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Noriega Cites Economic Diplomacy in Uruguay

State Dept. official discussed recent economic challenges facing Uruguay

Posted: July 28, 2005

The United States is committed to strengthening democratic institutions, promoting prosperity, investing in people and bolstering security in Latin America -- and the U.S. Department of State is employing its diplomatic tools to pursue these ends, says Assistant Secretary of State for Western Hemisphere Affairs Roger Noriega.

In July 27 testimony before the House Committee on International Relations' Subcommittee on the Western Hemisphere, Noriega said that the United States is willing to work with all nations throughout the Americas interested in strengthening their political institutions and implementing economic reforms to take advantage of trade opportunities.

Noriega cited several examples of U.S. diplomatic challenges in the region, including the establishment of a free-trade agreement with Central America and the Dominican Republic (known as CAFTA-DR) and supporting Colombia's efforts to confront terrorism and the illegal narcotics trade.

During his testimony, Noriega also discussed recent U.S. economic diplomacy in Uruguay.

Whereas U.S. efforts to confront diplomatic challenges may not yield the desired results in the short term, the United States is determined to stay the course in spreading freedom and prosperity in the region, he said.

Following is the Uruguay segment of Noriega's remarks, as prepared for delivery:

(begin text)

Uruguay had a solid record of market-oriented economic policies in 2002 when the financial crisis in Argentina directly contributed to a bank run. The Treasury Department maintained close contact with the Uruguayan government and IMF officials during the first half of 2002, tracking the decline in deposits and assisting in formulation of a response to it. Initially, Uruguay drew on its existing IMF program, and a new IMF program was launched in March and augmented in June. When it became clear in early summer that these measures would not be sufficient to bolster public confidence, Treasury began a series of intensive meetings with Uruguayan and IMF officials to develop a strategy for addressing the bank run decisively.

As a result, the United States joined with the IMF in supporting the government of Uruguay's plan to fully back dollar checking and savings deposits while reprogramming dollar time deposits. The deposit guarantee plan was financed with additional funds from the IMF, World Bank and Inter-American Development Bank. The government of Uruguay also determined that it would suspend the operations of four private domestic banks. To assist the banking system until the multilateral assistance could be disbursed, the U.S. Treasury provided a short-term $1.5 billion loan to the government of Uruguay. The loan was repaid within one week.

These interventions -- the result of sustained close coordination between the Treasury Department, IMF, the State Department, our embassy in Montevideo and Uruguayan officials -- combined with fiscally responsible policies of the government of Uruguay helped the country avert a possible collapse of its banking system and default. In 2004, two years after the onset of the financial crisis and one year after a successful debt restructuring, Uruguay enjoyed real GDP growth of 12.3 percent.

(end text)

See related article for the complete text of Noriega's remarks.


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