Argentina and the International Monetary Fund are nearing an agreement that will permit the cash-strapped nation to receive $900 million from commercial banks and the IMF, even though Argentina has not met all the terms of its year-old loan agreement, banking sources said yesterday.
Meanwhile, Mexican officials negotiated in Mexico City and Washington trying to reach an IMF agreement that will permit the country to borrow billions of dollars it needs to help offset the severe loss of oil income this year.
The sudden intervention of U.S. officials earlier this week seemed to rejuvenate nine-month-old talks between Mexico and the multinational financial-rescue agency.
The country and the IMF have been haggling about how big a federal deficit Mexico can run.
But Mexico is running out of dollars it needs to pay interest on its $98 billion in foreign debt; the 50 percent decline in oil prices has severely reduced Mexico's export income and its domestic tax revenue. Officials are worried that Mexico may have to reduce or suspend its interest payments, a move that could create international financial havoc.
Argentina needs the $900 million to give it time to work out a refined domestic economic program, a new agreement with the IMF and continue to meet its international debt obligations. Argentina has foreign loans of about $52 billion and is Latin America's third-biggest debtor behind Brazil and Mexico.
The funds represent the final $300 million disbursement from a $1.4 billion IMF loan and a final payment from a $4.2 billion commercial bank loan agreed to last year.
Argentina has been in a year-long, largely successful fight to reduce inflation. International banking sources said that, although Argentina has not met all its spending targets, it has come close and has resisted most domestic political pressures to ease up on monetary and spending stringency.