Argentina

["Ian Murray" <seamus2001@xxxxxxxx>]

Argentine President Addresses Economy


By Serena Parker
Associated Press Writer
Thursday, November 1, 2001; 8:10 PM

BUENOS AIRES, Argentina -- President Fernando De la Rua went on
national television Thursday night offering an ambitious rescue plan
for Argentina's ailing economy that proposes new measures to chip away
billions of dollars from the country's heavy debt burden.

Speaking in a prerecorded national address, the president sought to
defuse a week of growing investor uncertainty over the country's
ability to avoid default on its $132 billion in debt, vowing his plan
would in no way interrupt debt servicing payments to creditors.

"We will meet our obligations" to creditors, De la URA said in an
address from the pink Government House. He vowed Argentina would not
default or devalue its peso currency because of the grave economic
crisis.

He said he wanted to reduce the debt-servicing costs that have forced
the cash-strapped state to dispense with hundreds of millions of
dollars a month to creditors. The plan called for bringing high
interest rates down to single digits.

In his most important economic address in two years in power, the
president bluntly told his 36 million compatriots that they simply had
rung up far too much debt and that the country had no other choice but
to take bold steps and seek a voluntary debt renegotiation

De la Rua and Economy Minister Domingo Cavallo want to restructure the
country's debt load by offering greater payment guarantees in exchange
for lower interest rates. The president said he was seeking new bonds
at interest rates of 7 percent.

It's not clear if foreign lenders would be willing to accept such a
move, which Cavallo's team characterized as "voluntary." Nervous
markets had been awaiting the plan all week and the first test of its
soundness is expected when trading resumed Friday.

Credit agencies have warned that a debt swap might be considered a
partial default.

De La Rua also called for the nation to rally behind him in a time of
crisis. He went ahead with his announcement despite a political
impasse that continued Thursday with 23 provincial governors who
balked at his calls to enlist in his effort to balance the budget.

The debt crisis has worried Wall Street and emerging markets for
months as Argentina teetered on the brink of a possible default.

Argentina's unemployment rate has been stuck in double digits for
years, the economy is stumbling after seven punishing rounds of
austerity measures, and some cash-strapped provincial governments have
resorted to paying state workers partly with bonds in lieu of cash.

With state coffers dwindling, De la Rua is locked in a bitter
political impasse with the governors over the federal government's
failure to pass along more than $500 million in tax revenue owed to
the provinces.

But the government has said it doesn't have the money at a time when
Argentina must come up with $1.1 billion to service its debt this
month and another $774 million in December.

The International Monetary Fund apparently has no immediate plans to
come to the rescue, as it has twice already since December. An IMF
official, Thomas Dawson, told reporters in Washington Thursday that
releasing any funds ahead of schedule was "not in the cards" at this
time.

Argentina's next IMF loan is a $1.3 billion installment that will be
available in December.

Argentine governors resumed meetings Thursday to discuss the federal
government's proposal for spending cuts and tax-revenue sharing
measures. But differences remained between the two sides.

As well as offering a strategy for debt, the president on Thursday
also offered sales tax relief to those who make purchases with credit
cards. He also proposed modest payments to low-income households and
the unemployed to spur consumer spending.

However, critics say far more needs to be done to encourage consumers
to begin spending again, a necessary step to raise badly needed tax
revenue to pay off the debt. On Thursday, the government announced
that collected taxes fell 11 percent in October after plunging 14
percent in September.