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Argentina unveils plan

November 2, 2001 Posted: 1407 GMT

BUENOS AIRES, Argentina (Reuters) -- Argentina unveiled late Thursday last-ditch measures aimed at saving its ailing economy from bankruptcy by restructuring its entire $132 billion public debt and boosting consumer spending.

Dismissing fears of devaluation or default that have rattled world markets already skittish at the prospect of a global economic downturn, the government announced consumer- and business-friendly steps including tax rebates to jump-start the economy. But while most investors initially gave the voluntary debt restructuring plan the thumbs up, details were scant, leaving them asking what sacrifice bondholders would be asked to make.

"We are at the limit of what we can stand, we have a debt that has left us stagnant for decades, without credibility, without credit, without growth, but we have the will to change," President Fernando De la Rua said, flanked by Cabinet ministers, in a pre-recorded televised speech. "It is time for us to face the problems we've been postponing for 50 years. It is time to rebuild the brand of Argentina," the president said, urging Argentines to spend more to help shake off an economic slump now in its fourth year.

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The government expects to save a minimum of $4 billion in interest payments in 2002 thanks to a swap, and to reduce the interest it pays on its debt to 7 percent or less. Economy Minister Domingo Cavallo, who has pledged to end deficit spending with the help of spending cuts in the central government and the provinces, wants to trim by 40 percent the $10 billion seen needed to service its debt burden next year.

Argentina faces debt payments of around $2 billion this month alone. The package of measures is widely seen as the last chance for Latin America's number-three economy to head off the biggest sovereign debt default in history for a nation cut off from international credit and cold-shouldered by the International Monetary Fund after $22 billion in bailouts since December 2000.

A government decree authorized the Economy Ministry to seek funds or guarantees from international organizations for the swap or a debt buyback, contradicting earlier statements by Cavallo that Argentina would not seek international help.

The IMF declined immediate comment on the package other than to say it was reviewing it.

De la Rua said the government would cut worker pension contributions for a year and cut sales taxes on purchases bought with credit and debit cards to encourage spending and avoid tax evasion. The embattled government is fighting on several fronts to pry Argentina out of recession, and is struggling to convince the provinces to take a cut on federal tax transfers to help ease pressure on state coffers and ensure it can meet its debt servicing obligations.

"We are the world champions in terms of assistance from the IMF and the international financial community for the financing of our deficits," Cavallo said wryly, stressing the debt operation would be "orderly."





 
 
 
 



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