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2,300 | <s>[INST] Were this to occur, we estimate that the [/INST] basic rate of income tax in England could be reduced by 2p in the pound. </s> |
2,301 | <s>[INST] This estimate is based on Treasury figures for [/INST] 1994-95-the most recent available-and allocates the whole of North Sea oil revenue to Scotland. </s> |
2,302 | <s>[INST] The prospect of tax cuts in England is not sufficient [/INST] reason to let Scotland go; there is more to life than the basic rate of income tax. </s> |
2,303 | <s>[INST] But English taxpayers might ponder on whether it is appropriate for [/INST] them to help finance public spending in Scotland, which is one-sixth higher per head than it is in England. </s> |
2,304 | <s>[INST] FITZPATRICK Chantrey Vellacott London Home truths SIR-As your leader on domestic services suggests ("Jeeves [/INST] strikes it rich", September 26th), some lost souls may well still believe that lawyers are more productive for society at the bar than do-it-yourselfing at home. </s> |
2,305 | <s>[INST] After LTCM, only those firmly fixed in limbo can still believe [/INST] that Nobel-winning economists would not do us all a favour by staying at home reading Galbraith by the fire. </s> |
2,306 | <s>[INST] ___ Document 318 of 400 The Americas: The battle [/INST] royal for Brazil's real Author: Anonymous Publication info: The Economist 348.8085 (Sep 12, 1998): 35-36. </s> |
2,307 | <s>[INST] accountid=28034 Abstract: In the first [/INST] 3 days of this month, $3.8 billion fled Brazil. </s> |
2,308 | <s>[INST] The official reserves are now around $58 [/INST] billion - some 20% less than at the start of August. </s> |
2,309 | <s>[INST] The real was at risk, [/INST] and so was President Fernando Henrique Cardoso's second term. </s> |
2,310 | <s>[INST] Both his popular support and his government program [/INST] are centered on the currency that, as finance minister, he invented 4 years ago. </s> |
2,311 | <s>[INST] If the real were to fall, few experts [/INST] believe that Argentina's peso, long tied to one-to-one to the dollar, could hold the parity. </s> |
2,312 | <s>[INST] Full text: Headnote Brazil's government, facing elections [/INST] on October 4th, has bought more time for its currency-but maybe not much. </s> |
2,313 | <s>[INST] Anxious Argentina holds its breath [/INST] THE campaign has become a nail-biting affair. </s> |
2,314 | <s>[INST] But the figures that officials and [/INST] pundits pore over are not those of opinion polls. </s> |
2,315 | <s>[INST] These show President Fernando Henrique [/INST] Cardoso well on course for a second term. </s> |
2,316 | <s>[INST] The worry has been over [/INST] the amount of capital flooding out of the country. </s> |
2,317 | <s>[INST] In the first three days [/INST] of this month, $3.8 billion fled Brazil. </s> |
2,318 | <s>[INST] On Friday September 4th, amid mounting panic, exacerbated by a [/INST] devaluation in Colombia and a downgrading of Brazilian debt by the credit-raters of Moody's, $2.9 billion followed. </s> |
2,319 | <s>[INST] That lowered the official reserves to [/INST] around $58 billion-some 20% less than at the start of August. </s> |
2,320 | <s>[INST] Both his popular support and his government programme [/INST] are centred on the currency that, as finance minister, he invented four years ago. </s> |
2,321 | <s>[INST] A strong real has helped cut roaring inflation to [/INST] an annual rate of 4%, the lowest since the 1950s, and less in recent months. </s> |
2,322 | <s>[INST] But it has also meant high interest [/INST] rates and large deficits in the current account and the public finances. </s> |
2,323 | <s>[INST] Many economists thought the real [/INST] too high even before other currencies fell. </s> |
2,324 | <s>[INST] Ten months ago, when Asia's troubles put the real under pressure, Mr Cardoso's team [/INST] doubled interest rates to 43%, and announced an $i8 billion package of tax rises and spending cuts supposed to cut the budget deficit by 2.5% of GDP. </s> |
2,325 | <s>[INST] That bought several months of calm, [/INST] but chilled the economy, despite gradual cuts in interest rates. </s> |
2,326 | <s>[INST] This time, the government is as determined [/INST] as ever to avoid a devaluation, but it has less room for manoeuvre. </s> |
2,327 | <s>[INST] It tried to turn the tide of capital [/INST] flows last month by changing rules to allow shortterm foreign investment in government paper. </s> |
2,328 | <s>[INST] So in the evening of [/INST] September 4th it lifted interest rates again. </s> |
2,329 | <s>[INST] The Central Bank suspended for a month its [/INST] minimum lending rate, in practical effect raising the benchmark shortterm rate from 19% to 29.75%. </s> |
2,330 | <s>[INST] In June, to coax sceptical local moneymen into accepting [/INST] a pre-election loosening of monetary policy, the Central Bank began to issue floating-rate real paper. </s> |
2,331 | <s>[INST] This now accounts for over half of [/INST] all real-denominated public debt-to be financed at the new, high interest rates. </s> |
2,332 | <s>[INST] In one month that will cost [/INST] the treasury an extra 3 billion reais ($2.6 billion). </s> |
2,333 | <s>[INST] So on September 8th Pedro Malan, the finance minister, [/INST] announced emergency cuts of 4 billion reais in this year's budget, with more to come in 1999. </s> |
2,334 | <s>[INST] A decree will also oblige the government, by [/INST] law, to post preinterest-costs fiscal surpluses (5 billion reais for 1998, 8.7 billion for 1999). </s> |
2,335 | <s>[INST] The Sao Paulo stockmarket stabilised on [/INST] Tuesday, thennot alone in Latin America-fell 2.8% on Wednesday. </s> |
2,336 | <s>[INST] For a week or two, it had paid [/INST] investors to borrow reais to convert into dollars and buy high-yielding Brazilian dollar bonds. </s> |
2,337 | <s>[INST] The Central Bank is also issuing a new sort of real but dollar-linked debt And [/INST] it has reverted to what Brazilians call norma fone-decree by telephone: in plain Portuguese, browbeating banks not to be too helpful when their customers want to rush into dollars. </s> |
2,338 | <s>[INST] But in today's climate of [/INST] freedom this may not work as it used to. </s> |
2,339 | <s>[INST] The crux of Mr [/INST] Cardoso's problem, however, remains the budget deficit. </s> |
2,340 | <s>[INST] And here the government faces a credibility deficit too: [/INST] it pushed through last November's tax increases, but not most of the promised spending cuts. </s> |
2,341 | <s>[INST] Add higher interest payments, mounting losses from the still unreformed [/INST] pension system, and the public-sector borrowing requirement has climbed to 7% of GDP, from 4.5% a year ago. </s> |
2,342 | <s>[INST] One view is that the government [/INST] is just delaying harsh spending cuts until after the election. </s> |
2,343 | <s>[INST] In fact, toughness in defence of the real might win votes: polls show that [/INST] part of Mr Cardoso's appeal is that he is more trusted than his main opponent, Luiz Inacio Lula da Silva, to ward off the world economic turmoil. </s> |
2,344 | <s>[INST] Mr Cardoso's trouble is that he cannot cut [/INST] deeply even if he wants to: much official spending is still mandated by the constitution. </s> |
2,345 | <s>[INST] He has got Congress to pass the constitutional amendment [/INST] needed to reform the civil service-but not yet the laws to turn principle into practice. </s> |
2,346 | <s>[INST] Mr Malan has talked of bringing [/INST] the deficit down to 3.5% of GDP in three years. </s> |
2,347 | <s>[INST] If, as polls suggest, Mr Cardoso wins a first-round victory on October 4th, he is [/INST] expected to recall Congress swiftly, and try to push through the civil-service laws (which would allow all tiers of government to trim payrolls) and the pensions amendment. </s> |
2,348 | <s>[INST] Officials will be watching the daily [/INST] flow of the reserves anxiously for weeks to come. </s> |
2,349 | <s>[INST] Argentina holds its breath Meanwhile, the people of [/INST] Argentina, not just its ministers or moneymen, have been holding their breath about Brazil. </s> |
2,350 | <s>[INST] If its real were to be sucked down, few [/INST] experts believe that Argentina's peso, long tied one-to-one to the dollar, could hold that parity. </s> |
2,351 | <s>[INST] And the ordinary Argentine is [/INST] addicted to what he knows as "convertibility". </s> |
2,352 | <s>[INST] Argentina installed a currency board in 1991, tying [/INST] its austral (soon, minus four zeros, to become the peso) to the dollar. </s> |
2,353 | <s>[INST] Suddenly, a society once ravaged by [/INST] hyperinflation discovered price stability; inflation today is barely 1% a year. </s> |
2,354 | <s>[INST] "Scrapping convertibility is unthinkable, it'd be [/INST] disastrous," says Eduardo Vitullo, owner of a Buenos Aires gift shop. </s> |
2,355 | <s>[INST] He remembers literally running in his past days as a lawyer [/INST] to spend his pay cheques before inflation, galloping at 1% a day or faster, could catch up with them. </s> |
2,356 | <s>[INST] The loans and mortgages that later helped [/INST] people like him set up in business were not available then, he recalls. </s> |
2,357 | <s>[INST] It was Domingo Cavallo, President Carlos [/INST] Menem's economy minister of 1991-96, who brought in convertibility. </s> |
2,358 | <s>[INST] He can be blamed too-and was-when its [/INST] rigidities drove unemployment up to 18% after the Mexican currency crisis. </s> |
2,359 | <s>[INST] But his slaying of inflation remains a legend [/INST] (regilded this month when Russia's embattled government flew him to Moscow for advice). </s> |
2,360 | <s>[INST] Not even the twoparty opposition Alliance, critical as it is [/INST] of unemployment, still around 13%, dares to suggest printing money (the currencyboard system forbids it) as a cure. </s> |
2,361 | <s>[INST] The Alliance, formed in 1997, is eager for the [/INST] presidency in 1999; it promises that this bit of Mr Menem's legacy will not be touched. </s> |
2,362 | <s>[INST] Yet now the peso-for-dollar parity [/INST] that goes with the system is at risk. </s> |
2,363 | <s>[INST] The peso has stood firm [/INST] as Mexico's, Venezuela's and Colombia's currencies have slumped. </s> |
2,364 | <s>[INST] It could withstand the influx of cheap Asian goods [/INST] -cars, electronics and textiles-that are pouring in, despite the barriers of Mercosur, the South American trade grouping. </s> |
2,365 | <s>[INST] True, there is pain: when Siderar, its largest [/INST] steel producer, had to stop work for a week in July, it blamed foreign dumping. </s> |
2,366 | <s>[INST] Brazil buys one-third of Argentina's [/INST] exports, and could swamp its home market. </s> |
2,367 | <s>[INST] That alone would imply a [/INST] huge rise in unemployment-or devaluation in Argentina to match. </s> |
2,368 | <s>[INST] Out of the question, says Miguel Kiguel, under-secretary at the economy ministry, echoing [/INST] Mr Menem, who on September ist promised a "freeze" on public spending, and pointed to Argentina's hefty $30 billion (his figure) of reserves. </s> |
2,369 | <s>[INST] Officials point too to bank deposits, which, both in pesos [/INST] and dollars, have continued to rise, whereas $8 billion flooded out after the Mexican crisis of 1995. </s> |
2,370 | <s>[INST] If the real went, [/INST] the peso would be next under fire. </s> |
2,371 | <s>[INST] Thanks to the monetary system, liquidity would [/INST] shrink, and output and jobs with it, again as in 1995. </s> |
2,372 | <s>[INST] Because this time Argentina would see not only a [/INST] monetary squeeze, but a currency undercut by that of its main (and Mercosur) trade partner. </s> |
2,373 | <s>[INST] Even that would be beyond reach after a real [/INST] devaluation, and 1999 would bring recession-or slump, if Argentina went on trying to hold its parity. </s> |
2,374 | <s>[INST] As they hold their breath, [/INST] men like Mr Vitullo should cross their fingers too. </s> |
2,375 | <s>[INST] ___ Document 343 of 400 The Americas: Clouds [/INST] over Argentina Author: Anonymous Publication info: The Economist 348.8075 (Jul 4, 1998): 29-30. </s> |
2,376 | <s>[INST] accountid=28034 Abstract: Even as Argentine officials insist that the economy can cruise for several [/INST] years with growth of 5% or more, they are looking anxiously over one shoulder at Asia, and over the other at the uncertainties of Brazil. </s> |
2,377 | <s>[INST] The most tangible sign of [/INST] this mood is last month's tightening of economic policy. </s> |
2,378 | <s>[INST] President Carlos Menem announced a $1 billion cut in this year's [/INST] government spending and backed a fresh effort to get Congress behind a tax package to end distortions that hinder business. </s> |
2,379 | <s>[INST] The underlying aim is to assuage market fears for the current-account [/INST] deficit, which the IMF reckons was heading for 4.8% of GDP this year, a full point over the agreed target. </s> |
2,380 | <s>[INST] Full text: Headnote As the economic [/INST] outlook darkens, can Latin America's fastest-growing economy slow, without crashing? </s> |
2,381 | <s>[INST] Maybe-if its politicians do the right things BY RIGHTS, Argentina should be looking forward [/INST] to a period of prosperity and political tranquillity, the reward of almost a decade of radical free-market reforms and a broad consensus about maintaining them. </s> |
2,382 | <s>[INST] Even as they insist that the economy can cruise for several years with [/INST] growth of 5% or more, officials are looking anxiously over one shoulder at Asia, and over the other at the uncertainties of Brazil. </s> |
2,383 | <s>[INST] And though a presidential election is still 15 months [/INST] away, a premature start to the campaign has killed hopes of much progress on further reforms. </s> |
2,384 | <s>[INST] The most tangible sign of [/INST] this mood is last month's tightening of economic policy. </s> |
2,385 | <s>[INST] First, Roque Fernandez, the economy minister, announced the shelving of [/INST] a $10 billion road programme dear to President Carlos Menem, and postponement of a scheme to raise teachers' wages. </s> |
2,386 | <s>[INST] Then Mr Menem announced a $1 billion cut in this year's [/INST] government spending, and backed a fresh effort to get Congress behind a tax package to end distortions that hinder business. </s> |
2,387 | <s>[INST] This new tack follows months in which the [/INST] government publicly pooh-poohed IMF calls to cool an economy that grew by 8.6% last year. </s> |
2,388 | <s>[INST] Argentina's loan agreement with the IMF (needed to reassure markets rather than for [/INST] the money) calls for a 1998 budget deficit below $3.5 billion; a "reasonable" target, says Mr Fernandez, and he is acting to meet it. </s> |
2,389 | <s>[INST] Chronic evasion meant that record growth was [/INST] not matched by tax collection, $1 billion below target in JanuaryMay. </s> |
2,390 | <s>[INST] Yet in January-March alone spending was [/INST] $775m under budget; Mr Menem's promised cuts are already under way. </s> |
2,391 | <s>[INST] The underlying aim is to assuage market fears for the current-account [/INST] deficit, which the IMF reckons was heading for 4.8% of GDP this year, a full point over the agreed target. </s> |
2,392 | <s>[INST] Central to Argentina's recovery from hyperinflation at the start of [/INST] Mr Menem's presidency in 1989 was a scheme which Argentines call "convertibility" and economists call a currency board. </s> |
2,393 | <s>[INST] The peso is pegged by law to the dollar, [/INST] and freely convertible, while the money supply is tied to the level of foreign-exchange reserves. </s> |
2,394 | <s>[INST] This rigid arrangement has delivered price stability [/INST] and growth (and is reluctantly endorsed by the two-party centreleft opposition Alliance). </s> |
2,395 | <s>[INST] But success has come at a price: in 1995, as [/INST] foreign money, and thus domestic liquidity, drained away after Mexico's crisis, the economy slumped and unemployment leapt to 18%. </s> |
2,396 | <s>[INST] Officials insist that its defences [/INST] against external contagion are far stronger than in 1995. </s> |
2,397 | <s>[INST] A rickety financial system has been stiffened, [/INST] with weaker banks shut down and many larger ones sold to foreigners. </s> |
2,398 | <s>[INST] The government has stretched the [/INST] average maturity of its foreign debt to nine years. </s> |
2,399 | <s>[INST] Though exports recently stopped growing, they have not fallen, despite what Pedro Pou, the central bank's [/INST] governor, calls "a unique combination of negative circumstances"-lower commodity prices, the rise of the dollar and so the peso, bad weather, floods, and stagnation in Brazil, Argentina's biggest export market. </s> |
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