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2,400 | <s>[INST] Mr Cavallo, the darling of foreign investors but often considered [/INST] a political liability on the domestic stage, will be replaced by Mr Roque Fernandez, central bank president. </s> |
2,401 | <s>[INST] Mr Fernandez, 49, a fairly close collaborator [/INST] of Mr Cavallo, is unlikely to change the basic thrust of economic policy. </s> |
2,402 | <s>[INST] The Merval index of blue-chip stock closed down 4.09 per cent, [/INST] and is likely to be turbulent on Monday as local and foreign investors assess the implications of Mr Cavallo's dismissal. </s> |
2,403 | <s>[INST] Mr Menem, in a late-night press conference, said Mr [/INST] Fernandez "is of the same economic philosophy as myself and wholly in accordance with the economic model". </s> |
2,404 | <s>[INST] The change of personnel would [/INST] have no effect on Argentina's economic course, he said. </s> |
2,405 | <s>[INST] Tension between Mr Cavallo and Mr Menem has [/INST] mounted since the economy plunged into recession last year after Mexico's devaluation in December 1994. </s> |
2,406 | <s>[INST] The final straw appears to have been an [/INST] argument this week over a decree that was to reinstate a tax on bank transactions. </s> |
2,407 | <s>[INST] Mr Cavallo was reported by the local press to [/INST] have threatened - not for the first time - to resign should the decree be passed. </s> |
2,408 | <s>[INST] Although Mr Cavallo's determined cost-cutting and stewardship of the economy staved off [/INST] collapse after Mexico's devaluation, many politicians in the governing Peronist party saw the minister as having few answers to Argentina's deep recession. </s> |
2,409 | <s>[INST] His apparent inability to tackle unemployment - at [/INST] 17 per cent, nearly triple the rate when he took office - was particularly criticised. </s> |
2,410 | <s>[INST] The task of Mr Fernandez will be heavily affected by the [/INST] reaction of foreign investors, some of whom still regard Mr Cavallo as essential to keep Argentina's fragile economic reforms on course. </s> |
2,411 | <s>[INST] Under the so-called convertibility plan implemented by Mr Cavallo in 1991, Argentina [/INST] cannot print pesos unless backed by inflows of foreign currency, making the economy heavily dependent on the sentiment of foreign investors. </s> |
2,412 | <s>[INST] Mr Arturo Porzecanski, chief economist at ING Barings, said, however, [/INST] that Mr Cavallo's dismissal, by removing months of uncertainty, could make Argentina a more stable investment environment. </s> |
2,413 | <s>[INST] The nomination of Mr Fernandez, a strictly orthodox economist, [/INST] sent a clear message that the rules of the game would not be altered, he said. </s> |
2,414 | <s>[INST] ___ Document 354 of 400 Sell-off call for bank that lends a hand: Argentina's [/INST] Nacion, banker to the neglected, is told to go commercial, writes David Pilling Author: Pilling, David Publication info: Financial Times [London (UK)] 20 June 1996: 04. </s> |
2,415 | <s>[INST] Full text: The marble corridors of the grandiose [/INST] headquarters of Argentina's state-owned Banco Nacion have not seen such agitation in years. </s> |
2,416 | <s>[INST] Not only did the bank last week cancel a $249m systems upgrade [/INST] contract with International Business Machines after the indictment of 30 Nacion, government and IBM officials on suspicion of defrauding the state. </s> |
2,417 | <s>[INST] It is also fending off something which, to many, [/INST] is even more ghastly than a bribery scandal: a recommendation that the bank be privatised. </s> |
2,418 | <s>[INST] Nacion, Argentina's biggest bank, is one of [/INST] the few state assets left untouched by Latin America's most sweeping privatisation process. </s> |
2,419 | <s>[INST] But a recent report on the financial system by Mr Gerald [/INST] Corrigan, former head of the Federal Reserve Bank of New York, includes a suggestion that Nacion, too, should eventually be sold. </s> |
2,420 | <s>[INST] "The basic case for the privatisation of banks (including Nacion) rests on solidifying [/INST] the impartiality of the credit decision-making process and insuring a competitive, level playing field," says Mr Corrigan, now a senior executive at Goldman Sachs . </s> |
2,421 | <s>[INST] "Whether in Argentina, Italy or anywhere [/INST] else, government-owned banks are not the way to go". </s> |
2,422 | <s>[INST] That recommendation, taken up and then dropped by Mr Domingo Cavallo, economy minister, [/INST] was recently endorsed - much to the annoyance of the bank's executives - by Mr Michel Camdessus, managing director of the International Monetary Fund . </s> |
2,423 | <s>[INST] Sacred or not, Nacion [/INST] is the giant of Argentina's banking herd. </s> |
2,424 | <s>[INST] It has a monopoly on all state financial transactions, and holds [/INST] nearly 16 per cent of total deposits in the $50bn financial system - three times more than its nearest private-sector rival. </s> |
2,425 | <s>[INST] The biggest commercial network of [/INST] 180 branches is dwarfed by Nacion's 527. </s> |
2,426 | <s>[INST] "The private banking system could not cope with [/INST] the impact of privatising Banco Nacion," says Mr Jorge Elorza, the bank's spokesman. </s> |
2,427 | <s>[INST] Four-fifths of the annual $8bn lent by the [/INST] bank goes to small and medium-sized companies, which are generally shunned by other institutions. </s> |
2,428 | <s>[INST] Decades of high inflation have made Argentine [/INST] banks experts in speculation, but relative novices in lending to the productive sector. </s> |
2,429 | <s>[INST] Nacion, like its private sector peers, gathers the bulk of [/INST] its deposits in economically robust Buenos Aires, but unlike them lends mainly in the nation's neglected interior. </s> |
2,430 | <s>[INST] Farmers, for years starved of credit, [/INST] make up 43 per cent of Nacion's loan portfolio. </s> |
2,431 | <s>[INST] It has branches scattered throughout Argentina's enormous [/INST] territory, in places where commercial banks are but a distant rumour. </s> |
2,432 | <s>[INST] "Nacion has two functions, that of [/INST] economic support and that of social support," says Mr Elorza. </s> |
2,433 | <s>[INST] "It wouldn't make commercial sense [/INST] for a private bank to do this". </s> |
2,434 | <s>[INST] The bank's socially driven lending policies, exacerbated by frequent political [/INST] manipulation, the bailing out of free-spending governments and last year's recession, have left its portfolio in sorry shape. </s> |
2,435 | <s>[INST] According to Fundacion Capital, a private consultancy, 25 per cent [/INST] of Nacion's loans are non-performing, compared with only 7 per cent among foreign banks operating in Argentina. </s> |
2,436 | <s>[INST] Given its huge presence, [/INST] such defects influence the entire financial system. </s> |
2,437 | <s>[INST] Mr Corrigan says it is too simplistic to [/INST] hold Nacion responsible for Argentina's high real interest rates, among the continent's most onerous. </s> |
2,438 | <s>[INST] But, he argues, the anomaly between "high spreads and low [/INST] bank profitability" stems from the fact that "a huge fraction of credit is chewed up by credit losses". </s> |
2,439 | <s>[INST] Given the relative sophistication of [/INST] the economy, Argentina's banking system is surprisingly backward. </s> |
2,440 | <s>[INST] Years of economic chaos and [/INST] negative interest rates have stunted its development. </s> |
2,441 | <s>[INST] Only one in five Argentines has [/INST] a bank account, the rest dealing exclusively in cash. </s> |
2,442 | <s>[INST] Total deposits represent a mere 16 per [/INST] cent of gross domestic product, half the level of neighbouring Chile. </s> |
2,443 | <s>[INST] The absence of a clearing [/INST] system means inter-bank transactions are settled in cash. </s> |
2,444 | <s>[INST] That explains the bumper-to-bumper [/INST] armoured vehicles lining Buenos Aires' financial district. </s> |
2,445 | <s>[INST] To tackle such shortcomings, "we need a crash course programme [/INST] to build up financial infrastructure, so the banking system can expand its range, availability and efficiency", says Mr Corrigan. </s> |
2,446 | <s>[INST] "We have to modernise the bank [/INST] and give it an efficient and competitive management," he says. </s> |
2,447 | <s>[INST] The central element of that modernisation, however, the [/INST] ill-fated IBM systems upgrade, is now subject to the vagaries of Argentina's legal system. </s> |
2,448 | <s>[INST] The contract, due to be completed in May, hangs in suspended [/INST] animation while Nacion's new board - appointed in September to replace the disgraced previous administration - prepares to do legal battle. </s> |
2,449 | <s>[INST] It could be 18 months [/INST] before any new system is installed, admits Mr Elorza. </s> |
2,450 | <s>[INST] It could be longer still before [/INST] Argentina's financial system is robust enough to permit Nacion's privatisation. </s> |
2,451 | <s>[INST] Besides, says the head of a foreign bank, "they need Nacion [/INST] to subsidise agriculture and to do many other things that would be difficult if the government did not control it. </s> |
2,452 | <s>[INST] ___ Document 399 of 400 Argentine upturn puts hope back on menu: Optimistic [/INST] Cavallo is seizing on patchy signs of economic recovery, writes David Pilling Author: Pilling, David Publication info: Financial Times [London (UK)] 31 May 1996: 03. </s> |
2,453 | <s>[INST] Full text: Recent television pictures of slum dwellers in [/INST] Santa Fe province skinning and cooking a cat were hard for most Argentines to stomach. </s> |
2,454 | <s>[INST] Although the event may have been a put-up job, paid for by [/INST] an unscrupulous journalist, the image symbolised for many the depth of Argentina's year-long recession and the desperation of many of its 2.4m unemployed. </s> |
2,455 | <s>[INST] Small wonder then that credible signs of a recovery, [/INST] albeit fragile and patchy, have sent waves of relief through the corridors of the economy ministry. </s> |
2,456 | <s>[INST] For months, officials have been painting a bright [/INST] picture that bore little relation to bleak economic statistics or to growing public discontent. </s> |
2,457 | <s>[INST] "We are seeing a genuine, though tenuous, [/INST] recovery after last year's deep recession," says Mr Orlando Ferreres, a private-sector economist. </s> |
2,458 | <s>[INST] He estimates that gross domestic product has edged up [/INST] 0.8 per cent in the second quarter of 1996 against the same period last year. </s> |
2,459 | <s>[INST] That would be the first positive result after [/INST] four negative quarters, and follows last year's withering of GDP by 4.4 per cent. </s> |
2,460 | <s>[INST] Sales of steel have rocketed in the [/INST] past few months, while car sales, devastated by recession, have begun to recover. </s> |
2,461 | <s>[INST] White goods purchases are also up, rising [/INST] 14 per cent in the first quarter against the same period in 1995. </s> |
2,462 | <s>[INST] Tax receipts, which closely track consumption, are steadily [/INST] improving, though not fast enough to meet fiscal targets agreed with the International Monetary Fund. </s> |
2,463 | <s>[INST] This week, a much-watched industrial production index produced by FIEL, an [/INST] economic think-tank, registered its first rise in 12 months, with April's figure 5.3 per cent above the same month in 1995. </s> |
2,464 | <s>[INST] But even that good news [/INST] was tinged: April production was marginally below March. </s> |
2,465 | <s>[INST] There is still an insufficient body of reliable, seasonally adjusted statistics [/INST] on which to base a trustworthy assessment of Argentina's economic cycle, says Mr Pedro Lacoste of the Alpha economic consultancy. </s> |
2,466 | <s>[INST] Energy consumption, help-wanted advertisements and use of public services - all [/INST] cited by officials as encouraging leading indicators - have a poor track record in foreshadowing economic activity, he says. </s> |
2,467 | <s>[INST] Mr Lacoste, nevertheless, believes the elements are in place for a [/INST] recovery from last year's recession, which was triggered by an $8bn capital outflow in the months following Mexico's devaluation. </s> |
2,468 | <s>[INST] Bank deposits have recovered to pre-Mexican levels, interest rates are [/INST] lower, and consumers - who have reduced their debts - are being tempted to spend as prices fall. </s> |
2,469 | <s>[INST] A potential deflationary spiral appears to have been [/INST] avoided and Alpha is predicting GDP growth of 2.3 per cent for 1996. </s> |
2,470 | <s>[INST] Evidence of recovery has been [/INST] seized on by Mr Domingo Cavallo, economy minister. </s> |
2,471 | <s>[INST] Higher sales, which have been improving for several months, [/INST] have since April been reflected in increased production as inventory stocks are used up, he says. </s> |
2,472 | <s>[INST] Mr Cavallo, critical of pessimistic analysts, says: "Last [/INST] year, they said we were entering a recession from which we would never emerge. </s> |
2,473 | <s>[INST] This year, they're saying the recovery will [/INST] be very tenuous and that we will only grow by 2 per cent. </s> |
2,474 | <s>[INST] I predict that at the end of the year, when we [/INST] are growing at 8 or 9 per cent, they will accuse me of being a Keynesian [for artificially stimulating growth]". </s> |
2,475 | <s>[INST] Given Argentina's currency board system, a strait-jacket which prohibits artificial [/INST] expansion of the money supply, one of the few pump-priming tools at Mr Cavallo's disposal is his eternal optimism. </s> |
2,476 | <s>[INST] Of the minister's insistence that rapid expansion is just [/INST] around the corner, Mr Lacoste says: "I would say the same if I were in government". </s> |
2,477 | <s>[INST] Mr Ferreres says Mr Cavallo's prediction [/INST] of 5 per cent growth for this year is "nearly impossible". </s> |
2,478 | <s>[INST] Even Mr Michel Camdessus, managing director of the IMF and an ardent defender [/INST] of the Argentine "success story," was evasive this week when asked about the official growth forecast, on which 1996 fiscal targets are based. </s> |
2,479 | <s>[INST] "I know there is a certain scepticism [/INST] within Argentina as to whether these goals can be met," he said. </s> |
2,480 | <s>[INST] Mr Lacoste warns that strong recovery in [/INST] 1996 and 1997 depends on several factors, some beyond Argentina's control. </s> |
2,481 | <s>[INST] He highlights the continued stability of Brazil (on which much of Argentina's [/INST] export boom is based), the direction of international interest rates, domestic bank lending policy, and the cabinet's ability to stifle latent tensions. </s> |
2,482 | <s>[INST] If all goes well, Argentina could be clipping along [/INST] at 6 per cent next year; if not, growth could be half that, he says. </s> |
2,483 | <s>[INST] Even if recovery is vigorous, few believe this will have much [/INST] immediate impact on the 16.4 per cent jobless rate, which opinion polls indicate is the number one concern of Argentines. </s> |
2,484 | <s>[INST] Unemployment, nearly triple the historic average, is more the [/INST] result of profound economic restructuring than the ravages of last year's recession, most analysts argue. </s> |
2,485 | <s>[INST] That is not necessarily the public perception, though, [/INST] and the next unemployment figure, due out on June 28, is eagerly awaited. </s> |
2,486 | <s>[INST] Should the rate fall, the government [/INST] will cite this as another sign of economic recovery. </s> |
2,487 | <s>[INST] But should it rise, the public will take much convincing that things [/INST] are improving, and thoughts will turn again to desperate images such as that conjured up by the slum dwellers of Santa Fe. </s> |
2,488 | <s>[INST] ___ Document 296 of 400 Fiat picks up speed in South America: New [/INST] plant in Argentina highlights region's importance to the Italian carmaker Author: Simonian, Haig Publication info: Financial Times [London (UK)] 20 Dec 1996: 28. </s> |
2,489 | <s>[INST] Full text: When President Carlos Menem of Argentina opens Fiat's new $600m [/INST] car plant in Cordoba today, he will lay another milestone in the breathtaking revival of South America's motor industry in the 1990s. </s> |
2,490 | <s>[INST] In the past month, General Motors and Volkswagen [/INST] 's upmarket Audi subsidiary have announced big spending plans for new factories in Brazil. </s> |
2,491 | <s>[INST] In Argentina, Chrysler is investing [/INST] heavily in aplant in Cordoba for sports utility vehicles. </s> |
2,492 | <s>[INST] For Fiat, the Argentine factory is part of a campaign [/INST] to lift sales in one of the few regions of the world where demand for cars is growing rapidly. </s> |
2,493 | <s>[INST] "Fiat enjoyed a triumphalist period in Argentina from [/INST] the mid-1950s to the mid-1970s," says Mr Vincenzo Barello, chairman of Fiat Argentina. </s> |
2,494 | <s>[INST] "In those years, it invested heavily and [/INST] was even the biggest employer in the country at one stage". </s> |
2,495 | <s>[INST] Decline in Argentina coincided roughly with the company's push into [/INST] Brazil, where Fiat built a new car plant at Betim, near the industrial city of Belo Horizonte, in 1976. </s> |
2,496 | <s>[INST] By the early 1980s, Fiat had sold its Argentine car business to the [/INST] local Macri family, which already made cars for Peugeot , while its once dominant market share had dropped to just 10 per cent. </s> |
2,497 | <s>[INST] Although also suffering from political and economic instability, it [/INST] was clear that Brazil would be the dominant operation and the focus of Fiat's future spending. </s> |
2,498 | <s>[INST] First was Mercosur , the four-country trade bloc [/INST] that includes Uruguay and Paraguay, which has boosted economic recovery in the region. </s> |
2,499 | <s>[INST] As a result of the free trade area, Fiat's activities [/INST] in Brazil and Argentina are now closely intertwined, explains Mr Giovanni Razelli, head of Fiat's Brazilian-based South American operations. </s> |
Subsets and Splits