VZCZCXRO5342
RR RUEHGI
DE RUEHFR #7491/01 3251514
ZNR UUUUU ZZH
R 211514Z NOV 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 3271
INFO RUEATRS/DEPARTMENT OF TREASURY WASHDC
RUEKJCS/SECDEF WASHDC
RUEHRL/AMEMBASSY BERLIN 6445
RUEHSW/AMEMBASSY BERN 1861
RUEHBR/AMEMBASSY BRASILIA 1708
RUEHBS/AMEMBASSY BRUSSELS 5952
RUEHBY/AMEMBASSY CANBERRA 1652
RUEHCP/AMEMBASSY COPENHAGEN 1402
RUEHHE/AMEMBASSY HELSINKI 1244
RUEHLO/AMEMBASSY LONDON 6327
RUEHMD/AMEMBASSY MADRID 2479
RUEHMO/AMEMBASSY MOSCOW 5684
RUEHNY/AMEMBASSY OSLO 1428
RUEHOT/AMEMBASSY OTTAWA 2003
RUEHRO/AMEMBASSY ROME 8100
RUEHUL/AMEMBASSY SEOUL 1368
RUEHSM/AMEMBASSY STOCKHOLM 1446
RUEHTC/AMEMBASSY THE HAGUE 2626
RUEHKO/AMEMBASSY TOKYO 2389
RUEHVI/AMEMBASSY VIENNA 1639
RUEHBS/USEU BRUSSELS 1825
RUEHLU/AMEMBASSY LUANDA 0796
RUEHBU/AMEMBASSY BUENOS AIRES 1317
RUEHGI/AMEMBASSY BANGUI 0024
RUEHNJ/AMEMBASSY NDJAMENA 1101
RUEHKI/AMEMBASSY KINSHASA 1433
RUEHAB/AMEMBASSY ABIDJAN 1032
RUEHUB/USINT HAVANA 0034
RUEHGE/AMEMBASSY GEORGETOWN 0155
RUEHPU/AMEMBASSY PORT AU PRINCE 0687
RUEHGB/AMEMBASSY BAGHDAD 0534
RUEHLB/AMEMBASSY BEIRUT 0453
RUEHCH/AMEMBASSY CHISINAU 0352
RUEHPL/AMEMBASSY PORT LOUIS 0816

UNCLAS SECTION 01 OF 06 PARIS 007491 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/IFD/OMA 
TREASURY FOR DO/IDD AND OUSED/IMF 
SECDEF FOR USDP/DSAA 
PASS EXIM FOR CLAIMS -- EDELARIVA 
PASS USDA FOR CCC -- ALEUNG/DERICKSON/KCHADWICK 
PASS USAID FOR CLAIMS 
PASS DOD FOR DSCS -- PBERG 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID XM XA XH XB XF FR
SUBJECT: PARIS CLUB - NOVEMBER 2006 TOUR D'HORIZON 
 
SENSITIVE BUT UNCLASSIFIED.  NOT FOR INTERNET DISTRIBUTION 
 
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SUMMARY 
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¶1.  (U) At the November 15 meeting of the Paris Club, creditors 
decided on an initial response to Argentine Finance Secretary 
MacLaughlin's letter to the Club expressing the GOA's desire to 
restart a dialogue and normalize relations as soon as possible. 
Creditors agreed that Paris Club Chairman Musca should tell the 
Argentines at the November 18-19 G-20 Meeting in Melbourne that 
creditors welcomed his letter, but that Argentina should clear its 
arrears in full and that any rescheduling would require an IMF 
program.  Meanwhile, Spain appears close to concluding a separate 
bilateral deal with Argentina to restructure an $850 million loan 
extended during the 2001 financial crisis.  A Spanish deal could 
complicate Argentina's discussions in the Paris Club.  The US 
briefed creditors on the Iraq Compact and asked that they consider 
providing 100% debt relief as their contribution to the Compact. 
There was little reaction, reflecting an understanding among 
creditors that a decision will be made at higher political levels. 
Creditors also provided financing assurances for the Central African 
Republic's new IMF program.  The Club will likely consider a "Naples 
flow" treatment (partial reduction on payments coming due) in 
January once the program is approved.  Other countries on the agenda 
included Angola, Chad, the Republic of Congo, Cuba, Guyana, Haiti, 
Cote d'Ivoire, Lebanon, Moldova and the Seychelles.  END SUMMARY. 
 
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ANGOLA 
------ 
 
¶2.  (SBU) Angola has fulfilled its commitment to make a $100 million 
good faith payment toward arrears, but has not yet resumed payments 
on 2006 maturities.  The secretariat will follow up with the 
authorities.  (Angola has no arrears to the US and is current on its 
debt service.)  At a G-7 debt experts meeting held prior the main 
Paris Club meeting, the secretariat said now was the time to give 
the IMF a "gentle push" to play a more proactive role in trying to 
reach agreement with the authorities on a Standby-Arrangement 
(SBA). 
 
--------- 
ARGENTINA 
--------- 
 
 
PARIS 00007491  002 OF 006 
 
 
¶3.  (SBU) Finance Secretary MacLaughlin sent a letter November 9 to 
the secretariat expressing the government's desire to restart a 
dialogue with the Paris Club, with the aim of normalizing relations 
as soon as possible.  Creditors will formulate a written response at 
the December Paris Club meeting.  In the meantime, Paris Club 
Chairman Musca will approach MacLaughlin on the margins of the 
November 18-19 G-20 meeting in Melbourne to seek more information 
about Argentina's intentions and to deliver the following five-point 
message:  (1) Creditors appreciate Argentina's desire to restart a 
dialogue; (2) Given healthy reserves (around $30 billion), the 
optimal solution would be for Argentina to clear its $3 billion in 
arrears immediately; (3) Any debt rescheduling would require an IMF 
program; (4) A separate agreement with Spain, were it to 
materialize, would not create a precedent for any future debt 
treatment in the Paris Club; and (5) Chances for normalization would 
be helped if Argentina did not disclose its discussions with the 
Paris Club to the press.  Italy, concerned about domestic 
sensitivities, asked that Musca refer to overarching Paris Club 
principles, rather than present a unified Paris Club position toward 
Argentina in particular. 
 
¶4.  (SBU) The Spanish delegation was unable to confirm an agreement 
reportedly reached between Prime Minister Zapatero and President 
Kirchner at a summit in Uruguay earlier in the month.  According to 
press reports, the two leaders have agreed to a seven-year 
rescheduling of Spain's $835 million loan extended in 2001.  (At the 
G-7 debt experts meeting, France said it believed the reports were 
accurate.)  The Spanish delegation said it had not received any 
information from the prime minister's office and was not in a 
position to confirm or deny the press reports.  All creditors, with 
the exception of Spain, stressed that the loan was no different from 
any other Paris Club loan and should not be treated outside the 
Paris Club framework.  Several expressed concern that a separate 
Spanish deal would lead Argentina to expect similar or better 
treatment from the Paris Club. 
 
------------------------ 
CENTRAL AFRICAN REPUBLIC 
------------------------ 
 
¶5.  (U) Creditors provided financing assurances for CAR's new 
Poverty Reduction and Growth Facility (PRGF), expected to come to 
the IMF executive board in late December, pending clearance of CAR's 
arrears to the World Bank and African Development Bank.  The 
secretariat confirmed that CAR, as a pre-HIPC decision point 
 
SIPDIS 
country, stands to benefit from a Naples flow treatment (67% 
reduction on flows of non-concessional debt coming due during the 
 
PARIS 00007491  003 OF 006 
 
 
IMF program and rescheduling of concessional debt) once the PRGF is 
approved.  The IMF said decision point could be reached following 
six months of performance on the program.  At decision point, the 
Club usual increases flow reduction to 90%. 
 
---- 
CHAD 
---- 
 
¶6.  (U) Chad has still not completed the first review of its 
three-year PRGF approved in February 2005.  As a result, the Paris 
Club consolidation period ending September 2005 has not been 
extended, and most creditors are invoicing for maturities falling 
due.  The IMF said a mission was currently in the field, with the 
aim of completing the first and second reviews.  (The US is not a 
creditor.) 
 
----------------- 
CONGO-BRAZZAVILLE 
----------------- 
 
¶7.  (U) The IMF said large fiscal overruns have prevented completion 
of the third review of the PRGF.  The second phase of Congo-B's 
decision point agreement, covering maturities falling due between 
October 2005 and September 2006, entered into force earlier this 
year.  However, the final phase, covering maturities falling due 
between October 2006 and September 2007, is conditioned on 
completion of the fourth review of the PRGF before January 1, 2007. 
Therefore, maturities falling due after September 2006 are due and 
payable.  The secretariat asked creditors, where possible, not to 
ask for payment. 
 
------------- 
COTE D'IVOIRE 
------------- 
 
¶8.  (SBU) The IMF said an Emergency Post-Conflict Assistance (EPCA) 
agreement was contingent on clearance of arrears to the World Bank 
and African Development Bank, as well as agreement with the 
authorities on a macroeconomic framework and continued donor 
support.  (Cote d'Ivoire is a pre-HIPC decision point country.) 
 
---- 
CUBA 
---- 
 
¶9.  (U) In 2001, the U.S. blocked a formal Paris Club negotiation 
 
PARIS 00007491  004 OF 006 
 
 
with Cuba on the ground that Cuba didn't have an IMF program and 
wasn't even a member of the IMF.  Afterwards, some Paris Club 
members met with Cuba in an unsuccessful attempt to discuss a 
possible treatment of Cuba's external debt.  At this meeting, 
Belgium said it had been contacted by the Cuban central bank 
expressing interest in a debt treatment.  Several creditors reported 
short-term debt agreements with Cuba concluded in recent years.  In 
most of these cases, Cuba has since suspended payments. 
 
------ 
GUYANA 
------ 
 
¶10.  (SBU) The secretariat will follow-up with the Guyanese 
authorities to try to learn more about the potential systemic risks 
of requiring the GOG to implement fully the comparability of 
treatment provision in Guyana's 2004 HIPC completion point 
agreement.  The US, supported by the UK, said it welcomed the 
secretariat's efforts to seek more information, but noted it was not 
 
SIPDIS 
going to revoke HIPC debt relief over this issue, regardless of the 
outcome.  Japan agreed, but cautioned against allowing debtor 
countries to avoid having to seek comparable treatment by 
transferring debt from non-residents to residents. The US pointed 
out that the amount of money was relatively modest.  Guyana is 
proposing to cancel about $5 million of $26 million in bonds held by 
Guyana's fourth largest commercial bank and a number of pension 
funds, whereas comparable treatment would require cancellation of an 
additional $15 million. 
 
----- 
HAITI 
----- 
 
¶11.  (U) Haiti's new PRGF is scheduled to come before the IMF 
executive board on November 20, together with decision point. 
Negotiations in the Paris Club will take place in December. 
 
---- 
IRAQ 
---- 
 
¶12.  (U) The US briefed creditors on the Iraq Compact and asked that 
they consider providing 100% debt relief as their contribution to 
the Compact.  There was little reaction, reflecting an understanding 
among creditors that any decision on Iraq debt will be made at 
higher political levels.  The UK encouraged all creditors to press 
the Gulf countries - especially Saudi Arabia and Kuwait - to provide 
 
PARIS 00007491  005 OF 006 
 
 
at least 80% debt relief. 
 
¶13.  (U) Russia said it had nothing new to report on the status of 
its bilateral agreement.  Signature awaits "legal authority," and 
the final decision will be made "outside of the Ministry of 
Finance."  (Russia remains the only Paris Club creditor that has yet 
to conclude its bilateral agreement implementing the December 2004 
agreed minute.)  Commenting on a report provided by the Iraqi 
government that 96% of its commercial debt has been settled on Paris 
Club terms, the secretariat declared that Iraq had satisfied the 
comparability of treatment requirement with respect to its 
commercial creditors. 
 
------- 
LEBANON 
------- 
 
¶14.  (U) France said a donors conference is scheduled to take place 
in Paris in January 2007.  The IMF said a mission is currently in 
Beirut, with the objective of assessing debt sustainability and 
providing technical support ahead of the conference.  Although the 
financial system has managed to weather the shock of the conflict 
with Israel, the fiscal situation remains fragile. 
 
------- 
MOLDOVA 
------- 
 
¶15.  (U) The US and Italy had concluded their bilateral agreements 
implementing the May 2006 agreed minute.  Russia and Japan expected 
to conclude their bilateral agreements shortly (Japan has since 
signed).  Germany said bilateral discussions were scheduled for the 
week of November 20. 
 
---------- 
SEYCHELLES 
---------- 
 
¶16.  (U) Creditors agreed on a formula for dividing up a 4 million 
euro arrears payment from the Seychelles.  The formula is the same 
as that agreed last month for dividing up a $100 million arrears 
payment from Angola, and includes the same stipulation that, on an 
"exceptional" basis, no payments shall be applied to late interest. 
Italy, which stood to receive a larger portion of the 4 million euro 
under an alternative formula, complained that creditors had agreed 
last month that the Angola solution would not set a precedent for 
future allocation exercises.  (The US is not a creditor.) 
 
PARIS 00007491  006 OF 006 
 
 
 
-------------------------------------------- 
PC Prepayment Policy to be Posted to Website 
-------------------------------------------- 
 
¶17. (U) Creditors agreed on text to be posted to the Paris Club 
website describing the Club's policies on prepayments and buybacks. 
 
 
------------------------------------------- 
Relations between G-8 and non-G-8 creditors 
------------------------------------------- 
 
¶18.  (SBU) During the meeting of the G-7 debt experts, G-7 creditors 
discussed a non-paper from certain non-G-8 members of the Paris 
Club, calling on the G-8 members to sign a Code of Conduct to 
enhance inclusiveness and transparency.  Under this proposed Code of 
Conduct, the G-8 would commit not to make any decisions related to 
the Paris Club without first consulting the non-G-8.  The proposal 
came in reaction to high-profile Paris Club agreements with Iraq in 
2004 and Nigeria in 2005 that were mainly decided in the G-8 and 
generated resentment among the non-G-8.  G-7 debt experts agreed 
that it would be ill-advised to sign a binding code restricting the 
G-8's freedom of maneuver.  At the same time, they acknowledged the 
need to try to improve the relationship with the non-G-8.  The 
secretariat has drafted a non-paper that lays out steps for better 
 
SIPDIS 
coordination, and will deliver it to the non-G-8 creditors in 
December. 
 
----------------------------------------- 
Confidentiality of Paris Club Discussions 
 
SIPDIS 
----------------------------------------- 
 
¶19. (SBU) Also at the G-7 debt experts meeting, the secretariat 
expressed its displeasure at Norway issuing a press release that 
divulged internal Paris Club discussions regarding Norway's decision 
to unilaterally cancel $78 million in ship export debt.  Paris Club 
Chairman Musca sent a letter to the head of the Norwegian delegation 
rebuking Norway for breaching Paris Club confidentiality. 
 
STAPLETON