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2,300 | <s>[INST] Convertibility, which forbids the printing of local currency not backed [/INST] by foreign inflows, in effect removes the tools Argentina might otherwise use to jolt the economy into action. </s> |
2,301 | <s>[INST] Next year, according to Merrill Lynch, the US securities house, [/INST] Argentina's financing needs reach an uncomfortable peak, with debt-service payments rising from $11.7bn in 1996 to $14.8bn. </s> |
2,302 | <s>[INST] "The reason the transition was so smooth was due [/INST] to the orthodoxy of the economic team," says Mr Pedro Lacoste of the Alpha economic consultancy. </s> |
2,303 | <s>[INST] This could happen, he believes, because Mr Fernandez, as [/INST] a strict Chicago-trained monetarist, is likely to be more rigid in his policy decisions than Mr Cavallo. </s> |
2,304 | <s>[INST] Social and political demands are mounting fast, given 17 per cent unemployment, and [/INST] the likely inflexibility of Mr Fernandez could quickly become a headache for the Peronist party, which has its roots in the working class. </s> |
2,305 | <s>[INST] Neither does Mr Fernandez have the political clout of [/INST] his predecessor, who often took the blame for unpopular decisions, shielding the president from criticism. </s> |
2,306 | <s>[INST] Mr Fernandez, most analysts agree, will take a tougher stance than Mr [/INST] Cavallo on the growing fiscal deficit, likely to reach $5bn, or nearly 2 per cent of gross domestic product, this year. </s> |
2,307 | <s>[INST] Mr Cavallo tended to put his faith in expected future growth, while [/INST] Mr Fernandez, conscious of the rigorous standards imposed on Argentina by foreign investors, will be inclined to seek immediate deficit reduction. </s> |
2,308 | <s>[INST] "On the one hand, Fernandez has to adopt a [/INST] tighter fiscal policy to show that the deficit has not become structural," says Mr Lacoste. </s> |
2,309 | <s>[INST] "But, on the other, he has [/INST] to make every single effort to speed up recovery. </s> |
2,310 | <s>[INST] It is unclear whether the fractious [/INST] Peronist party has the stomach to push through ever-tougher policies. </s> |
2,311 | <s>[INST] And the unions, which are today mounting a 24-hour general [/INST] strike against economic policy, are not likely to extend an over-friendly hand to the conservative Mr Fernandez. </s> |
2,312 | <s>[INST] "Mr Fernandez may be doomed to entering [/INST] a lose-lose game," warns Mr Shafiq Islam of Credit Suisse . </s> |
2,313 | <s>[INST] "If he goes after greater fiscal austerity in a jobless [/INST] economy struggling to emerge from recession, he will quickly earn the wrath of the old-guard Peronists . </s> |
2,314 | <s>[INST] If he gives in to Menem's manipulation, he [/INST] will lose credibility in the international financial community and earn the ire of the IMF". </s> |
2,315 | <s>[INST] Mr Orlando Ferreres, an economic consultant, believes Mr Fernandez has the skills [/INST] to steer the economy in the right direction, and that President Menem has the political courage to push through necessary legislation. </s> |
2,316 | <s>[INST] Above all, he says, recent [/INST] events have been a test of fire for Argentina. </s> |
2,317 | <s>[INST] ___ Document 282 of 400 Tax changes in store for Argentines New [/INST] economy minister seeks to repair the budget deficit Author: Pilling, David Publication info: Financial Times [London (UK)] 30 July 1996: 03. </s> |
2,318 | <s>[INST] Full text: Mr Roque Fernandez, Arg-entina's new economy minister, yesterday said he would pursue [/INST] a rigorous fiscal policy and introduce some tax changes to repair the growing budgetary deficit that is threatening the country's agreement with the IMF . </s> |
2,319 | <s>[INST] Mr Fernandez, who was due to be sworn in [/INST] yesterday evening, said he was considering raising fuel taxes, especially those on diesel, to increase revenue. </s> |
2,320 | <s>[INST] However, President Carlos Menem , whose political backing for his [/INST] new minister will be closely monitored in the next few days, immediately ruled out any tax rises. </s> |
2,321 | <s>[INST] Markets reacted calmly to Friday's surprise sacking of Mr Domingo [/INST] Cavallo and his replacement by Mr Fernandez, with Brady bonds opening slightly higher in London and New York. </s> |
2,322 | <s>[INST] The Merval index of blue-chip stock [/INST] was 3.65 per cent higher shortly after trading began. </s> |
2,323 | <s>[INST] Ms Joyce Chang, head of emerging market debt research at Merrill Lynch [/INST] , said the transition had been handled "maturely", with Argentine political, business and financial leaders throwing their weight behind the new minister. </s> |
2,324 | <s>[INST] "There's been a complete sea-change in sentiment in terms of linking Cavallo [/INST] with the success of the continuation of the convertibility plan," said Mr Neil Lockwood, emerging markets economist at ANZ Bank in London. </s> |
2,325 | <s>[INST] The viability of the convertibility plan, the government's economic [/INST] cornerstone, had until recently been thought by many foreign investors to depend almost exclusively on Mr Cavallo. </s> |
2,326 | <s>[INST] Mr Fernandez, who at the weekend named his team of largely Chicago-trained [/INST] economists, told foreign investors yesterday that he would cut spending and modify some taxes to rectify Argentina's increasingly wayward fiscal situation. </s> |
2,327 | <s>[INST] He preferred to balance budgets [/INST] than to take on new debt, he said. </s> |
2,328 | <s>[INST] Argentina would, nevertheless, need to seek a waiver from [/INST] the IMF and renegotiate targets when the Fund visited Buenos Aires early next month, he said. </s> |
2,329 | <s>[INST] A sluggish economy and low tax receipts have already [/INST] caused the treasury to overshoot the $2.5bn (£1.6bn) deficit agreed with the IMF for the whole year. </s> |
2,330 | <s>[INST] Local analysts said much would depend [/INST] on Mr Fernandez's ability to work with Congress to pass legislation. </s> |
2,331 | <s>[INST] "He doesn't have the same strong personality as Cavallo, [/INST] but this had become a liability," said Mr Freddy Thomsen, economist at ING Bank in Buenos Aires. </s> |
2,332 | <s>[INST] "Cavallo's relationship with Congress had become so [/INST] bad that they were blocking legislation just because it came from him". </s> |
2,333 | <s>[INST] Legislators promised to work closely with Mr Fernandez and dispatch [/INST] new legislation rapidly, especially that dealing with the privatisation of nuclear and hydro-electric plants, as well as airports. </s> |
2,334 | <s>[INST] However, Mr Fernandez has said that draft legislation to [/INST] tax luncheon vouchers, widely used in Argentina as a tax-free wage supplement, would not be withdrawn. </s> |
2,335 | <s>[INST] Public outcry over this legislation [/INST] had dominated the final days of Mr Cavallo's tenure. </s> |
2,336 | <s>[INST] Mr Lockwood of ANZ said doubts over the political effectiveness of [/INST] Mr Fernandez remained, although he believed there would be an initial "hand of goodwill" extended to the new minister. </s> |
2,337 | <s>[INST] ___ Document 283 of 400 Latin American sector shakes [/INST] off Argentine jitters Author: John, Peter Publication info: Financial Times [London (UK)] 30 July 1996: 22. </s> |
2,338 | <s>[INST] Full text: Calm returned to Latin American debt [/INST] markets yesterday following Friday's upheaval, which was inspired by the sacking of Argentina's economy minister. </s> |
2,339 | <s>[INST] Brady bonds, which had been down by almost [/INST] 2 percentage points throughout the sub-continent on Friday, rallied about half a point on average. </s> |
2,340 | <s>[INST] The fall was triggered by the announcement that President Carlos Menem had sacked Mr Domingo [/INST] Cavallo , the man credited with the Argentine economic "miracle" during which the country's inflation fell from 5,000 per cent in 1989 to nothing a few years later. </s> |
2,341 | <s>[INST] However, emerging markets specialists, who had braced [/INST] themselves for a busy day of Argentine analysis yesterday, found themselves sidelined. </s> |
2,342 | <s>[INST] Mr Stephen Leach, regional strategist with Citibank , said: "I came in this morning expecting [/INST] to talk about Argentina and found that most of the discussion was about Indonesia [where shares and the currency have been hit by a weekend of heavy political rioting]". </s> |
2,343 | <s>[INST] The leading US ratings agencies [/INST] maintained their current speculative grade ratings on Argentina. </s> |
2,344 | <s>[INST] Ms Lacey Gallagher, of Standard & Poor's , said: [/INST] "We don't think a change of minister will in any way impact on the economy". </s> |
2,345 | <s>[INST] Ms Kristin Lindow of Moody's commented: [/INST] "Our B1 rating was positioned to take this event into account". </s> |
2,346 | <s>[INST] Argentine Brady bonds quoted in London recovered with the floating [/INST] rate bonds rising to 74 cents in the dollar, up more than a point from Friday's lows. </s> |
2,347 | <s>[INST] Dealers said the rise principally represented a squeeze [/INST] as some dealers were left short of paper following Friday's wave of selling. </s> |
2,348 | <s>[INST] Elsewhere, the story was generally the same, although Brazil, Argentina's [/INST] principal trading partner, slipped back with its par bonds down {1/4} at 53.750 in late London dealing. </s> |
2,349 | <s>[INST] They argued that the departure of Mr Cavallo, [/INST] and his replacement by Mr Roque Fernandez, had been changes waiting to happen. </s> |
2,350 | <s>[INST] Mr Leach said the level [/INST] of foreign reserves would be an important indicator. </s> |
2,351 | <s>[INST] On the narrowest definition they stood [/INST] at $16.9bn just before the cabinet change was made, he said. </s> |
2,352 | <s>[INST] This is about $1bn higher [/INST] than before the Mexican peso crisis last year. </s> |
2,353 | <s>[INST] However, there are some doubts that Mr Fernandez [/INST] has the muscle to sustain the radical economic reforms started by Mr Cavallo in 1991. </s> |
2,354 | <s>[INST] Mr Ousmene Mandeng, a director of West Merchant Bank said: "It is [/INST] not that Mr Fernandez does not appear as committed, but the key question is whether he has the same political clout". </s> |
2,355 | <s>[INST] There is also a feeling that if Argentina lacks the strength to [/INST] maintain economic stability, other - weaker - emerging market economies will be even less likely to continue on a path of fiscal rectitude. </s> |
2,356 | <s>[INST] On that rationale, even the debt prices [/INST] of some eastern European markets had fallen initially, only to bounce later. </s> |
2,357 | <s>[INST] ANZ Bank is wary [/INST] of following the Argentine market back up. </s> |
2,358 | <s>[INST] It says Argentine volatility could combine [/INST] with a turbulent US Treasury market to trigger another sell-off. </s> |
2,359 | <s>[INST] ___ Document 288 of 400 A clash of personalities: David Pilling on [/INST] the aftermath of Carlos Menem's sacking of Argentina's economy minister Author: Pilling, David Publication info: Financial Times [London (UK)] 29 July 1996: 14. </s> |
2,360 | <s>[INST] Full text: Argentina's political stage was always a cramped setting for two such strong-willed protagonists [/INST] as Mr Domingo Cavallo, the economy minister who slayed hyperinflation and engineered sweeping free-market reforms, and Mr Carlos Menem, the president bent on reversing decades of national decline. </s> |
2,361 | <s>[INST] That Mr Menem suddenly sacked Mr Cavallo on Friday, ending months [/INST] of bitter feuding, may ultimately be less surprising than that the two managed to work together for more than five years. </s> |
2,362 | <s>[INST] The sacking raises the question of whether Argentina's economic reform programme will [/INST] crumble without its chief architect, or whether the edifice constructed by Mr Cavallo is strong enough to survive his own demise. </s> |
2,363 | <s>[INST] President Menem's choice of the ultra-orthodox Mr Roque Fernandez as Mr Cavallo's successor [/INST] could hardly have been a clearer signal to domestic and international markets that economic policy will not alter and that changeover need not be traumatic. </s> |
2,364 | <s>[INST] As central bank president since 1991, Mr Fernandez understands fully the intellectual [/INST] and practical foundations of Convertibility, the currency board system on which Argentina's economic restructuring and destruction of hyperinflation have been based. </s> |
2,365 | <s>[INST] Since 1991, this has pegged the peso at parity with [/INST] the dollar, and restored monetary value by banning the printing of local currency unless backed by foreign inflows. </s> |
2,366 | <s>[INST] Mr Menem was at pains to stress that his inability [/INST] to continue sharing a cabinet with the bombastic Mr Cavallo was a question of personalities, not policies. </s> |
2,367 | <s>[INST] "We will continue with the [/INST] same model and the same philosophy," he said. </s> |
2,368 | <s>[INST] "I can absolutely assure you that there will be [/INST] no type of change or surprises in terms of interest-rate or monetary policy," echoed Mr Fernandez. </s> |
2,369 | <s>[INST] "This could be a mini re-run of the Tequila effect," says Mr [/INST] Geoffrey Dennis, chief Latin American strategist at Bear Sterns , referring to Argentina's financial crisis last year following Mexico's confidence-sapping devaluation. </s> |
2,370 | <s>[INST] Markets have for months been [/INST] preparing for the once unthinkable departure of Mr Cavallo. </s> |
2,371 | <s>[INST] But Mr Dennis believes the Merval index of blue-chip stocks, which [/INST] fell 4 per cent on Friday in the minutes following the minister's sacking, could drop by a further 10 per cent. </s> |
2,372 | <s>[INST] There could also be a net withdrawal of bank deposits by nervous Argentines, [/INST] says Mr Dennis, though not on the scale of the $8bn (£5.1bn), or nearly 20 per cent of bank deposits, that fled after Mexico's devaluation. </s> |
2,373 | <s>[INST] None of this will help Mr Fernandez [/INST] in his most pressing task, that of hauling the economy from recession. </s> |
2,374 | <s>[INST] "Withdrawal of money will obviously have an [upward] [/INST] effect on interest rates, which will tend to delay recovery further," says Mr Dennis. </s> |
2,375 | <s>[INST] Mr Fernandez inherits an economy that shrunk 4.4 per cent [/INST] in 1995 and whose sluggish recovery this year is endangering fiscal targets agreed with the International Monetary Fund . </s> |
2,376 | <s>[INST] Like Mr Cavallo, Mr Fernandez will be faced with the unenviable task of trying [/INST] to squeeze more tax revenue from a stagnant economy and forcing further spending cuts in the face of calls for emergency resources to kick- start growth. </s> |
2,377 | <s>[INST] It was Mr Cavallo's apparent impotence in [/INST] the face of recession that was the final nail in his coffin. </s> |
2,378 | <s>[INST] Once considered indispensable as the engineer of rapid growth, then [/INST] as the guarantor against financial collapse, by this year he was increasingly associated with stubborn recession and record unemployment. </s> |
2,379 | <s>[INST] Mr Cavallo's previous ability to bully parliament [/INST] into passing legislation had also evaporated as congressmen rebelled against his badgering. </s> |
2,380 | <s>[INST] "I was a spent [/INST] force," Mr Cavallo said at the weekend. </s> |
2,381 | <s>[INST] Mr Fernandez, a Chicago-trained economist whose technical credentials are [/INST] considered impeccable, will stand or fall according to his ability to manage these political forces. </s> |
2,382 | <s>[INST] Much of Mr Cavallo's growing unpopularity was [/INST] due to his refusal to adopt expansionary measures to tackle recession and unemployment. </s> |
2,383 | <s>[INST] Mr Fernandez, who will be even less willing than his [/INST] Harvard -educated predecessor to indulge in supply-side measures, will need to do a better job in winning legislative support. </s> |
2,384 | <s>[INST] "The future will not depend on Roque Fernandez and his technical [/INST] abilities - which are more than adequate - but on the support he gets from Congress," said Mr Cavallo. </s> |
2,385 | <s>[INST] The political muscle of Mr Fernandez, however, has hardly been [/INST] beefed up by Mr Menem's admission that the central bank technocrat was only third choice for the post. </s> |
2,386 | <s>[INST] ) Nor will the new minister's task be made easier by the fact [/INST] that nearly all Mr Cavallo's team has resigned with him, obliging Mr Fernandez to piece together a new economic cabinet virtually from scratch. </s> |
2,387 | <s>[INST] Internationally, Mr Fernandez is well known, and this weekend he received the [/INST] endorsement of Mr Michel Camdessus, managing director of the IMF , an institution with which the new minister is a seasoned negotiator. </s> |
2,388 | <s>[INST] In the coming months, he will probably [/INST] need to use such contacts to cut a new deal with the Fund. </s> |
2,389 | <s>[INST] Argentina will also have to tap international financial [/INST] markets for fresh resources just when investors may be at their most nervous. </s> |
2,390 | <s>[INST] There are concerns that Mr Fernandez, who has a [/INST] rather dour public image, may not be as good a salesmen as his forceful and flamboyant predecessor. </s> |
2,391 | <s>[INST] "My doubts are about his [/INST] abilities to sell Argentina to the world's capital markets. </s> |
2,392 | <s>[INST] Just as concern over Mexico last year affected markets [/INST] throughout Latin America, some analysts worry that nervousness over Argentina could have a similarly continent-wide effect. </s> |
2,393 | <s>[INST] "There is a danger that investors will pull back a little [/INST] from the region as a whole and that this will be seen as another hiccup in regional recovery," says Mr Dennis. </s> |
2,394 | <s>[INST] "This could help Argentina because it will demonstrate that the [/INST] economic model we have built over the past five years does not depend on individuals," says Mr Cavallo. </s> |
2,395 | <s>[INST] "My going will demonstrate the [/INST] strength of our political and economic institutions". </s> |
2,396 | <s>[INST] Mr Fernandez, who today begins the task of filling the [/INST] void left by Mr Cavallo's enormous personality, will be hoping more than anyone that Mr Cavallo's optimism proves well-founded. </s> |
2,397 | <s>[INST] ___ Document 291 of 400 Argentina's economy minister [/INST] sacked Author: Pilling, David Publication info: Financial Times [London (UK)] 27 July 1996: 02. </s> |
2,398 | <s>[INST] Full text: Mr Domingo Cavallo, Argentina's economy minister, was sacked [/INST] yesterday by President Carlos Menem, placing into question the country's ability to sustain radical economic reforms begun in 1991. </s> |
2,399 | <s>[INST] The sacking, which follows months of bitter feuding between the country's two [/INST] most influential politicians, ends Mr Cavallo's five-year stint as economy minister, in which he helped tame hyperinflation and implement sweeping free-market reforms. </s> |
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