UENOS AIRES, Aug. 7 Confronted with the prospect of another financial meltdown in Latin America, the International Monetary Fund agreed today to a $30 billion rescue loan for Brazil. At the same time, Treasury Secretary Paul H. O'Neill was urging Argentina to move quickly to reach a similar accord, saying that the United States will not bail out the government and believes that additional reforms of the Argentine economy are needed.
The rescue package for Brazil demonstrated an attempt to meld political and economic goals. While it runs counter to the Bush administration's public opposition to international bailouts, Brazil is the largest economy in Latin America and has attracted billions of dollars in investment by American companies. Administration officials argue that Brazilian economic policies have been fundamentally sound, but the country's currency has plunged in value as investors have grown panicky about coming elections.
Investors and banks have been badly unnerved by the strength of two left-wing presidential candidates in elections this fall, both of whom have attacked Brazil's current policies that are intended to reduce inflation, balance the budget and expand free trade.
The $30 billion accord, which covers the next 15 months, comes on top of an existing $15 billion credit line from the I.M.F. to Brazil and permits Brazil's central bank to reduce the minimum level of its reserves by $10 billion.
The size of the package was nearly double what most Brazilian analysts had been predicting and requires the government to make almost no modification of its existing policies. But Brazil would not be able to use 80 percent of that money until 2003 after the elections this fall.
The fund also noted that the agreement "could be" presented for approval by its full executive board in early September, but it gave itself room to delay approval if Brazilian officials do not provide enough assurances that policies will remain unchanged.
The developments in Brazil and Argentina underlined the growing alarm in the United States and Europe at the seriousness of the financial crisis that began here last year and has recently spread to Uruguay and other nations in the region. But the marked difference in attitudes also appeared to dash Argentina's hopes that fears of just such a regional "contagion" would make its task easier.
Argentina has been bogged down in unsuccessful talks with the I.M.F. ever since its credit line with the body was suspended late last year. The accord with Brazil, in contrast, was reached in near-record time, with formal discussions having begun less than a month ago, and was accompanied by a ringing endorsement of the Brazilian government's economic program.
"Brazil is on a solid long-term policy trend which strongly deserves the support of the international community," the managing director of the I.M.F., Horst Köhler, said in a statement issued late this afternoon. In a reference to the contentious presidential election that is less than two months away and has generated market nervousness, Mr. Köhler also said that "the fund stands ready to support any government committed to sound policies."
Brazil's agreement leaves only Argentina without financial protection among the three troubled South American countries that Mr. O'Neill has visited this week. On Sunday night, as Mr. O'Neill was arriving in the region, the United States announced that it was making an emergency $1.5 billion bridge loan to Uruguay, reversing a policy that had been in place since the start of the Bush administration.
That immediately generated hopes that Washington might ease its opposition to a rescue package for Argentina and revert to more supportive policies that had been in place under the Clinton administration. But Mr. O'Neill quashed that notion today, saying that "each nation's facts are different" and that the action taken to help Uruguay was an unusual exception.
"We think the lead institution for dealing with international financial issues ought to be the International Monetary Fund," he said at a news conference this morning. American policy, he said later in the day, has been to "work generally quietly behind the scenes" rather than "lecture countries that were having troubles and to have a high-profile role."
While praising Argentina for "working hard to implant policies that will create the basis for sustained growth," Mr. O'Neill also made it clear that he thinks the government here must complete additional reforms. He repeatedly mentioned, for instance, "the importance of a functioning bank system" and a "very crystal clear idea of the practice of the rule of law."
The government in Argentina froze most savings accounts in early December to avert massive capital flight, and the government has been bickering with banks, some of which have threatened to close down operations and leave the country, over how they are to be compensated for billions of dollars in losses. Mr. O'Neill, had lunch today with some of the country's leading bankers, whom he later praised as smart and talented.
Appearing with Mr. O'Neill at a news conference here this morning, the minister of the economy, Roberto Lavagna, in contrast emphasized the steps Argentina had already taken to right its economy. He described the the two men's 90-minute breakfast meeting as one in which they "reanalyzed the characteristics of what we consider to be an economically sustainable plan."
After Mr. O'Neill met with President Eduardo Duhalde on Tuesday night, Argentine government officials stressed the urgency of reaching an accord with the I.M.F. as soon as possible. Foreign reserves here are now less than $9 billion, compared with $13 billion at the start of the year, and Argentina must repay nearly $3 billion more to international lenders by the end of the year, including a large payment next month.
Mr. O'Neill, however, seemed less concerned with the prospect of Argentina defaulting to international lending institutions, which would make the country an economic pariah. "There's plenty of time to work on this issue," he said, adding that Mr. Lavagna had told him Argentina would submit a formal proposal to the I.M.F. "in a week or so."
Between his meetings with government officials and businessmen, Mr. O'Neill visited a day care center in a Buenos Aires suburb in which more than half of the 500,000 inhabitants are now living below the poverty line. As his motorcade sped through the streets, onlookers rubbed their fingers together to indicate money and one man shouted "where's the cash, where's the cash?"
Workers at the center, built with a grant from the World Bank, said that most of the parents of the 110 children, ages 2 to 5, enrolled in the program were unemployed. The breakfast and lunch which today consisted of chicken and rice with milk and flan for dessert is the only nourishment many of the children receive, the workers said.
"We need that money so that the economy can grow and people can go back to work," Nilda Ortega, a cook and mother of eight, said in reference to the I.M.F. negotiations. "People here really want to work, but with our country in the situation it is in, there is nothing for them."
Originally, Mr. O'Neill's itinerary also called for him to tour a Ford auto plant in the Buenos Aires suburbs. But that visit was canceled, according to people close to labor unions here, because workers threatened to walk off the job in protest if Mr. O'Neill appeared.