the Deputy Minister of Finance, Jorge Von Horoch, stated that the Executive has decided to provide the process with the greatest possible degree of transparency, and therefore it has requested the IMF to release both an English and Spanish version of the terms of the programme.

Notwithstanding the fact that the government has fulfilled most commitments undertaken in the previous agreement, those same points that are currently delaying the signing of this new agreement have remained pending. In view of the result of similar measures in the rest of the continent, what benefits will bring the “privatization” of state-owned companies to Paraguay as demanded by the IMF?

Related Information:

Paraguay’s hand-wrestle with the IMF

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