World Financial Officials Back New Debt Framework

By EDMUND L. ANDREWS
WASHINGTON, Sept. 27 ?- The United States and the world's other

leading industrial countries moved tonight to assuage global anxieties by declaring their willingness to help countries

caught up in economic turmoil, mentioning both Brazil and Argentina as examples.

In a statement issued by the finance

ministers from the Group of Seven industrial countries, following a meeting here this evening, the countries acknowledged

that some countries face "considerable challenges" and said they would support those who adopt strong policies to restore

growth.

The statement also highlighted how worried the United States and others have become about the fragility of the

world economy. And it reflected a renewed emphasis by the Bush administration on addressing the problems in poorer

countries.

The group emphatically praised Brazil, where investors have become increasingly panicked about the

likelihood of a leftist victory in next month's presidential election. Brazil received a $30 billion loan package last month

from the International Monetary Fund, but its currency has been sinking badly in the last few days.

But the finance

ministers, led by Treasury Secretary Paul O'Neill, also voiced surprisingly warm support for Argentina, which has defaulted

on more than $100 billion in loans and been widely criticized for failing to fix its fiscal problems.

" We welcome

Brazil's continued commitment to sound policies and are ready to support Argentina, through the I.M.F., in the context of a

sustainable program," the countries said tonight.

The communiqué fits into a broader pattern by the Bush

administration to view the problems of developing countries as not only economic issues but also as part of a national

security strategy, a marked departure in tone from the administration's initial tough-love approach.

Earlier this

evening, Mr. O'Neill and the finance ministers from other industrial countries endorsed an important new international legal

framework to help nearly bankrupt countries renegotiate loans with their creditors.

Under the plan, which will be

endorsed publicly on Saturday, a country in financial trouble would be able to enter something akin to a bankruptcy

proceeding. The key change is that a country could re-negotiate its loans if it wins approval from a majority of its

creditors, and dissenting creditors would be required to go along.

At least part of the plan is fiercely opposed by

big international banks like Citigroup and J. P. Morgan Chase, which fear being forced to renegotiate billions of dollars in

loans they have made throughout Latin America, Africa and Asia.

Under the plan, to be endorsed publicly on Saturday,

a country in financial trouble would be able to enter something akin to a bankruptcy proceeding. The major change is that a

country can renegotiate its loans if it wins approval from a majority of its creditors. At the moment, common practice allows

any one dissenter to stop such renegotiations.

The meetings, which began today, were organized mostly by the

International Monetary Fund and the World Bank. They have drawn together financial officials and bankers from around the

world.


They have also drawn thousands of protesters, and the police arrested 649 of them today, mainly on charges

of disrupting traffic or holding demonstrations without a permit.

The protests had been widely expected. Some

organizers had said they planned to "shut down" Washington today, but the crowds that showed up were smaller and more subdued

than many had predicted.

The protesters, organized by a group called the Anti-Capitalist Convergence, marched and rode

bicycles to a park several blocks from the White House. Carrying signs with messages like "End Corporate Greed" and "Drop

Bush Not Bombs," their ranks included antiwar protesters, self-avowed anarchists and even a small, enthusiastic group of

pagans.

Though some protesters openly hoped to disrupt normal business here, they were far outnumbered by the police.

There was little violence, but security was so tight that police officers quickly began arresting people for holding rallies

without a permit or disrupting traffic.

"It was a herding of cattle," said David Stewart, a 24-year-old protester who

attended several events but was not arrested.

Between the large police presence and a relatively small turnout of less

than 2,000 protesters, the demonstrations had far less effect on Washington businesses than the fact that thousands of

workers stayed home to avoid possible trouble.

But thousands of other protesters planned a series of other events on

Saturday. Those have been organized by a broad array of environmentalists, labor unions and groups that view the World Bank

and the monetary fund as agents of large multinational corporations.

Leaders organizing those events, many under a

group called Mobilization for Global Justice, have registered most of their events with the police in advance and have vowed

to keep their rallies nonviolent.

Inside the heavily barricaded buildings of the monetary fund and the World Bank,

financial leaders focused heavily on the growing problems in Latin America. Argentina, which has already defaulted on more

than $100 billion in loans, remains stalled in its pleas for more lenience from the fund.

In Brazil, which accounts

for 40 percent of the Latin American economy, the national currency has hit its lowest point since the fund offered a $30

billion bailout package last month.

There were far more signs of disagreement than agreement at the meetings. Rich and

poor countries are increasingly at odds over what has come to be called the "Washington consensus," an American-style

prescription for economic development under which financial assistance is focused on countries that support open markets,

deregulation and prudent fiscal policies.

The World Bank stepped up its criticism of the United States and Europe on

trade policy, accusing both of causing immense damage to poor countries by maintaining high barriers to agricultural

imports.

The meetings are taking place at a time when economic anxiety runs high in many corners of the world. The

global economy remains weak, stock markets are buried in pessimism, oil prices are rising amid fear of an American attack on

Iraq and trade protectionism is on the rise.

The Bush administration, though occupied with its campaign against

terrorists and with its efforts to topple Saddam Hussein in Iraq, is nonetheless devoting greater attention to the economic

distress of poor countries.

http://nytimes.com/2002/09/28/international/28MEET.html