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Arg1998

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<s>[INST] The unemployment rate fell by almost [/INST] 3 percentage points and 810,000 new jobs were created. </s>

<s>[INST] This was accomplished in the context of a stand-by loan [/INST] program with the International Monetary Fund that limited the size of the public-sector deficit to 1.4% of GDP. </s>

<s>[INST] My forecast for 1998 is zero inflation, GDP [/INST] growth of at least 6% and a fiscal deficit of 1% of GDP. </s>

<s>[INST] Despite this combination of robust growth and fiscal [/INST] restraint, some analysts continue to climb a wall of worry about the Argentine economy. </s>

<s>[INST] This stems largely from traditional -- and wrongheaded [/INST] -- concerns about a current-account deficit, which in Argentina today is 4% of GDP. </s>

<s>[INST] In order to understand why this deficit does not threaten [/INST] stability -- and why it is central to growth -- one must understand how it has come about. </s>

<s>[INST] The fuel behind the unprecedented [/INST] economic achievements of 1997 was domestic and foreign investment. </s>

<s>[INST] Imports of capital goods and other [/INST] inputs grew by 37% and represented 44% of all imports. </s>

<s>[INST] This investment is a result of a shift toward [/INST] a market economy, begun in 1989, which has radically changed the composition of foreign investment. </s>

<s>[INST] The first investment wave, in [/INST] 1990-94, came from the privatization of many Argentine companies. </s>

<s>[INST] But it was unfortunately disrupted by the [/INST] 1994 Mexican "Tequila" crisis which prompted investors to move to the sidelines. </s>

<s>[INST] By mid-1996 the Tequila recession was over but the Argentine "country- risk" premium [/INST] was costing the country 800 basis points -- as measured by the spread between yields on Argentine dollar-denominated "Brady" bonds and U.S. Treasuries. </s>

<s>[INST] Since then the minister of the economy, Domingo Cavallo [/INST] has stepped down, the Peronist party has lost control of Congress and the Asian crisis has hit. </s>

<s>[INST] In spite of these shocks, the risk premium has fallen [/INST] by 60% (to a level of 310 basis points) and international reserves have grown by $4.2 billion (22%). </s>

<s>[INST] Along with our increasing prosperity, [/INST] we now have a large current-account deficit. </s>

<s>[INST] The government can be blamed only [/INST] for about one percentage point of this 4% of GDP deficit. </s>

<s>[INST] The continuing current-account deficit is the result [/INST] of the confidence of foreign investors in Argentina's new economic system. </s>

<s>[INST] IRSA, a property company that is partially bankrolled by George Soros, [/INST] is buying urban property (office space and malls), Luciano Benetton is buying ranchland and Hong Kong & Shanghai Banking Corp. </s>

<s>[INST] of the U.K. and Banco [/INST] Santander of Spain are buying our larger private banks. </s>

<s>[INST] If we want to balance our current account, the only alternative short [/INST] of turning the small fiscal deficit into a large surplus would be to discourage genuine foreign investors from coming to our country. </s>

<s>[INST] In fact, if the only goal is to reduce the [/INST] current-account deficit, a smaller fiscal deficit might backfire since it would reduce country risk, encouraging more private inflows. </s>

<s>[INST] Asset prices are well below 1991 and [/INST] 1992 levels and consumption grew less in percentage terms than GDP last year. </s>

<s>[INST] The government's foreign debt stands at only 23% of GDP and the financial requirements for [/INST] 1998 are $14.4 billion, an amount that in no way threatens available reserves, which exceed $37 billion (including liquidity requirements and an IMF stand-by facility of $7 billion). </s>

<s>[INST] In January, the IMF reduced Argentina's growth-rate projection for 1998 to 4% and [/INST] in March an IMF consulting mission report indicated that the economy should be cooled down since it is growing at more than 8%. </s>

<s>[INST] This sharp change in views indicates the need [/INST] for a more complete understanding of what causes Argentina's current growth and the current-account deficit. </s>

<s>[INST] The key lies in the causal [/INST] relationship between the capital inflows and the structural reforms implemented. </s>

<s>[INST] Productive investment is the engine of our growth [/INST] and it responds to fundamentals, not to ad hoc rules like limiting current-account deficits. </s>

<s>[INST] The best way to instantly solve our external deficit would be to create panic [/INST] so that capital flees, output falls and imports are cut, as happened in the hyperinflation years of 1989-90, when we ran the two largest trade-account surpluses ever. </s>

<s>[INST] Economic analysis indicates that a [/INST] change towards sound economic policy produces confidence. </s>

<s>[INST] Confidence brings in foreign investment, [/INST] which increases absorption, and thus the current-account deficit rises. </s>

<s>[INST] The experience of the 1990's confirms this hypothesis: during 1991-97 GDP [/INST] grew at a compound rate of 6.1% while the current account showed an average deficit of 2% of GDP. </s>

<s>[INST] Bad economic policy, on the other hand, [/INST] generates capital outflow that reduces absorption and thus "improves" the current account. </s>

<s>[INST] The experience of the 1980s illustrates the results of such economic [/INST] policies: during 1981-90 the current account showed an average surplus of 1.1% while GDP fell at an annual rate of 1.4%. </s>

<s>[INST] Argentina is not likely to generate current-account surpluses for some [/INST] time as the opportunities for foreign investment are being widened by the political consolidation of economic reforms. </s>

<s>[INST] No significant political party calls for changes in the [/INST] new basic rules of the game: a currency board, fiscal balance, and an open market economy. </s>

<s>[INST] The country has signed a three year extended fund facility with [/INST] the IMF that incorporates several structural targets, among them reforms in the labor regime and tax and revenue sharing systems. </s>

<s>[INST] It aims at solving the taxation bias against employment while at [/INST] the same time closing several loopholes that had significantly eroded the tax base -- particularly regarding the income and value-added taxes. </s>

<s>[INST] If this tax law is passed, Argentina will have [/INST] advanced another step towards becoming a viable market economy and this will further boost foreign investment. </s>

<s>[INST] After decades of stagnation and [/INST] capital flight, Argentina is a capital thirsty country. </s>

<s>[INST] The political and economic transformations that we are experiencing in the 1990s provide the ideal [/INST] conditions for this capital -- both physical and human -- to be supplied partly from abroad, similar to what has happened with the U.S. during the last 220 years. </s>

<s>[INST] --- Mr. Rodriguez is secretary of economic [/INST] policy of Argentina and president of CEMA University in Buenos Aires. </s>

<s>[INST] ___ Document 77 of 500 World Watch Author: Compiled by [/INST] Paul J. Deveney Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 01 May 1998: A11. </s>

<s>[INST] accountid=28034 Abstract: Olympic Airways [/INST] got a tongue lashing from its owner. </s>

<s>[INST] The Greek government, in a strong rebuke, compared [/INST] the nation's flag carrier to a "black hole" that gobbles up taxpayers' money. </s>

<s>[INST] The nation's foreign minister went so far [/INST] as to call for the government to shut down the debt-ridden airline. </s>

<s>[INST] The outburst came after a wave of strikes in recent months -- triggered [/INST] by plans to cut jobs to make the company more competitive -- left thousands of travelers stranded at airports in Greece and elsewhere. </s>

<s>[INST] But more important, it may be a sign of Greece's increasing frustration as it finds itself [/INST] far behind other nations in the European Union that have been selling off state assets and reforming the way they do business ahead of European economic and monetary union. </s>

<s>[INST] A slight but better-than-expected gain in first-half earnings [/INST] at British food and beverage concern Allied Domecq wasn't good enough for investors. </s>

<s>[INST] The group's failure to unveil a comprehensive strategy [/INST] when it released the latest results yesterday pushed its shares down 1.4% in London trading. </s>

<s>[INST] The prospects of Allied Domecq, which reported a 1% increase in earnings to GBP 320 million ($534.3 [/INST] million) for the six months through February, have been called into question following the merger of its two main rivals, Guinness and Grand Metropolitan, to form the food and drinks giant Diageo. </s>

<s>[INST] There is concern that Diageo's strength will cut [/INST] sharply into Allied's earnings unless it makes significant changes soon to its corporate structure. </s>

<s>[INST] British transport group Stagecoach Holdings is in [/INST] an acquisitive mood once again -- this time both at home and abroad. </s>

<s>[INST] It said it secured deals valued at GBP 148 million to buy [/INST] Glasgow's Prestwick International Airport and a stake of as much as 28% in a Hong Kong group that builds roads in China. </s>

<s>[INST] The purchase of the Scottish airport [/INST] is noteworthy because it marks Stagecoach's entry into the aviation market. </s>

<s>[INST] The company says Prestwick will become part of a new subsidiary that [/INST] will seek more deals in the United Kingdom and overseas; it is already on a short list to purchase Skavsta airport in Stockholm. </s>

<s>[INST] Full text: EUROPE Athens Criticizes Olympic Airways [/INST] As Reforms Lag Olympic Airways got a tongue lashing from its owner. </s>

<s>[INST] The Greek government, in a strong rebuke, compared [/INST] the nation's flag carrier to a "black hole" that gobbles up taxpayers' money. </s>

<s>[INST] The nation's foreign minister went so far [/INST] as to call for the government to shut down the debt-ridden airline. </s>

<s>[INST] The outburst came after a wave of strikes in recent months -- triggered [/INST] by plans to cut jobs to make the company more competitive -- left thousands of travelers stranded at airports in Greece and elsewhere. </s>

<s>[INST] But more important, it may be a sign of Greece's increasing frustration as it finds itself [/INST] far behind other nations in the European Union that have been selling off state assets and reforming the way they do business ahead of European economic and monetary union. </s>

<s>[INST] Foreign Minister Theodoros Pangalos spread the [/INST] blame for the airline's troubles across a wide spectrum. </s>

<s>[INST] He cited the current and previous governments, [/INST] the airline's management and intransigent employees for creating Olympic's fiscal woes. </s>

<s>[INST] Even sadder, the foreign minister conceded in an interview with [/INST] Athens daily Eleftherotypia that the airline isn't unique, saying such problems are shared by other state-owned Greek companies. </s>

<s>[INST] U.K. Food Giant Disappoints Investors A slight but better-than-expected [/INST] gain in first-half earnings at British food and beverage concern Allied Domecq wasn't good enough for investors. </s>

<s>[INST] The group's failure to unveil a comprehensive strategy [/INST] when it released the latest results yesterday pushed its shares down 1.4% in London trading. </s>

<s>[INST] The prospects of Allied Domecq, which reported a 1% increase in earnings to GBP 320 million ($534.3 [/INST] million) for the six months through February, have been called into question following the merger of its two main rivals, Guinness and Grand Metropolitan, to form the food and drinks giant Diageo. </s>

<s>[INST] There is concern that Diageo's strength will cut [/INST] sharply into Allied's earnings unless it makes significant changes soon to its corporate structure. </s>

<s>[INST] Japan Brewer to Lift European Role In a part of the world where nations such as [/INST] Belgium and Germany take pride in the vast selection and quality of their beers, it would seem to be a tough market for an Asian brewer to make much headway. </s>

<s>[INST] But one of Japan's biggest beer makers, Asahi [/INST] Breweries, says it's willing to spend more money to go against the best of them. </s>

<s>[INST] It will establish a European subsidiary to strengthen [/INST] its business in the region, where it already exports its popular Asahi Super Dry brand. </s>

<s>[INST] The establishment of the new unit in London follows Japanese rival [/INST] Kirin Brewery's announcement this week that it will acquire a controlling 45% interest in New Zealand brewing concern Lion Nathan. </s>

<s>[INST] Stagecoach to Buy Glasgow Airport British transport group Stagecoach [/INST] Holdings is in an acquisitive mood once again -- this time both at home and abroad. </s>

<s>[INST] It said it secured deals valued at GBP 148 million to buy [/INST] Glasgow's Prestwick International Airport and a stake of as much as 28% in a Hong Kong group that builds roads in China. </s>

<s>[INST] The purchase of the Scottish airport [/INST] is noteworthy because it marks Stagecoach's entry into the aviation market. </s>

<s>[INST] The company says Prestwick will become part of a new subsidiary that [/INST] will seek more deals in the United Kingdom and overseas; it is already on a short list to purchase Skavsta airport in Stockholm. </s>

<s>[INST] BRIEFLY: -- France got some encouragement on the jobless [/INST] front as the nation's unemployment rate slipped to 12% in March from 12.1% the previous month. </s>

<s>[INST] -- The European Commission cleared the creation of [/INST] a joint venture between Belgian retail bank Banque Bruxelles Lambert and American Express. </s>

<s>[INST] The venture will group the two companies' [/INST] business travel activities in Belgium, and their business and leisure interests in Luxembourg. </s>

<s>[INST] -- British Aerospace says it will acquire a 35% [/INST] interest in Swedish aerospace group Saab from parent Investor in a deal valued at GBP 269 million. </s>

<s>[INST] -- German pharmaceutical company Bayer saw its first-quarter [/INST] earnings jump 21% to 858 million marks ($477.8 million) on a 8.3% rise in sales. </s>

<s>[INST] -- Royal Bank of Scotland Group and U.K. insurer General Accident were fined GBP [/INST] 290,000 and GBP 120,000, respectively, by a British watchdog for their part as trustees to the mutual funds of a former Deutsche Morgan Grenfell fund manager. </s>

<s>[INST] --- ASIA/PACIFIC Singapore Sends Signal on Forecast Singapore [/INST] pooh-poohed talk by analysts that it could register negative growth in the current year. </s>

<s>[INST] But the nation's deputy prime minister, Lee Hsien Loong, conceded that economic [/INST] growth could fall below the 2.5%-to-4.5% forecast issued by the government earlier this year -- but only if the regional crisis worsens. </s>

<s>[INST] Mr. Lee, who is also chairman of the Monetary Authority of Singapore, [/INST] said the city-state hasn't escaped unscathed from the problems of its troubled neighbors, adding that retail sales and tourism have been hard hit. </s>

<s>[INST] Analysts agree that lower spending by Singaporeans in the face [/INST] of the uncertain outlook, along with fierce global competition and slowed investments point to slower growth this year. </s>

<s>[INST] Bangkok Searches Soul Amid Crisis Thailand is likely to name names next week [/INST] over who is to blame for its economic travails, and the nation's central bank governor could show up at the top of the list. </s>

<s>[INST] More than half the employees at the Bank of Thailand came [/INST] to work dressed in black yesterday to protest what they believe is Bangkok's plan to oust their boss, Chaiyawat Wibulswasdi. </s>

<s>[INST] While the names of several qualified candidates [/INST] for the post have surfaced, most say they don't want the job. </s>

<s>[INST] One exception: Chatumongol Sonakul, former permanent secretary of the Ministry of Finance, who has been [/INST] highly critical of the central bank's economic policy -- which included paying out billions of dollars in foreign reserves in a futile attempt to prop up the Thai currency. </s>

<s>[INST] But if appointed he may face vigorous resistance [/INST] from the institution's rank and file, who are fiercely loyal to Mr. Chaiyawat. </s>

<s>[INST] Japan Housing Industry Posts a Slump Japanese construction orders and housing starts fell steeply [/INST] for the year ended March 31, and analysts say a massive fiscal stimulus package during the current year will do little to produce a recovery. </s>

<s>[INST] The latest figures show that construction orders received by 50 [/INST] leading contractors dropped 8.9% to 18.525 trillion yen ($139.94 billion), while housing starts tumbled 17.7% to 1.34 million units. </s>

<s>[INST] The 16.65 trillion yen ($125 billion) economic stimulus package unveiled by the government [/INST] last week includes fresh public works spending, but traders say it will probably give no more than a modest lift to the sluggish construction industry. </s>

<s>[INST] BRIEFLY: -- Thailand's central bank says local financial institutions can [/INST] now charge higher interest rates to borrowers for funds to support exports, the agricultural sector and some other industries. </s>

<s>[INST] -- Official Chinese reports hint at resistance from localities at implementing [/INST] the ban on direct sales that has generated rioting and thrown thousands out of work amid rising national unemployment. </s>

<s>[INST] -- Major Japanese telecommunications provider KDD and Teleway [/INST] Japan failed to reach agreement on their planned merger by yesterday's target date. </s>

<s>[INST] -- A group of 140 creditors has agreed in principle [/INST] to allow Thai Petrochemical Industry to delay repayment of foreign-currency debts totaling $3 billion, the company said. </s>

<s>[INST] --- THE AMERICAS Canada Forestry Firm Posts a Loss International Forest Products of Canada [/INST] posted a loss of 14.2 million Canadian dollars (US$9.9 million) for the first quarter, linking its woes to the slump in the Japanese building industry. </s>

<s>[INST] The company says 36% of [/INST] its sales are generated in the Japanese market. </s>

<s>[INST] Meanwhile, the group said that despite consolidation in the [/INST] global forest-products industry, it isn't pursuing merger or acquisition opportunities -- at least not now. </s>