Transcript of joint meeting of the Executive Directors of the IBRD and IDA, held on Tuesday, April 14, 1987 : Argentina - Small and Medium Scale Industry Credit Project

STRICTLY CONFIDENTIAL NM:nm INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Tuesday, April 14, 1987 Washington, D.C. The meeting of the Executive Directors was convened at 10:09 a.m. in the Board Room, 1818 H Street, N.W., Washington, D.C., Mr. Barber B. Conable, Chairman, presiding. n MILLER REPORTING CO .. INC. 507 C Street, N.E. Washington . D .C. 20002 (202) 546- 6666  STRICTLY CONFIDENTIAL 2 C O N T E N T S ITEM PAGE 1 1 L _J 3 Proposed Loan - Argentina (Small and Medium- Scale Industry Credit Project) 66 Mr. Hosny 68 Mr. Yamaguchi 73 Mr. Guimaraes 75 Mr. Zhang 81 Mr. Rao Sahib 83 Mr. Dujmovic 84 Mr. Sanclemente . 86 Mr. Al-Shawi 87 Mr. Rodriguez 88 L MILLER REPORTING CO., INC. 507 C Street, N .E. Wa shington, D.C. 20002 (202) 546- 6666  66 STRICTLY CONFIDENTIAL We will now move to the Argentine. This is a proposed loan in the amount of U.S. equivalent $125 million for Small and Medium-Scale Industry Credit Project. Mr. Artaza-Rouxel of the LAC Region will introduce the proposal and, Mr. Artaza-Rouxel, you are recognized for that purpose. n MR. ARTAZA-ROUXEL: Thank you, Mr. Chairman. Mr. Chairman, Members of the Board: Argentina has a relatively sophisticated and diversified industrial structure compared with countries of similar income levels. The industrial sector has long had sustained, albeit irregular, growth. By the early 1970s, Argentina was an acknowledged regional industrial leader, exporting substantial engineering goods and capital equipment. This progress was interrupted in the mid-1970s, however, by a combination of political instability, galloping inflation, and economic stagnation. The situation worsened subsequently when inconsistent macroeconomic and trade policies MILLER REPORTING CO .. INC, 507 C Street, N .E. Washington , D .C. 20002 (202) 54 6-6666  67 STRICTLY CONFIDENTIAL reduced industry's willingness to take risks or expand pro- duction, which led to a major sector recession. The present authorities have set about to formulate and carry out a strategy, not only to boost exports, but also o expand, restructure and modernize Argentine industry. The strategy aims at: (a) increasing production for exports; (b) gradually opening the economy to stimulate competition and improve efficiency; (c) redefining the system of incen- tives; and (d) introducing new technology. This strategy is designed to increase Argentina's industrial competitiveness. The recent agreements with 11 L _J Brazil illustrate the incentives which have been introduced to create an environment conducive to the rapid expansion and diversification of manufactured exports. Moreover, a new industrial promotion law is being drafted which would bring the incentive system more in line with Argentina's comparative advantage. The project presented today for your consideration aims at contributing to Argentina's economic reactivation and employment while enabling small and medium-scale industries to better adapt to the changes introduced by the government's new policies by improving their efficiency and productivity. The proposed loan to provide credit for sma ll and MILLER REPORTING CO.• INC. 507 C Street. N .E. Washington, D .C. 20002 (2 0 2) 546-6666  68 STRICTLY CONFIDENTIAL medium-scale industry is part of a broad-based Bank effort n to support the government's revitalization of Argentina's industry. This effort includes other operations aimed at redressing the strong anti-export bias in the present system of tariffs and other protection, thus improving export competitiveness; bolstering complementary policy reforms; improving financial services to industry and commerce; and supporting the restructuring of key industrial firms. All these operations have a common objecdtive: to assist the government in achieving its goals of promoting the growth of Argentina's industry and the integration of n the country's economy in the world market. Thank you, Mr. Chairman. MR. CONABLE: Thank you, Mr. Artaza-Rouxel. Do we have comments or questions on this? Mr. Hosny. MR. HOSNY: Thank you, Mr. Chairman. This Chair supports the proposed loan, particularly as it would contribute to removing the main constraint for small and medium-industries' development, which had the C shortage of credit, nnsuitable terms . to these pivotal industri es, which account for 55 pe rce nt and 44 percent o f employment and output respectively in the industrial s e ctor MILLER REPORTING CO .. INC. 507 C Street, N.E. Washington, D .C. 20002 (202) 546-6666  69 STRICTLY CONFIDENTIAL in Argentina. Added to this is the potential of the small and medium industries for promoting direct and indirect exports, as well as import substitution. The project is expected, therefore, to contribute to the far-reaching adjustment program carried out by Argentina. Rates of return assessed to amount to at least 12 percent for sub-projects are adequate. Similar Bank operations, Mr. Chairman, in other recipient countries would merit the Board's and management's support and encouragement. The only observation, Mr. Chairman, is that a look at Schedule D, on Table A, page 8, strikes us with respect to the magnitude of undisbursed amounts from previous Bank loans. For example, out of the loan for $100 million allocated to Loan Number 2063, to Banco Nacional de Desarrollo for Industrial Credit Number 2, which was contracted in 1981, that is since about six years ago, the undisburse d balance stands at $84.3 million, this at the time when, as indicated in para. 10 on page 3, other Bank loans relating directly or indirectly to the industrial sector in Argentina are presently unde r conside ration. L It wou l d, t he r efore, be no l ess b e neficial to recipie nt countrie s in ge neral if a s much atte ntion is given to reactivating stagnant loans, particularly when MILLER REPORTING CO•. INC . 507 C Street, N .E. Washington . D .C. 20002 (202) 546-6666  70 STRICTLY CONFIDENTIAL delays in disbursements for a number of years could hinder the implementation of priority projects, not to speak of the substantial accumulation of commitment fees. We believe that a more flexible approach by the Bank with respect to disbursements might help in expediting disbursement of loan balances. This Chair, therefore, considers that the pace of disbursements should be reviewed regularly by the Board, particularly as large undisbursed balances are becoming a common feature for many borrowing countries. A periodic in- depth consideration by the management and the Board of this [] issue might lead to some constructive policy recommendations, including the possible introduction of new and more flexible procedures which could expedite disbursements particularly when the original loan project faces parameters, either due to changes in external or domestic conditions and environments in the macro and micro levels. Thank you, Mr. Chairman. MR. CONABLE: Thank you, Mr. Hosny. I think -- Mr. Artaza-Rouxel, would you like to C comment on the question of the undisbursed loans that we have ? MR . ARTAZA-ROUXEL: Yes, Mr. Chairman. F irst, l e t me be s pecific with regard to the proj e c t MILLER REPORTING CO .. INC . 507 C Street, N.E. Washington, D .C. 20002 (202) 546-6666  71 STRICTLY CONFIDENTIAL 2063 Argentina to which you have referred also specifically n for BANADE industrial project. You are correct, Mr. Hosny, when you state that there have been delays in the disbursement of this project. We have recognized that in our documents when we said that overall implementation of the loan has not been as smooth mainly as a result of political uncertainties and economic recessions, and because there was a long delay in loan signing. However, during the last year with regard to this project, BANADE has taken a series of measures to improve the commitment of funds under the project. And we are fairly certainly that with these new arrangements, we will be able to disburse the full amount of the loan by a date more or less close to us. With regard to the other projects, in general, the Bank and the Government of Argentina had made arrangements, and we have reached a good understanding with the government, to improve our disbursements under all the other projects, and they have improved remarkably during the last year. This year, during 1986, we almost doubled the amount of funds disbursed in Argentina with regard to the previous year, and we expect to continue improving that disburse ment. Thank you. MILLER REPORTING CO .. INC . 507 C Street, N.E. W as hington , D.C. 20002 ( 202) 5 46- 6666  STRICTLY CONFIDENTIAL 72 MR. CONABLE: Thank you, sir. I think the Chair should report that we are informed that negotiations are proceeding quite satisfactorily with respect to Argentina's external debt between them and the banks' Steering Committees that have been doing such negotia- tion. I don't know that the negotiations have been concluded, but they are dealing with some of the more trouble- some elements in the Mexican package, and I believe the evelopments so far have been quite encouraging in the progress hat has been made. [l Mr. Gue, would you like to say something about that? MR. GUE: Yes, Mr. Chairman. I think we could erhaps say a little more. We have been informed that agree- ment has been reached yesterday in principle with the commerci 1 banks, and these are the main features that we know about as of now. Discussions are continuing on some details and a term sheet should be available tomorrow or Thursday. The multi-year rescheduling will cover all service C ayments, stretching over five or six years at the moment, and will be for a term of 18 years including six years of grace. The spread will be 13/16 of one percent on old debt and 7/8 MILLER REPORTING CO .. INC . 507 C Street, N .E. Washington , D.C. 20002 (202) 546-6666  73 STRICTLY CONFIDENTIAL percent on the new facility. This new facility will amount to about $1.9 billion, between $1.9 and $1.95 billion, and it will be disbursed in five tranches, starting probably in September 1987 and stretching over early 1988. There has also been agreement on the two questions which took a long time to negotiate, that is the debt/equity swaps' question and the onlending question. So we expect the negotiations to be completed any moment. MR. CONABLE: Thank you. I thought you might be interested in that informa- C tion. Mr. Yamaguchi has some questions about this par- ticular loan, I believe. Mr. Yamaguchi. MR. YAMAGUCHI: Thank you, Mr. Chairman. This is very innovative for Argentina because this finance would cover 1,400 sub-projects, and it would maintain about 12,500 jobs of medium and small-sized industries. And it would set up a specialized SMI, second-tier sub-loan delivery system in coordination with technical assistance. This might be a very good project and very good f i nancing. However, I had one point which I cannot agree with, that is on paragraph 9. MILLER REPORTING CO .. INC. 507 C Street, N.E. Washington . D.C. 20002 (202) 546-6666  74 STRICTLY CONFIDENTIAL Paragraph 9 says that "SMis will be loath to take n foreign-exchange denominated obligations. However", it says, "since local currency subloans will be adjusted according to the inflation rate and sub-borrowers will be charged real interest rates, SMis, in practice, would be covering the direct foreign exchange risk." It is vague or ambiguous, in my view. And I think that if we think about this scheme of financing, first of all, convertible currencies will be lent from this Bank to the central bank, and the central bank -- n this is explained in paragraph 6 -- will relend those resource to the Development Bank of Argentina in Australes. So convertible currencies will be held in the hands of the centra bank. I do wonder why in this case the SMis, the small and medium enterprise, in practice would be expected to cover the direct foreign exchange risk. It is too severe because they are not allowed to hold and use, spend any convertible currencies. They are allowed just to use, spend Australes given by the Development Bank. C I think that I don't s e e any logic which is plausible for me on direct interlinkage between real interest rate and potential depreciation of the currency Austral. If MILLER REPORTING CO .. INC. 507 C Street, N.E. Washington, D.C. 20002 (202) 546- 6666  75 STRICTLY CONFIDENTIAL the currency held by the central bank and used for whatever it may be used, and if the sub-borrower just is expected to bear the foreign exchange risk, that would not be fair in my view. Thank you, Mr. Chairman. MR. CONABLE: Mr. Guimaraes wants to comment on this same point, I believe. MR. GUIMARAES: Yes. If you allow me, Mr. Chairman, in a question related with Mr. Yamaguchi's question, I would like to take advantage of this opportunity to ask some elaboration from the staff on a related matter in connection II L_ _J with the point raised by Mr. Yamaguchi. It is said in the report -- of course, we very much support the loan, no question about it. But we are a bit concerned with the real interest rate that the sub-borrowers are supposed to pay; 8 percent real per annum for fixed assets and technical assistance, and 12 percent for working capital upon Australes. And this concern is, let us say, exacerbated when one realizes that the economic rate of return that is expected from the project will be not less than 12 percent. That adds to the risks, I believe. I would like really to have some elaboration from the staff that would help me to understand if there is not a too tough conditionali y MILLER REPORTING CO., INC. 507 C Street, N .E. Washington, D.C. 20002 (202) 546-6666  76 STRICTLY CONFIDENTIAL imposed on these loans because really 8 real and 12 percent at least on historical levels are a very heavy burden on sub- borrowers . Thank you, Mr. Chairman. MR. CONABLE: Mr. Husain would like to respond first on this. MR. HUSAIN: Just an issue, Mr. Chairman, of broad policy on interest rates, which has a bearing on this one also. We do not ask both for the borrowers, five borrowers bearing the exchange risk and having a real interest rate, these are alternatives. [l In this case, as you would note, the real interest rate in the Argentinean market are substantially higher than the borrower would have to pay on this loan. And, in fact, there is no term lending in the Argentinean market. So to the recipients of this credit, this would be a substantially lower cost than they would bear in the market. A part of the Bank's dialogue in many of these countries is precisely to reduce the distortions in the market that come from highly subsidized interest rates in part of r-= the market, and this is a step in that direction. But the point to make is that these interest rates are substantially lower than the real interest rates in the Argentine market. MILLER REPORTING CO .. INC, 507 C Street, N .E. Washington, D .C. 20002 (202) 5 46- 6666  STRICTLY CONFIDENTIAL 77 MR. CONABLE: Is there anything further that staff would like to say on both Mro Yamaguchi's and Mr. Guimaraes' points? Mr. Artaza-Rouxel. MR. ARTAZA-ROUXEL: Thank you, Mr. Chairman. First, I would like to point out that, as Mr. Husain has indicated, there is no term lending available at the moment in Argentina in the amounts required for this kind of project. Second, that we have provision to revise the onlendi g rates at least every six months to see if they are fair and 11 L _j real. And third, that these interest rates are adjusted by combined price index from time to time, every six months. However, Mr. Chairman, if you consider it necessary to have further information on this matter, I would like to refer this question to my colleague, Mr. Alonso, if it's necessary. MR. CONABLE: Mr. Husain, did you wish to -- MR. HUSAIN: I think that the question has been answered. MR. CONABLE: Thank you. MILLER REPORTING CO .. INC . 507 C Strcer, N .E. Washington, D .C. 20002 (202) 546- 6666  STRICTLY CONFIDENTIAL 78 Mr. Zhang has -- Mr. Yamaguchi, you wanted to follow up? MR. YAMAGUCHI: Thank you, Mr. Chairman. I think that there is no market rate in Argentina which is corresponding to this long-term; I understand. But the paper exactly says that about 3 percent on average per month, it might amount to 36 percent times 12, 12 months with 3 percent -- 36 percent, but it doesn't say anything about what is real interest rate. MR. CONABLE: That's the real rate. MR. YAMAGUCHI: So does it mean then that if the sub-borrower is going to borrow from the market, then it might cost them 36 percent in real terms? MR. GUE: This is short-term, very short-term. MR. YAMAGUCHI: No, no, but -- MR. GUE: There is no long-term lending in Argentina. This is very short-term lending. MR. CONABLE: It would cost them that much to borrow short-term, in other words, and there would be no opportunity to borrow in longer-term. MR. YAMAGUCHI: So anyway, you are saying that this is not too e x p e nsive? MR. GUE: No, not at all. MILLER REPORTING CO. , INC. 507 C Srrcer. N .E. Washington , D .C. 2000 2 (20 2) 546-6666  79 STRICTLY CONFIDENTIAL MR. YAMAGUCHI: Very cheap. But they have to bear the burden of exchange rate. MR. KNOX: Mr. Chairman, may I say something? MRo CONABLE: Yes, all right. MR. KNOX: I think if you will allow me, sir, there are a few things about the Argentine financial market that ought to be made clear, which are very relevant to this project and very relevant to the subject we are now discussing. It is one of the problems of the Argentine economy that for a variety of reasons they relate to certain ineffi- ciencies in the banking system; they relate also to certain II L _J charges that are placed on banks, the very high reserve requirements, for example; that interest rates in real terms in Argentina are exceptionally high. Mr. Yamaguchi is having, I know, some difficulty accepting the idea that interest rates can be as high as 36 percent in real terms per year, but they have indeed been higher than that quite r e cently. Believe it or not, 36 percen is a reduction compared to what they were. Now one of the problems, therefore, that has to be dealt with is how to improve the whole operation of the financial markets in Argentina so that money can be inter- mediated at real costs that are lower than the real costs now MILLER REPORTING CO .. INC . 507 C Street, N .E. Washington, D.C. 20002 (20 2) 546- 6666  80 STRICTLY CONFIDENTIAL prevailing. And to that end we have been working very closely with the Argentine authorities and particularly with the Central Bank of Argentina on a financial reform project, which I hope we will be able to bring to the Board later in the course of this calendar year, because the Argentine authorities believe, and we very much share this view, that basic restructuring steps are necessary in the banking system of the country to try to ensure that finance is available at more reasonable cost than it is today. And it is quite clear that the kind of rehabilitatio of Argentine industry that is so badly needed will not occur n in any successful way until the s e financial questions are addressed. Now if I mi ght just come b a ck to the specific question of this particular project, the interest rates on this particular proj e ct, while I agre e with what Mr. Guimarae s has said seem extraordinarily high, are in fact very low by current Arge ntine standa rds. But there is one f actor, which is extremely important in setting a floor to which one can go in app lying inte r e st r ate s , and that is the r a t e ~ paid on deposits. It would make no sense at all in any financial system to charg e borr owers an in t e r e s t r a t e which was lower tha n the deposit rate paid to d e p ositors. MILL ER REPORTING CO .. INC , 507 C Street, N.E. Washington, D.C. 20002 (202) 546- 6666  81 STRICTLY CONFIDENTIAL You know, you can see what would happen. This money would immediately be borrowed and put into the nearest bank. It would not contribute to what it is supposed to contribute t , to the rehabilitation of Argentine industry, and that sets a floor below which no one can presently go, until one address s the more fundamental, the more far-reaching questions of t he Argentine financial system. Nevertheless, I would submit to you, sir, that this is still an important project. It will help significantl with reviving an important element of Argentine industry , name small and medium industries which have a real potential , wh ile r--1 L_ _J the Argentine authorities with our help are addressing the longer-term and more fundamental questions of how does one reorganize the financial structure of the country . MR. CONABLE: Thank you, Mr. Knox .. That was an important clarification. Mr. Zhang, you are recognized. MR. ZHANG: Thank you, Mr . Chairman. Like my colleagues, I also wish to voice this Chair' support for the p r oject. I belie v e the modernizat ion o f s ma ll and medium-scale industries shall play a very important role in reviving the Argentine economy . I only have two minor questions. F irstly , why are MILL ER REPORTING CO., INC . .5 07 C Street, N .E. W ashington, D.C. 20002 (~02) 5 46- 6666  STRICTLY CONFIDENTIAL 82 there several layers in the onlending process? And what is the impact on interest rate? Secondly, whether the participating banks are domestic or foreign banks? Thank you, Mr. Chairman. MR. CONABLE: All right. Thank you, Mr. Zhang. Mr. Artaza-Rouxel, please. MRo ARTAZA-ROUXEL: Thank you, Mr. Chairman. During the appraisal of this project and discussions with the government and BANADE, it seemed important to the Bank to establish a special fund within BANADE called FOPYME, C-J a fund for the small and medium industries within BANADE's structure, but with separate staff in order to act as a second-tier lending institution. BANADE and the private banks will share in the funds that the World Bank will send to them through this fund. BANADE has branches in many provinces, small cities and towns where comme rcial banks are not established. So the participation of BANADE as a first-tier lender at this stage is still nece ssary. C The private banks have shown interest in participati g in this project, and the i r p a r t icipa tion wi l l ensure a f a i r distribution of the funds received throug h FOPYME. This MILLER REPORTING CO.. INC. 507 C Street, N.E. Washington, D.C. 20002 (201) 546-6666  83 STRICTLY CONFIDENTIAL explains why we have established these layers, and we don't n think that they will affect the final cost to the borrower, since BANADE and the commercial banks will act as intermedia- ries with the same kind of interest spread. FOPYME will be the central recipient of the funds. With regard to the participation of the commercial banks, both foreign and domestic banks would be participating under the project. MR. CONABLE: Thank you. Mr. Rao Sahib. MR. RAO SAHIB: Thank you, Mr. Chairman. Mr. Chairman, just a line to express the support of this Chair to this proposal. We welcome the assistance that this project seeks to provide to modernize the small and medium-scale industrial sector in Argentina. It is clear that this will augment employment opportunities and help to disburse economic activity within the country. The project also provides for technical assistance to the small industries, and we trust that it will help to strengthen its export sector. Thank you, Mr. Chairman. MR. CONABLE: Thank you, Mr. Rao Sahib. Mr. Dujmovic. MILLER REPORTING CO .. INC. 507 C Srrcer, N .E. Washington, D.C. 20002 (202) 5 46-6666  84 STRICTLY CONFIDENTIAL MR. DUJMOVIC: Thank you, Mr. Chairman. This Chair strongly supports this project, and I think it is very important for countries like Argentina to have these kinds of operations. But I strongly believe that these kind of operations should be designed a little bit differently from this one as far as the period of time covered by these kinds of operations. I think if you have in mind the nature of these operations, then it is very difficult to defend why it should cover more than six years' period of time. I think these [l kind of operations, at least from my previous experience, should be designed for two, three years. Even if we had no commitment fee, I think it would be difficult to define why we designed these type of loans for more than six years, and the commitment fee is such as it is, and I think in this case Argentina is going to pay unnecessary commitment fee. So I wonder if we could have two operations instead of one, the first one which could cover the coming two or C three years and then, if necessary, to be back -- to have the other operations later on. That's it. Thank you. MILLER REPORTING CO .. INC . 507 C Street, N .E. Washingron. D.C. 20002 (202) 546-6666  85 STRICTLY CONFIDENTIAL MR. CONABLE: All right, Mr. Dujmovic. Is there any response on that? Mr. Husain would like to respond. MR. HUSAIN: On that general issue, Mr. Chairman, I wanted to mention that the disbursement profiles are simply based upon the past experience of disbursement in this sector in this country. We fully hope that this could be done faster in this particular case, and I hope that this will be done faster, but this is merely a mechanical projection based upon past experience of the disbursement of the loan. II L .J Secondly, in these loans the commitment is much faster than disbursement, which means that funds are corrunitted to individual projects, then they are disbursed as the projects are implemented. So the commitment period may be only about two to three years. MR. CONABLE: The commitment fee would be an encouragement to quick disbursement, would it not? Yes. Mr. Gue. MR c GUE: It is expected, Mr. Chairman, in this L case the commi tment p e r i od will be about a year-and-a-half and that we will then follow up with a second loa n. MR e CONABLE: All right. Mr. Sanclemente. MILLER REPORTING CO .. INC. 507 C Street, N .E. Washington, D .C. 20002 (202) 546- 6666  86 STRICTLY CONFIDENTIAL MR. SANCLEMENTE: Mr. Chairman, the proposed loan is a timely and appropriate vehicle for the provision of Bank assistance to Argentina's stabilization and recovery efforts and a good example of effective support to development finance institutions. On a more general plane, the provision of such financing to Argentina's industry at this time is particularly helpful because of the capital starvation arising from the necessary sharp macroeconomic adjustments. It would take time before financial markets reduce interest rates in line with lower inflation. n Therefore, this is a good example of the Bank's complementing a country's stabilization efforts. Our Chair hopes to see more substantial and sustained support of this type to Argentina, and similarly situated countries. In that context, we would like to request a special report for EDs about the agreement veached by the Argentinean Goverrunent with the commercial banks. Thank you, Mr. Chairman. MR. CONABLE: Will we get that information in any C written form? Mr o Gu e . MR. GUE: We could do this, yes. Do you want it to be distributed, Mr. Sanclemente? Yes. MILL ER REPORTING CO .. INC. 507 C Street, N.E. W ashington, D.C. 20002 (202) 546 - 6666  87 STRICTLY CONFIDENTIAL MR. CONABLE: I assume that there is agreement in principle only and there may be some details still to work out. As a matter of fac~, the onlending and the swap arrangements have been quite complicated and have slowed the process down quite a bit. They were considered to be things that would be desirable in the overall package. There also have been issues relating to exit bonds, have there not, for commercial banks? That is something that could be important in the future if there were further rescheduling. Yes, we will see that -- when we have the final report on this. As you know, at least at this point, the Bank has no direct involvement in this. There have been suggestions that we have an involvement, but it has not been necessary as yet. We will see how the final package looks and we will be glad to inform the EDs about it. It is an important step for Argentina, and very encouraging to see the progress that has been made there. Mr. Al-Shawi has a question about this. MR. AL-SHAWI: Yes, thank you, Mr. Chairman. L I would like the record to show our support for this IBRD loan to Argentina, and I had in mind to seek some clarification regarding the terms, the onlending terms, but MILLER REPORTING CO .. INC. 507 C Street, N .E. Washington, D.C. 20002 (202) 546- 6666  88 STRICTLY CONFIDENTIAL of course these were dealt with just a while ago. So thank you very much. MR. CONABLE: Thank you, Mr. Al-Shawi. Mr. Rodriguez, you have a question, sir? MR. RODRIGUEZ: Not really, just I would like to support the proposed loan in Argentina, since it will aid to modernize the medium-scale industrial base, and will complement the incoming trade and export diversification progr that are expected for approval during this current year. Thank you very much. MR. CONABLE: Thank you very much, Mr. Rodriguez. [l Is there further comment? Yes, Mr. Yamaguchi. MR. YAMAGUCHI: Mr. Chairman, like Mr. Sanclemente, I think I am and we are interested in having the agreement in principle which was done yesterday. So if you could distribute it, we would appreciate it. Thank you. MR. CONABLE: Mr. Gue. MR. GUE: Mr. Chairman, I think we could distribute what we know about the agre ement in principle but I think, as you said, Mr. Chairman, the final communication to the Board would have to await then the final agreement between Argentina MILLER REPORTING CO.. INC. 507 C Street, N .E. Washington, D.C. 20002 (202) 546-6666  89 STRICTLY CONFIDENTIAL and the banks. Now we can inform you, if you like, about what we know at this moment. Ii L J MR. CONABLE: We know only the broad outlines, do we not? MR. GUE: Only the broad outlines that I mentioned earlier. MR, CONABLE: Yes. If there are no further comments or questions, the minutes will show the Executive Directors approve this loan, the $125 million equivalent loan, on the terms proposed. MILLER REPORTING CO .. INC . 507 C Street , N .E. \V ,shingto n, D.C. 2000 2 (202) 5 46- 6666