FROM THE OFFICE OF PUBLIC AFFAIRS February 14, 2005 The U.S. Commitment to Uruguay and Latin America Thank you very much for inviting me here today and for this honor. I am pleased to have had the opportunity to work with Ambassador Fernández-Faingold, Minister Alfie, and other members of the Uruguayan government to help A core aspect of the Bush Administration's economic strategy for Another early focus of the Bush Administration was to deal with financial contagion and define clearly when a response from the international policy community is appropriate and desirable. We emphasized early on that contagion was not automatic, and that policy responses had to take this into account. This is important because reacting to false alarms about contagion can lead to support of countries that are not following strong and sustainable policies. At the same time, it is important to recognize instances where countries are pursuing strong policies but are hit by external shocks beyond their control that damage their economies. It became by the early summer that these measures were not enough to stop the run. More needed to be done to stabilize the situation and prevent a breakdown in the payments system that would compound the damage to The key challenge was this: because To financing the deposit guarantee plan, we reached agreement on a package that mobilized additional funds from the IMF, World Bank, and Inter-American Development Bank. In addition to reprogramming time deposits, the Uruguayan government would take strong measures to suspend the operations of four private domestic banks. The U.S. Treasury provided a short-term, $1.5 billion ESF loan to the government of Events have shown that the package and bridge loan were a success in both the short and in the longer term. Our bet to support The Uruguayan government followed through on its commitments to keep economic policies on track. With stability returning, the government successfully executed a debt exchange in May 2003 to put the country's debt on a sustainable path. It put in place fiscal policies aimed at bringing down debt levels. Through expenditure restraint and strengthened tax administration, the government increased the primary balance from a deficit of 1.2 percent of GDP in 2001 to a surplus of 3.6 percent of GDP in 2004. As the government proceeded with financial sector reforms and confidence improved, resident bank deposits of the non-financial private sector recovered to about 80 percent of their pre-crisis level and growth of bank credit to the private sector (excluding NPL write-offs) turned positive in 2004. Let's look at the results of these good policies and our support. In 2002 the economy contracted by 11 percent, inflation surged to 26 percent, and unemployment rose to 18 percent. By last year, We very much look forward to working with the incoming Vazquez administration to build upon these achievements, both in Our assistance to Uruguay is just one example of President Bush's continuing commitment to the region--a commitment reflected in areas as diverse as our support for countries confronting financial crises, to the Free Trade Area of the Americas (FTAA), to the Millennium Challenge Account (MCA) for our Hemisphere's poorest countries, to the initiatives launched at last year's Summit of the Americas to reduce the cost of remittances and increase the availability of bank credit to small businesses. Through working together in these and other areas, we can lay the foundation for a future with more prosperity and less poverty for all people in our hemisphere. Thank you again for this honor. |
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