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Lending less than meets the eye

Ricardo Hausmann

Washington's battles with big budget deficits may seem like a distant memory, but a familiar refrain from those days has taken on new meaning for the IMF. "Less is more" has been a powerful, if unstated, theme running through many Fund-led packages, ever since the Mexican peso crisis of 1994-95.

The size of these programmes continues to astound: $58.4 billion for Korea, $36.1 billion for Indonesia and $17.2 billion for Thailand all in one fell swoop when the Asian crisis hit bottom. The IMF next moved to spearhead a $41.5 billion package for Brazil's showdown with speculators in 1998-99. And then officials unveiled a $40 billion deal for Argentina last January.

These seem like big numbers, but there's a very different story in the fine print. "The money that matters needs to be incremental and freely disposable," points out Michael Gavin, director of Latin American research at UBS Warburg.

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