-Caveat Lector-
From
http://www.guardian.co.uk/Print/0,3858,4316416,00.html
}}}>Begin
IMF refuses to rescue Argentina
Currency close to collapse as finance minister emerges empty handed
from weekend crisis negotiations
Charlotte Denny
Monday December 10, 2001
The Guardian
Argentina's currency is on the verge of collapse, analysts warned
yesterday after the finance minister, Domingo Cavallo, emerged empty
handed from weekend crisis talks with the International Monetary Fund
over the country's $130bn (�90bn) foreign debt.
Although Mr Cavallo attempted to put a positive spin on his failure
to coax a promised $1.3bn bailout from the Washington-based lender,
Argentines are expected to flood banks once again this morning in a
desperate attempt to withdraw their savings.
The fund has reportedly demanded that Buenos Aires make a further $4bn in spending
cuts before it r
eleases the frozen loan, but the government is already facing stiff opposition to its
attempts to r
am through austerity me
asures.
"We have to work with the president, the cabinet and the governors to be sure that we
are capable o
f doing what is necessary to inspire credibility," Mr Cavallo said of the task.
His remarks came as analysts predicted that the peso's one-to-one peg with the dollar
was close to
rupturing. Black market money changers on the streets of Buenos Aires are already
selling the peso
for as much as 20% belo
w its official value.
"The pressures on Argentina's 10-year-old currency board are reaching levels close to
breaking poin
t," said Neil Douglas of Dresdner Kleinwort Wasserstein.
Devaluing the currency would bankrupt thousands of firms and households as most loans
have to be re
paid in dollars, but this is looking inevitable as the government no longer has
sufficient foreign
reserves to back its pr
omise to exchange every peso in circulation with a dollar.
The government has been forced into increasingly drastic measures to
prevent a complete financial meltdown. Earlier this month, Mr Cavallo
introduced strict controls on bank withdrawals and last Thursday he
took the drastic step of converting private pension funds into
government bonds and using the proceeds to pay off Argentina's
foreign creditors.
The ensuing cash crunch has devastated consumer spending in the run-
up to Christmas, with retail sales down as much as 80% last week,
according to a report from one retailers' group this weekend.
Guardian Unlimited � Guardian Newspapers Limited 2001
End<{{{
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