US throws Uruguay a lifeline

THE US has offered a lifeline to financially troubled Uruguay by agreeing a $1.5bn (£995m) emergency loan. Uruguay has suffered from the economic collapse of neighbouring Argentina and from worries over South America's biggest economy, Brazil.

The US help - highlighting the Bush government's continued support for the region - should enable Uruguay to reopen its banks, closed since last Tuesday to prevent massive withdrawal of funds.

The International Monetary Fund has also signalled its intention to provide a further $1.5bn to the country. Brazil also hopes to secure international loans but the US is wary in case forthcoming elections sweep in a populist left-wing government.

US Treasury Secretary Paul O'Neill said: 'Uruguay has effectively implemented sound economic policies and embraced free markets, liberalising trade and maintaining low inflation.'

Julian Jessop at emerging markets specialist Standard Chartered said the bridging loan would ease O'Neill's talks with Uruguay's neighbours.