Argentina

["eperez" <eperez@xxxxxxxxx>]

Yet another rescue package for Argentina.  The sucess of the
Argentine government in preserving its quasi-fiscal board has been
very dependent on the substantial assistance it has received from
international organizations over the years (the lenders of last resort
for Argentina). Supposedly, the quasi fiscal board was suppose to
avoid banking and balance of payments crisis.

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>From the FTimes.
Argentina on Monday unveiled an international package of financial
aid worth $39.7bn, designed to revive the
economy and quash fears it could default on its foreign debt.

Argentina accounts for up to a quarter of tradeable emerging
market debt worldwide, and there had been concern
amongst international finance officials that a default by the country
could set off a new round of financial
contagion.

The package, which is substantially larger than expected, includes
$13.7bn from the International Monetary Fund,
$2.5bn each from the World Bank and Interamerican Development
Bank and $1bn from Spain. From the private
sector, Argentina has secured an agreement by banks acting as
"market makers" for government debt issues
worth some $10bn, as well as a similar commitment by Argentine
pension funds for around $3bn.


Horst Köhler, IMF managing director, said the package "should
improve the investment climate and, together with
enhanced domestic and external confidence, lay the ground for
sustained economic growth in Argentina".

The package also received a statement of support from Larry
Summers, US Treasury Secretary, who expressed
his hopes that government reforms would lift the struggling
Argentine economy from its slumber.

Like other emerging markets, Argentina's economy fell into a deep
recession in 1999, contracting by more than 3
per cent. But unlike other regional economies, Argentina has so far
been unable to pull itself out. The economy is
expected to grow by less than 0.5 per cent this year.

In October, a political crisis nearly split the two-party coalition in
power, further damaging fragile confidence in the
country. Cut off from international capital markets, Argentina faced
big problems refinancing its $15.3bn in debt
coming due next year, let alone meeting its total financing
requirement of some $26bn when short-term debt is
included.

Argentina now hopes that the new aid package will restore
confidence in the country, bringing down interest rates
and helping kickstart the economy.

Of the total aid package, some $25.4bn will be available before the
end of 2001, the government said, covering
virtually all of its financing requirements. A senior government
official said that Argentina would draw $2.1bn from
its existing IMF loan agreement "in the next few days", followed by
up to $3bn in January, after the new aid is
agreed by the IMF board. On Tuesday, Argentine finance officials
will conduct a conference call to explain the aid
package to investors around the world.
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Esteban Pérez
Economic Affairs Officer
Economic Commission for Latin America and the Caribbean
United Nations
Av. Presidente Masaryk 29 12o Piso
Col. Chapultepec Morales 11570 Mexico D.F.
Phone   : 263-9681
Fax     : 531-1151
E-mail address: eperez@xxxxxxxxx
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