Troubled Argentina edges closer to international helpgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
-------------------------------------------------------------------------------- Argentina still rated a riskier bet for investors than fellow emerging markets Brazil, Turkey and Russia
Troubled Argentina edges closer to international help
Argentina appeared closer to clinching more international financial support to help quash global concerns that Latin America's third largest economy would default on its $128 billion public debt.
U.S. Treasury Undersecretary for International Affairs John Taylor, due to arrive Argentina later on Friday for a progress report, said on Thursday there was a "good chance" of bringing forward International Monetary Fund aid disbursements.
It was one of several signs Argentina may not have to go it alone despite earlier indications that the international financial community was wary of coming to its aid.
In a key show of support, U.S. President George W. Bush phoned President Fernando de la Rua on Wednesday to congratulate him on the passage of his "zero deficit" plan in Congress.
"There was no discussion of new money. The focus of the discussion was the important steps the De la Rua administration was taking and its existing IMF program," U.S. National Security Council spokeswoman Mary Ellen Countryman said.
Argentine Cabinet Chief Chrystian Colombo told a news conference on Thursday that De la Rua had asked Bush to send down U.S. government officials to witness the measures his administration was implementing.
"What was sought was the presence of U.S. government officials... to enable them to be completely informed about the measures implemented by the Argentine government," Colombo said, adding Taylor's visit was for exactly that purpose.
Taylor had said earlier that it was "hypothetical" to talk about new cash for Argentina now, and that he was not visiting to negotiate new aid.
Asked if Argentina is going to get earlier-than-scheduled previously agreed IMF loan disbursements -- which total about $2.5 billion for the rest of the year -- Taylor told reporters: "There is a good chance that there will be something like that."
The statements were a boost for a government that suffered another market drubbing on Wednesday, as investors worried over possible runs on international reserves and bank deposits.
A German Finance Ministry spokesman said on Thursday that Argentina has sought German support for a speeding disbursements of IMF aid as well as additional help. But Germany has not yet decided whether to back Argentina's request, he said.
Markets still skeptical Buenos Aires has said it would request faster loan disbursements only if it thought they were necessary. A speeding up in the payment schedule could reassure investors the country would meet all its loan commitments.
Despite De la Rua managing to pass a law to end deficit spending and carrying out huge debt swaps, the recession-hit country has struggled to convince investors that a default on payments of its public debt is not just around the corner.
Colombo blamed market speculators for compounding Argentina's woes, but said they had underestimated the government's resolve.
"Argentina is suffering a speculative run on its bonds .. because (speculators) did not think we would be able to cope ... and would allow the country to collapse," he said.
Argentina received an IMF-led $40 billion package in December, but that has failed to boost the economy out of a three-year slump. Local markets have plunged and made new international credit too expensive to get as worries grew that the recession would make the debt burden unbearable.
Argentina's leading MerVal share index closed 1.87 percent higher on Thursday on the prospect of outside help. Local country risk, the closely-watched premium the government must pay to entice investors away from safe-haven U.S. Treasuries, narrowed 153 points to 1,601 basis points on signs of growing international backing for Argentina.
But that still rated Argentina a riskier bet for investors than fellow emerging markets Brazil, Turkey and Russia.
Criticism at home Markets were not just looking for signs of international help. Traders say they want proof the government would stick to recent unpopular public spending cuts, especially in the politically sensitive areas of state salaries and pensions.
At home, former President Raul Alfonsin, who presides over De la Rua's centrist Radical Party, criticized the Alliance coalition government spending cuts, telling local television that "it was very difficult to see how these measures (under the zero deficit plan) would boost the economy."
While Alfonsin, who has been increasingly sidelined by the president, holds little real power, investors worry he is a destabilizing factor within a government in desperate need of political consensus for the austere months ahead.
Earlier this week, Economy Minister Domingo Cavallo was said to be negotiating unspecified "cooperation mechanisms" with European countries. Meanwhile, the World Bank's board was set to discuss the possibility of a $400 million loan at the end of August.
France, which has appeared keen to help Argentina, also said it was in close contact with its European counterparts and the IMF over Argentina's woes.
Also on Thursday, the U.N. Economic Commission for Latin America and the Caribbean (ECLAC) forecast in a report that Argentina's economy would shrink 1 percent this year.
Buenos Aires - Reuters
-- Martin Thompson (email@example.com), August 03, 2001
Sounds like Nixon's gold speculators.
-- David Williams (DAVIDWILL@prodigy.net), August 04, 2001.