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O'Neill Tours Economically-Troubled South America - 2002-08-05

U.S. Treasury Secretary Paul O'Neill is in South America on a mission to assess a spreading economic crisis and what impact international aid may have.

Mr. O'Neill was to meet with top Brazilian officials late Sunday in Rio de Janeiro. Topping the agenda is an International Monetary Fund (IMF) fiscal package aimed at calming Brazilian financial markets fearful of upcoming presidential elections.

The Brazilian real has lost 23 percent of its value against the dollar this year. The real sharply dropped fifteen percent after Secretary O'Neill suggested last week that aid money for South American countries has a tendency to end up in Swiss bank accounts. His remarks angered Brazil's government.

Meanwhile, the Bush administration says it plans to provide Uruguay with an emergency $1.5 billion loan to help deal with a crisis that forced banks to suspend operations last week.

The French News Agency, AFP, says IMF, World Bank and Inter-American Development Bank officials have offered an aid increase to Uruguay totaling $3.8 billion.

Sunday, Uruguay's Congress approved a law freezing hard currency bank deposits for up to three years. Uruguay links its economic problems to Argentina, which has defaulted on its $141 billion foreign debt. Uruguay fears defaulting on its foreign debt could jeopardize a separate loan from the International Monetary Fund.

Mr. O'Neill will meet with the presidents of Brazil, Uruguay and Argentina.