IMF PRESS STATEMENT (what it means)

frederic · Dec 19, 2003

Press Release No. 03/219
December 17, 2003

Dominican Republic Press Statement

(a wonderful example of diplomatic double-talk)

An IMF mission left Santo Domingo today after reaching technical-level understandings on economic policies for the first review of the country's Stand-by Arrangement with the Fund. (= they left without reaching an agreement at the higher ministerial and presidential levels)

Marcelo_Figuerola, the IMF mission chief, said in Santo Domingo: "The mission has reached broad agreement with the Dominican authorities on the main elements of the Letter of Intent for the upcoming review under the two-year Stand-By Arrangement with the Fund. (=The mission could not produce a specific agreement with the DR authorites about the details of the Letter of Intent, on time for the next revision)

In the coming weeks, the authorities plan to move ahead with a number of macroeconomic policy and structural measures of critical importance to the success of the program. These include the adoption of a strong budget for 2004, a plan to improve the financial position of the electricity sector, improved monetary control, and steps to ensure the efficient and transparent functioning of the foreign exchange market. Once these key measures are implemented, and financing assurances from official creditors are secured, it is expected that the Letter of Intent can be finalized and circulated to the IMF's Executive Board for early consideration." (= Since you tricked us with the first agreement and fooled us with the EDES affaire, we don't trust you anymore. Therfore, first adopt an austere budget, then improve your collection of electricity bills, stop printing inorganic money and liberalize the foreign exchange market and make it more transparent. After you do that, and you also get credit assurances from the US treasury and other official creditors, and only then, will we sit down again to finalize negotiating the details of the letter of intent and elevate it to our executive board for their consideration.

Pib · Dec 19, 2003

Wow!

I think the IMF needs to hire a translator from BS to English. And wow! it sounds like we are back to square one and that Hipo lied to us (surprise, surprise!) about an "impending agreement".

Wow!

Hillbilly · Dec 19, 2003

Frederick: Outstanding job!

That was an excellent analysis of just what is happening. I do believe the majority of educated Dominicans can't even conceive of the duplicity and immorality exercised by Hippito and his crowd.

The only reason for him to seek re-election is so he can stay out of jail for another four years..

"It wasn't me!!"...the theme song for Baez and Hippo....

"We were banging on the floor"
"It wasn't me"

How could I forget
I had given her an
extra key?

We were banging in the kitchen, we
were banging on the bathroom floor...

"It wasn't me

?eah, right!

HB

Pib · Dec 19, 2003

Is there ever ANY frigging chance that we'll reach an agreement with the IMF while Hipo is in power? I don't see that as something that might interest him. He just keep the IMF around to keep quiet the ones that are begging him to chew the bullet and sign now.

Oh god send them the plague. Any plague.

Pib · Dec 19, 2003

mondongo · Dec 19, 2003

frederic, according to my partial records, the Central Bank has issued roughly DR$30 Billion in short term certificates just over the last 2 months. I have 2 questions, if I may:

1) If Mejia can still raise this huge amount of money, then he really does not yet need the IMF. Who is foolish enough to buy these large amounts of govt debt?

2) Are there any public records of these sales (the Central Bank only keeps the latest)?

thanks

MerengueDutchie · Dec 19, 2003

urgent appeal to stop pyramid game!

As said before, the bottom line is that nobody outside the DR is going to provide credit to Hippo anymore unless:

1) He has a solid and verifiable budget and cash-flow prediction for the coming year and presumably 2005 as well.

2) He provides his creditors with the means to control the spending of the government so no leaking of funds to unauthorized expenditures can take place.

3) He stops his fixed peso/dollar exhcange rate scheme and allows the market to do its work.

4) He substantially cuts governement spending in unclear areas, such as payroll.

5) He provides a solid income generator for the governement to actually start paying his debts. This would include raising taxes and stimulating business, mainly exports.

6) He stops printing additional money and allows outside agencies to monitor the amount of money in circulation.

If he really implements these measures prior to re-election he will never be re-elected, because he will lose the support of his patronage.

Therefore, my prognosis is he will wait until re-election, blaming everything on outside parties, and then make a u-turn to have four more years of reforms.

Meanwhile the additional government bonds issued are not going to be worth the paper they are printed on come collection time. Somebody mentioned a pyramid game in a prior post. This is exactly what is happening, Hippo is financing the outstanding debt with more debt and the last to buy-in will lose all their money.

Usually this happens to the little guys, the poor people who will gamble away everything at the end. Is there any way to actually publicize this and avoid the poorer people to become the victim of this scheme? I'm thinking about newspaper adds, radio broadcasts etc. If the costs to publicize this scam are to prohibitive I migth consider making a donation towards this goal, as it will really hurt those who can affords it least!

Pib, Hillbilly, anybody any ideas?

MD:angry: :disappoin

:angry:

Porfio_Rubirosa · Dec 19, 2003

Re: urgent appeal to stop pyramid game!

MerengueDutchie said:
Usually this happens to the little guys, the poor people who will gamble away everything at the end. Is there any way to actually publicize this and avoid the poorer people to become the victim of this scheme? I'm thinking about newspaper adds, radio broadcasts etc. If the costs to publicize this scam are to prohibitive I migth consider making a donation towards this goal, as it will really hurt those who can affords it least!

Pib, Hillbilly, anybody any ideas?

MD:angry: :disappoin :angry:

Nice sentiment. If you do this in the DR, though, you'll go to jail.

As I wrote last Spring and as Golo recently agreed, those "in the know" get in early on these pyramid schemes and are told when to get out with a huge profit. The suckers come later.

In this case, the suckers are left with little choice. With currency devaluation and inflation, they lose the value of their savings unless they can get outrageous interest. And since the banks provide little safety and less return, government bonds must seem like the way to go. I feel sorry for these poor sods.

Edited to add: Hippo just wants what he got before: IMF money to misuse. And he'll get it too. Just watch.

frederic · Dec 19, 2003

Go To: www.funglode.org/zade/presentacion.pdf

mondongo said:
frederic, according to my partial records, the Central Bank has issued roughly DR$30 Billion in short term certificates just over the last 2 months. I have 2 questions, if I may:

1) If Mejia can still raise this huge amount of money, then he really does not yet need the IMF. Who is foolish enough to buy these large amounts of govt debt?

2) Are there any public records of these sales (the Central Bank only keeps the latest)?

thanks

The answer to some of your questions are available at a download at:
www.funglode.org/zade/presentacion.pdf

This was a presentation I did about a month ago.....

Tony C · Dec 19, 2003

Re: Frederick: Outstanding job!

Hillbilly said:
The only reason for him to seek re-election is so he can stay out of jail for another four years..
HB

HB,

Balaguer couldn't lock up Blanco what makes you think that Hippolito will ever see the inside of a jail?

Hillbilly · Dec 19, 2003

He did too!

Balaguer did too lock up Jorge Blanco and some of his cronies and made them stand trial. Cuervo G?mez for one. A couple of the others are still running. One left the country dressed as a woman!

And they were pissants next to these guys.

As for doing publicity, Dutchie, you have to remember a couple of things:

Most Dominicans do not read the papers, they listen to the radio or television. IF those guys, like the "Gobierno de la Ma?ana" get on their case a few more might take notice.

Few people took notice of Cristian Reyna's excellent articles and I can't say if they got much play in the electronic media.

Secondly, the PRD has some very "hard" voters, (yes I have said this before), that will vote for a pig is he is the "official" candidate of the PARTY...

Trying to play rich against poor can only back fire if all the opposition takes up Cristian's litany: We didn't violate the law and pay the Baninter depositors ALL their money. We didn't take out loans. We didn't buy back the Edes. We didn't etcetcetc.

Can't say what will happen as the campaign heats up but there will have to be fireworks.

Remember that one of Hippo's bodyguards killed a man last campaign, just for waving a handfull of grass...!!! Fact! And nothing was ever done that I heard of..

HB, very low profile.......

mondongo · Dec 20, 2003

frederic, good presentation. I have a question on your assesment of the exchange rate: you have mentioned that the fair value of the DR$ is around 30:1 based on PPP. How is PPP calculated in a small country like the DR?

frederic · Dec 20, 2003

How is PPP calculated?

mondongo said:
frederic, good presentation. I have a question on your assesment of the exchange rate: you have mentioned that the fair value of the DR$ is around 30:1 based on PPP. How is PPP calculated in a small country like the DR?

Source: http://fx.sauder.ubc.ca/PPP.html

"The simplest way to calculate purchasing power parity between two countries is to compare their price indexes.

There are two versions of PPP: absolute PPP and relative PPP.

Absolute PPP refers to the equalization of price levels across countries.

Relative PPP refers to rates of changes of price levels, that is, inflation rates."

for more information see:
http://fx.sauder.ubc.ca/PPP.html
_

Pib · Dec 22, 2003

So, now what?

We can read on DR1 news todays that Frederic does not expect the IMF agreement any time soon. So, now what? The country was holding its collective breath thinking that this would be the respite we needed. If word of this is out, how will the market react?

Curious and scared,
Pib

Porfio_Rubirosa · Dec 22, 2003

If it's true, that's great news Pib! Everyone is so afraid of a default. Why? Argentina defaulted, and it was the first very necessary step to recovery. It put the country in a different negotiating position with the bloodsuckers.

It is very important that the IMF NOT send any more money for now. It would just be used to buy reelection anyway.

The DR is now a "client" of the IMF, and JP Morgan and the rest must be paid! That means we will be in a pathetic state for many years. The whole weight of the New World Order is about to come down on us. We will all be crushed. Since this is going to happen whether they give a few hundred million dollars more to Hippo or not, it's better that Leonel deal with it.

mondongo · Dec 23, 2003

The DR will not go bankrupt in 2004. The reason for this is that most of the short term money that the Govt has to pay back....is denominated in DR$.

If you look back at the hard currency debt that Mejia has accumulated, is has been at the long end. 5 to 10 year payback periods. What this means is exactly what is going on now...IMHO:

1) Short term debt is being paid back by Central Bank issuing certificates at the rate of at least DR$15 Billion a month.

2) Mejia is sequestering US$ with his fixed exchange rate scheme. By forcing the exchange houses to give up some of the US$ that they exchange, they have access to the > US$1.5Billion/year influx of remittances from the USA. They also have access to the tourist US$. This is more than enough US$ to pay the interest on the US$ denominated debt.

What you will see, though, is a continuation of the cutback in Foreign Direct Investment.

mondongo · Dec 23, 2003

frederic, I agree with your article on the DR economy bouncing back.....if reputable politicians are elected in May, that is.

I looked at the external debt/gdp ratio for the DR now and compared it to what Argentiana had back in 2001. I used this article as my guide:

http://www.frbsf.org/publications/economics/letter/2002/el2002-31.pdf

My guess is that the external debt/gdp ratio for the DR is near 40% (is this correct?). If the debt is approximately US$6Billion, and this debt is comprised mainly of longer term notes, then the drain on the DR budget from interest payments is less than DR$30. If you assume a budget of DR$100Billion, this number is still pretty high, but not yet calamitous.

If the DR politicians do as you suggest: cut spending and taxes and pay down some of the debt....then I think we can get out of this within a few years.

MerengueDutchie · Dec 26, 2003

true enough

the DR should be able to get out of trouble in a few years, if they keep their belts tightened and pay off their external debt.

Reduction of foreign investment is going to mean that there will be limited capital to rebuild the economy and it will also raise interest rates to a higher level, curtailing investment further. If the internal economy does not grow then the payment of external debt will become a problem if inflation goes up and the peso rate goes down. If this happens the taxbase will dimish while at the same time the interest payments as part of GDP will rise.

Meanwhile the internal creditors are going to pay for this by either defaulting on internal notes or by way of increased inflation as the total monetary amount swells to guargantuan proportions.

Again nobody in his/her right mind should by any government notes at the moment and this needs to be communicated to the general populace as they will become victims of the government and their own ignorance. A sad tale in the offing..

MD:angry:

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IMF PRESS STATEMENT (what it means)

frederic

DR1 Expert

Pib

Goddess

Hillbilly

Moderator

Pib

Goddess

Pib

Goddess

mondongo

Bronze

MerengueDutchie

Silver

Porfio_Rubirosa

Bronze

frederic

DR1 Expert

Tony C

Silver

Hillbilly

Moderator

mondongo

Bronze

frederic

DR1 Expert

Pib

Goddess

Porfio_Rubirosa

Bronze

mondongo

Bronze

mondongo

Bronze

MerengueDutchie

Silver