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2,700 | <s>[INST] It is virtually impossible to imagine generating political consensus [/INST] for an IMF that was big enough to be a credible lender of last resort. </s> |
2,701 | <s>[INST] Even those, such as Mr Sachs, who believe that [/INST] East Asia's crisis was mainly a panic, do not conclude that a bigger Fund is the answer. </s> |
2,702 | <s>[INST] He believes the only way forward is [/INST] through some form of systematised debt work-outs, where creditors take a hit. </s> |
2,703 | <s>[INST] Despite an ever more global [/INST] capital market, legal authorities are still nationally based. </s> |
2,704 | <s>[INST] Practicalities aside, a framework that was too clear-cut (and too [/INST] kind to debtors) might invite poor-country recklessness or, more likely, might ensure that foreign capital flows simply dried up. </s> |
2,705 | <s>[INST] But no single institution or [/INST] innovation will magically make capital markets safe and sound. </s> |
2,706 | <s>[INST] As they prepare for their meetings, the post-Asia activists would do well [/INST] to take a look at "Manias, Panics and Crashes", the definitive analysis of financial crises by Charles Kindleberger, America's foremost economic historian. </s> |
2,707 | <s>[INST] The book's first sentence is a salutary reminder: [/INST] "There is hardly a more conventional subject in economic literature than financial crises". </s> |
2,708 | <s>[INST] Footnote * "The East [/INST] Asian Financial Crisis: Diagnosis, Remedies and Prospects". </s> |
2,709 | <s>[INST] ___ Document 17 of 600 Argentines' basic instincts say: stick with the dollar: [/INST] Currency link may be 'like being married to Sharon Stone' but it makes it harder to deal with the trade deficit, reports Ken Warn. </s> |
2,710 | <s>[INST] Officials say long memories of financial instability justify [/INST] the ties: Author: Warn, Ken Publication info: Financial Times [London (UK)] 05 May 1998: 07. </s> |
2,711 | <s>[INST] accountid=28034 Abstract: Foreign investors often ask Argentine officials if they [/INST] have an exit route from convertibility, the currency board system that links the peso at par to the dollar. </s> |
2,712 | <s>[INST] "When you are married to Sharon Stone," [/INST] said one senior official recently, "you do not require an exit route". </s> |
2,713 | <s>[INST] Since the unlikely alliance between the peso and the dollar [/INST] was sealed, GDP growth has averaged 7 per cent a year, hitting 8.4 per cent in 1997. </s> |
2,714 | <s>[INST] There is a historical precedent for this harmonious union - Argentina [/INST] operated a currency board system in the early years of this century, when it registered its best-ever period of growth. </s> |
2,715 | <s>[INST] But now the IMF is warning Argentina over its [/INST] soaring trade deficit, while the strong dollar - and peso - has set local exporters squealing. </s> |
2,716 | <s>[INST] Full text: Foreign investors often ask Argentine officials if they [/INST] have an exit route from convertibility, the currency board system that links the peso at par to the dollar. </s> |
2,717 | <s>[INST] "When you are married to Sharon Stone," [/INST] said one senior official recently, "you do not require an exit route". </s> |
2,718 | <s>[INST] Convertibility was introduced in 1991, despite International Monetary Fund doubts, [/INST] in a last-ditch attempt to halt the repeated bouts of hyperinflation that had laid the economy waste. </s> |
2,719 | <s>[INST] Since the unlikely alliance between the peso and the dollar [/INST] was sealed, GDP growth has averaged 7 per cent a year, hitting 8.4 per cent in 1997. </s> |
2,720 | <s>[INST] There is a historical precedent for this harmonious union - Argentina [/INST] operated a currency board system in the early years of this century, when it registered its best-ever period of growth. </s> |
2,721 | <s>[INST] But now the IMF is warning Argentina over its [/INST] soaring trade deficit, while the strong dollar - and peso - has set local exporters squealing. </s> |
2,722 | <s>[INST] Even posing the question demonstrates [/INST] ignorance of Argentina's economic and political realities, officials say. </s> |
2,723 | <s>[INST] Argentina is not a healthy, developed economy [/INST] which could readily engineer a modest devaluation to improve its competitiveness, they argue. </s> |
2,724 | <s>[INST] It is a nation [/INST] seared by its experience of financial instability. </s> |
2,725 | <s>[INST] Convertibility pulled the country back from [/INST] the abyss, and there are no votes in suggesting an alternative. </s> |
2,726 | <s>[INST] "No politician dares to propose a change that [/INST] risks bringing inflation back to the country," said Roberto Alemann, economist and former economy minister. </s> |
2,727 | <s>[INST] Under the currency board system, [/INST] only money backed by foreign reserves can be issued. </s> |
2,728 | <s>[INST] The central bank in effect hands [/INST] over the setting of interest rates to the markets. </s> |
2,729 | <s>[INST] Most Argentines, with memories of racing [/INST] round the supermarket before prices rose, appear happy with this arrangement. </s> |
2,730 | <s>[INST] A downside of convertibility is that [/INST] it gives the authorities no policy instruments to fine-tune the economy. </s> |
2,731 | <s>[INST] During the 1995 "tequila crisis" interest rates soared [/INST] as deposits fled the banking system, plunging the economy into a brief but sharp recession. </s> |
2,732 | <s>[INST] After the Asian financial crisis broke with full force last October, Argentina's country risk premium (the higher [/INST] interest rates it must pay compared with rates on US Treasury bonds) rose from 361 to more than 800 basis points, before falling back towards pre-crisis levels as fears of contagion eased. </s> |
2,733 | <s>[INST] The external account, however, is under increasing stress, with [/INST] the 12-month accumulated trade deficit already outstripping the $5bn limit agreed earlier this year with the IMF. </s> |
2,734 | <s>[INST] An IMF mission last month urged measures to slow [/INST] domestic demand and stressed the need to press on with structural reform to enhance competitiveness. </s> |
2,735 | <s>[INST] A change of monetary regime, however, [/INST] was most definitely not on the IMF prescription list. </s> |
2,736 | <s>[INST] Even supposing such a change could be engineered, [/INST] it is doubtful decoupling from the dollar would do much to help exporters. </s> |
2,737 | <s>[INST] Three factors are driving the worsening trade situation, said Alberto Ades, emerging [/INST] markets currency economist at Goldman Sachs: very strong investment growth, pulling in capital goods imports; lower world commodity prices; and the strong dollar. </s> |
2,738 | <s>[INST] "Of the three, I [/INST] would put least emphasis on the dollar". </s> |
2,739 | <s>[INST] Of its main exports, wheat prices fell 45 per cent between [/INST] May 1996 and December 1997 and soyabean prices 20 per cent between May and December 1997, according to Deutsche Morgan Grenfell. </s> |
2,740 | <s>[INST] Devaluation would not change this international context [/INST] - but it would send foreign investors fleeing for the exit. </s> |
2,741 | <s>[INST] The trade deficit will ultimately prove self-correcting [/INST] as foreign investment pays off in terms of increased exports, officials say. </s> |
2,742 | <s>[INST] The worry would be if trade continued to [/INST] deteriorate in the short term and Argentina was hit by a new external shock. </s> |
2,743 | <s>[INST] But even then, officials [/INST] argue, convertibility's defence mechanisms would kick in. </s> |
2,744 | <s>[INST] Officials also maintain that the banking system is much [/INST] stronger than it was in 1995, partly because of a wave of investment from deep-pocketed foreign banks. </s> |
2,745 | <s>[INST] High bank liquidity requirements and a $7bn financial safety net negotiated [/INST] with international banks mean Argentina could cover the outflow of 30 per cent of bank deposits, which now total about $73bn. </s> |
2,746 | <s>[INST] Argentina could conceivably find a solution in the creation [/INST] of a single currency for Mercosur, the customs union which also groups Brazil, Paraguay and Uruguay. </s> |
2,747 | <s>[INST] Mr Menem has been the single [/INST] currency's main backer, initially to the bemusement of other Mercosur members. </s> |
2,748 | <s>[INST] However, Argentine officials say they have [/INST] been pleasantly surprised by increased Brazilian receptiveness to the idea. </s> |
2,749 | <s>[INST] Progress could be built on a Maastricht-style [/INST] process of economic convergence which was totally transparent for the markets, advocates argue. </s> |
2,750 | <s>[INST] However, work on the project is [/INST] only just beginning, and sustained Brazilian enthusiasm is far from certain. </s> |
2,751 | <s>[INST] In the meantime, Argentina's peso [/INST] looks more than ever wedded to the dollar. </s> |
2,752 | <s>[INST] Talk of divorce is anathema, and [/INST] only the severest international financial turmoil could put the two asunder. </s> |
2,753 | <s>[INST] ___ Document 65 of 600 Argentina given benefit of doubt [/INST] EMERGING MARKET FOCUS: Author: Inman, Colin; Warn, Ken Publication info: Financial Times [London (UK)] 17 Apr 1998: 40. </s> |
2,754 | <s>[INST] accountid=28034 Abstract: An IMF mission, which left Buenos Aires last week, [/INST] flagged Argentina's rising trade deficit as an area of serious concern and offered detailed prescriptions to cool the domestic economy. </s> |
2,755 | <s>[INST] But economy minister Roque Fernandez politely declined the mission's advice and reiterated [/INST] the government's litany that the trade deficit was healthy, with record foreign investment fuelling capital goods imports which would ultimately benefit the economy. </s> |
2,756 | <s>[INST] For the time being, investors appear [/INST] willing to give them the benefit of the doubt. </s> |
2,757 | <s>[INST] Although last week saw nervous selling [/INST] in the stock market, it never developed into a rout. </s> |
2,758 | <s>[INST] The tone has been firmer recently, helped by some crumbs [/INST] of comfort from Michel Camdessus, IMF managing director, who made clear that Argentina's relationship with the IMF remained intact. </s> |
2,759 | <s>[INST] Full text: An IMF mission, which left Buenos Aires last week, [/INST] flagged Argentina's rising trade deficit as an area of serious concern and offered detailed prescriptions to cool the domestic economy. </s> |
2,760 | <s>[INST] But economy minister Roque Fernandez politely declined the mission's advice and reiterated [/INST] the government's litany that the trade deficit was healthy, with record foreign investment fuelling capital goods imports which would ultimately benefit the economy. </s> |
2,761 | <s>[INST] In the absence of any big corporate [/INST] moves, investors have been left pondering these two very different diagnoses. </s> |
2,762 | <s>[INST] The local media have picked up the debate with glee and every commentator in [/INST] town has been wheeled out to opine on whether Argentina is motoring along nicely after last year's 8.4 per cent growth, or careering towards the abyss. </s> |
2,763 | <s>[INST] "All the information is out [/INST] there, so it's up to investors to decide". </s> |
2,764 | <s>[INST] For the time being, investors appear [/INST] willing to give them the benefit of the doubt. </s> |
2,765 | <s>[INST] Although last week saw nervous selling [/INST] in the stock market, it never developed into a rout. </s> |
2,766 | <s>[INST] The tone has been firmer recently, helped by some crumbs [/INST] of comfort from Michel Camdessus, IMF managing director, who made clear that Argentina's relationship with the IMF remained intact. </s> |
2,767 | <s>[INST] "The consensus among investors is that the IMF [/INST] demand to cool the economy is not justified," said Roberto Guevara of Caspian Securities. </s> |
2,768 | <s>[INST] "But they like the fund keeping [/INST] up pressure for structural reform, especially on the labour front". </s> |
2,769 | <s>[INST] The Merval leading share index edged [/INST] back early yesterday after advances in the previous four sessions. </s> |
2,770 | <s>[INST] Little changed from last year's closing levels, the [/INST] Merval has missed out on double-digit percentage rises registered in other markets, including Sao Paulo. </s> |
2,771 | <s>[INST] With foreign investors either absent or net [/INST] sellers, the market has struggled to recover its pre-Asian crisis dynamism. </s> |
2,772 | <s>[INST] However, Argentina's private pension funds, AFJPs, continue steadily [/INST] to buy up their favourite stocks, at least establishing a floor under the market. </s> |
2,773 | <s>[INST] In March, the AFJPs invested $140m [/INST] in stocks, Caspian estimates, sharply up on the recent monthly average. </s> |
2,774 | <s>[INST] "I think we will see some better trade figures [/INST] later this year and the deficit fears will start to ease," said Christopher Ecclestone of brokers, Interacciones. </s> |
2,775 | <s>[INST] There is a potential $6.1bn of new equity [/INST] issues in the pipeline this year, Caspian estimates, against a total market capitalisation of $57bn. </s> |
2,776 | <s>[INST] The offerings comprise the sale of remaining government [/INST] and employee stakes in privatised companies, new privatisations, plus IPOs and rights offerings. </s> |
2,777 | <s>[INST] But until the market sparks back [/INST] into life, the big ones will have to wait. </s> |
2,778 | <s>[INST] ___ Document 79 of 600 Uruguay determined to set own pace as 'world champion of gradualism': Economy [/INST] is picking up just as Montevideo prepares to position itself as financial hub of Mercosur, reports Ken Warn: Author: Warn, Ken Publication info: Financial Times [London (UK)] 09 Apr 1998: 03. </s> |
2,779 | <s>[INST] accountid=28034 Abstract: Yet behind this genteel [/INST] decay, Uruguay's economy is showing increasing signs of vitality. </s> |
2,780 | <s>[INST] Montevideo is seeking to position itself as a [/INST] financial and administrative hub for Mercosur, the customs union which includes Brazil, Argentina and Paraguay. </s> |
2,781 | <s>[INST] Last year, the economy grew by an [/INST] estimated 6 per cent following 4.9 per cent growth in 1996. </s> |
2,782 | <s>[INST] This year the picture is clouded by uncertainty over the economic [/INST] prospects for Brazil and Argentina, the country's biggest trading partners, which take almost 50 per cent of its exports. </s> |
2,783 | <s>[INST] Inflation, which began the 1990s at over 100 [/INST] per cent, was down to 15 per cent by the end of last year. </s> |
2,784 | <s>[INST] This year, the government hopes to [/INST] secure single digit inflation for the first time in decades. </s> |
2,785 | <s>[INST] Despite persistent high inflation, Uruguay never experienced [/INST] the hyper- inflation and economic chaos that plagued neighbouring Argentina and Brazil. </s> |
2,786 | <s>[INST] As a result, governments have not had the [/INST] political cover to introduce shock measures to sweep away vestiges of the corporatist, welfare state. </s> |
2,787 | <s>[INST] "We are the world champions [/INST] of gradualism," said Elias Bluth, presidential chief of staff. </s> |
2,788 | <s>[INST] Full text: In the historic quarter of Montevideo, the Uru [/INST] guayan capital, old men while away their days over coffee, as ornate buildings around them slowly deteriorate. </s> |
2,789 | <s>[INST] There is a flurry of excitement as a [/INST] street is roped off to protect passers-by from chunks of masonry falling from a hotel. </s> |
2,790 | <s>[INST] Yet behind this genteel decay, [/INST] Uruguay's economy is showing increasing signs of vitality. </s> |
2,791 | <s>[INST] Montevideo is seeking to position itself as a [/INST] financial and administrative hub for Mercosur, the customs union which includes Brazil, Argentina and Paraguay. </s> |
2,792 | <s>[INST] Last year, the economy grew by an [/INST] estimated 6 per cent following 4.9 per cent growth in 1996. </s> |
2,793 | <s>[INST] This year the picture is clouded by uncertainty over the economic [/INST] prospects for Brazil and Argentina, the country's biggest trading partners, which take almost 50 per cent of its exports. </s> |
2,794 | <s>[INST] Since 1996, a coalition government of the Colorado and Blanco parties, [/INST] historic rivals for the centre and centre-right vote, has squeezed down inflation and opened areas of the state dominated economy. </s> |
2,795 | <s>[INST] The public sector deficit, 1.6 [/INST] per cent of GDP last year, is improving. </s> |
2,796 | <s>[INST] Inflation, which began the 1990s at over 100 [/INST] per cent, was down to 15 per cent by the end of last year. </s> |
2,797 | <s>[INST] This year, the government hopes to [/INST] secure single digit inflation for the first time in decades. </s> |
2,798 | <s>[INST] Despite persistent high inflation, Uruguay never experienced [/INST] the hyper- inflation and economic chaos that plagued neighbouring Argentina and Brazil. </s> |
2,799 | <s>[INST] As a result, governments have not had the [/INST] political cover to introduce shock measures to sweep away vestiges of the corporatist, welfare state. </s> |
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