HC Deb 24 February 1983 vol 37 cc1041-2
5. Mr. Winnick

asked the Chancellor of the Exchequer if he will make a statement on the latest position regarding United Kingdom involvement in loans for the Argentine Government.

Sir Geoffrey Howe

The IMF has approved loans amounting to about $2.2 billion in support of an economic stabilisation programme. International banks, including British banks, signed a short-term bridging facility for $1.1 billion at the end of last year and are still negotiating a $1.5 billion medium-term loan.

Mr. Winnick

Is the Chancellor aware that many people will be wondering how much of the loans advanced to Argentina will be used by the ruling junta to purchase arms for any future military adventures? Why should the Argentine economy need such assistance, bearing in mind the flattering remarks of the present chairman of the Conservative party when he visited Argentina on a trade mission in 1980 and said that the junta was running the economy well?

Sir Geoffrey Howe

The Argentine economy has many natural strengths. In addition, Argentina runs a trade surplus. There is never a shortage of countries willing to offer arms in exchange for commodities produced as a result of the trade surplus. The effect of the IMF programme is, as I have explained, to require the Argentines to undertake an adjustment programme to correct the balance of their economy because, notwithstanding the country's natural resources, its economy has been so managed as to accumulate substantial debts.

Mr. Wilkinson

Will my right hon. and learned Friend reconsider that reply? Was it not a rather bland statement, because the Argentine Government have not renounced the use of force as a way of solving the Falkland Islands dispute? Is it not rather unedifying that British banks should be engaged in such negotiations?

Sir Geoffrey Howe

British banks have substantial and long-standing financial interests in Argentina. One conclusion at which we arrived was that financial restrictions should be removed in both directions. One cannot, by manipulating such matters, stop the Argentines engaging in arms purchasing. I fully endorse my hon. Friend's complaint about the conduct of the Argentine Government and I hope, with all other hon. Members, that they will renounce their willingness to commit hostilities.

Mr. Shore

As conditionality is at the heart of IMF lending, as the Argentine Government—a dictatorship—have been spending excessively on military hardware and services, and as Argentina is engaged with Britain in hostilities that it has not called off, why did the right hon. and learned Gentleman allow the British member of the executive board of the IMF to agree to a further loan to Argentina? Since the Bank of England refused to join the BIS in the temporary bridging loan some two to three months ago, why has the Chancellor now allowed the Bank of England to organise not merely the rescheduling of old British debt, but the lending of new money to Argentina?

Sir Geoffrey Howe

The right hon. Gentleman must accept the reality of the position. Conditions inserted into such loans will not stop the Argentine Government acquiring arms as a result of their surplus in trade. The Argentine Government's capacity to do so will be reduced significantly by the introduction of the IMF programme for its loan. The programme includes conditions that require substantial adjustments in the Argentine economy, and that will reduce rather than increase the scope for the purchase of arms.