Argentina

[Ed Weick]

To those still interested, it seems that the interim government of Argentina has done something clever.  Rather than risk further alienation of its own constitutents, it has decided to risk alienating its creditors.  The latter is not much of a risk.  It would seem that the international investment community expected it and would probably not have had much more faith in Argentina than the little it already has even if it had been paid.  As a further step in maintaining domestic calm, the government has maintained the link between the dollar and the peso.  It will apparently also introduce a new currency which will trade alongside the dollar and the peso, but which will probably be allowed to find its own value.  There is thus at least some prospect that people's incomes and savings, currently dependent on the fixed dollar-peso link, will not be further eroded.   These are all positive steps, but only as very short run measures.  They are a means of buying domestic peace.  The government now has to get on with the very serious business of restoring confidence on a more permanent basis and by undertaking some pretty fundamental economic reforms.  Step number one is restructuring the country's debt to something more workable, but that is only a beginning.   Ed Weick