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"onomist at J.P. Morgan SA, Argentina. ""The next government has to put together a very clear economic agenda."" But confidence in the political transition took a blow recently when Eduardo Duhalde, presidential candidate for the Peronist party, suggested he would renegotiate Argentina's foreign debt. The comments caused a sharp rise in Argentine government treasury-bill rates, which will translate into higher rates on longerterm loans as well. In a positive sign, total private-sector bank deposits are up around 4% through March, an indication of confidence. In fact, there are few signs of capital flight in Argentina despite the Brazilian devaluation and recent stock-market jitters. That is an improvement over 1995 when, in the aftermath of the Mexican-peso devaluation, deposits fell as much as 20% as nervous clients pulled their cash out of the banking system. The rise in deposits is reassuring, says Mr. Werning of J.P. Morgan, because ""banks have a lot of cash and at some point this should be channeled back into the economy."" One possible deterrent to a rapid recovery in bank lending is the latest upturn in past-due loans. Since the 1995 bank scare, the central bank has made strenuous efforts to improve lending practices and supervision; it has also closed or sold off more than 30 weak banks. Nevertheless, past-due loans are creeping higher, even at well-managed banks such as Banco de Galicia, Banco Frances SA, and Banco Rio de la Plata SA. Jason Mollin, Argentine bank stock analyst at Dresdner Kleinwort Benson North America LLC, New York, says total past-due loans among privatesector banks could rise by 40% this year before charge-offs. Credit: Staff Reporter of The Wall Street Journal  "
"he first time in six years a Mexican president and a California governor met, and aimed to mend relations with Mexican officials, who were offended by former Gov. Pete Wilson's hostility to illegal immigrants. ""These people were so hungry for a new chapter, a new story in the relationship in Mexico,"" says Mr. Villaraigosa, a Los Angeles Democrat. ""We were almost treated like rock stars."" The speaker plans to seek about $500,000 in the 1999-2000 state budget to open a three-person office in Buenos Aires. The current budget allots $5.7 million to run seven trade offices and open five smaller ones, in Calgary, Alberta; Manila, Philippines; Sao Paulo, Brazil; Seoul, South Korea; and Shanghai, China. According to the state Trade and Commerce Agency, the seven trade offices now operating -- in London, Mexico City, Tokyo, Frankfurt, Johannesburg, Hong Kong and Taiwan -- brought California more than $6 for every $1 invested in 1997-98, generating over $26 million in tax revenue. Mr. Villaraigosa says the Buenos Aires office would open by 2002 and serve not only Argentina but also members of the Mercosur trade alliance -- Brazil, Paraguay and Uruguay -- as well as Bolivia and Chile. Together, they have a population of 227 million and a combined economy of $1.1 trillion, but California has left this market relatively untapped, with shipments to those countries representing only 2% of the state's $109.5 billion export economy in 1997, according to Trade and Commerce Agency figures. ""This is a real opportunity here,"" says Mr. Villaraigosa, who visited Argentina last summer. ""You see a marked difference, in infrastructure, in telecommunications. This is a country that is vibrant."" Indeed, Argentina's $290 billion economy is the third-largest in Latin America, after Mexico and Brazil. And while exports to Argentina have grown by double-digit percentages in recent years, California continues to lag behind East Coast states. ""When Argentine businesses think about the U.S., they usually think about the East Co"
"that total public borrowing this year will equal 3% of GDP. The main hope of preventing a pre-electoral explosion of public spending lies in an incipient deal between Mr Fernandez, Mr Duhalde and the opposition. This might include new curbs on provincial governments' spending, and a commitment to a new ""fiscal convertibility"" law that is supposed to place limits on the deficit, but would take effect only next year. Mr Fernandez this week stressed that Argentina could withstand any speculative attack on the currency. Indeed, the worries seem exaggerated. Argentina has $25 billion in reserves, enough to cover all pesos in circulation. It has already raised enough money to cover almost all the debt payments due this year. In an emergency, it could draw up to $15 billion in contingency credits. And Mr Menem has said that rather than devalue he would adopt the dollar (though that would be politically complicated). Further market plunges might not put paid to convertibility, but they would mean higher interest rates and a longer recession. The ensuing extra pain associated with the fixed exchange rate might weaken the wide public approval it still enjoys. But that has not happened yet. Fernando de la Rua, the presidential candidate of the centre-left opposition Alliance has echoed Mr Duhalde in backing convertibility. ""There is discontent, but nobody is prepared to pay the cost of abandoning the model,"" says Luis Secco of Estudio Broda, a consultancy. In normal circumstances, Mr Menem's woes might be expected to benefit Mr de la Rua. But as Mr Duhalde's battle with the president has hogged the headlines for months, Mr de la Rua has watched his lead in the opinion polls melt away. Now he risks seeing his campaign overshadowed by financial turmoil. Nevertheless, on May 25th, Argentina's national day, Mr de la Rua attempted to take the offensive. At a rally to launch the Alliance's manifesto, he promised ""education, work and justice for all"" and a crackdown on corruption. Corruption was once expected to dominate the campaign, and it may yet do so. It is an issue that does not help the Peronists. Some of Mr Menem's opponents have long argued that his efforts to cling to office have been motivated by fear of sleaze-related prosecution once he lost it. But whoever wins the election will govern with a Peronist majority in the Senate, and a Supreme Court packed with Mr Menem's appointees. His power has certainly diminished, but it has not yet completely disappeared.  "
"___  Document 420 of 600  Argentina rejects 'myth of Brazil dependency': 'Don't panic' has been Buenos Aires' cool response, but there may be unease behind the scenes, reports Ken Warn:  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 19 Jan 1999: 06.  http://search.proquest.com/docview/248679153?accountid=28034  Abstract: In a series of press confer ences and television appearances last week, Roque Fernandez, Argentina's economy minister, managed to exude his habitual, Zen-like tranquillity, even while the maelstrom whirled around him. Argentina would take no hasty measures in response to the Brazilian devaluation, he intoned. Behind the public posture of ""masterly inactivity"", the mood is doubtless less serene. Not for the first time, Argentine officials are cursing their Brazilian counterparts. Devaluation by the neighbouring giant looks certain to deliver a powerful shock to the already slowing Argentine economy. Private sector analysts at the weekend were busily cutting this year's growth forecasts for Argentina, hovering around the 2 per cent mark, to zero or below. However, the scale of the impact on Argentina is still unclear, and depends heavily on how the Brazilian situation evolves, said Alberto Ades, emerging markets currency economist at Goldman Sachs.  Full text: In a series of press confer ences and television appearances last week, Roque Fernandez, Argentina's economy minister, managed to exude his habitual, Zen-like tranquillity, even while the maelstrom whirled around him. Argentina would take no hasty measures in response to the Brazilian devaluation, he intoned. Behind the public posture of ""masterly inactivity"", the mood is doubtless less serene. Not for the first time, Argentine officials are cursing their Brazilian counterparts. Devaluation by the neighbouring giant looks certain to deliver a powerful shock to the already slowing Argentine economy. Many analysts believe higher interest rates, restricted access to credit, more corporate failures, reduced economic activity and rising joblessness are the inevitable consequences of Brazil's actions. An influx of bargain-pr"
"___  Document 464 of 600  Business upbeat on prospects NEWS DIGEST  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 05 Jan 1999: 07.  http://search.proquest.com/docview/248657617?accountid=28034  Abstract: A poll of 211 businesses by Price Waterhouse-Argentina, a member firm of PwC, found 77 per cent ""moderately optimistic"" about the economy, with 2 per cent ""strongly optimistic"" and 21 per cent ""moderately pessimistic"". "
"iced Brazilian goods into the Argentine economy also threatens to unleash fresh tensions in Mercosur, the customs union dominated by the two countries. And with the buckling of Brazil's exchange rate regime, at least some investors may question the appropriateness of ""convertibility"", the currency board system that pegs the Argentine peso at par to the dollar. Private sector analysts at the weekend were busily cutting this year's growth forecasts for Argentina, hovering around the 2 per cent mark, to zero or below. However, the scale of the impact on Argentina is still unclear, and depends heavily on how the Brazilian situation evolves, said Alberto Ades, emerging markets currency economist at Goldman Sachs. The least destabilising scenario for Argentina is if Brazil can rapidly restore credibility. ""But this looks more like it is going to be a messy affair, and we are going to see a lot more volatility"" - with all its negative consequences for the region, he said. Argentina has some solid reasons for not rolling out rapid countermeasures in the face of the crisis. The authorities are unwilling to adopt any measures that look like window-dressing, or worse, panic-driven adjustments that could ignite concerns over convertibility. The government has also been steadily lining up insurance against just such an eventuality, in the form of fresh credit lines from the multilateral lenders, ever since the Russian debt crisis last August. As a result, normally capital-hungry Argentina can avoid resorting to the international borrowing markets through to the end of the first half of the year, according to Pablo Guidotti, deputy economy minister. The International Monetary Fund, with which Argentina already has a $2.8bn extended fund facility, has offered to make emergency funds available to Argentina and Mexico if the regional situation deteriorates rapidly. There is an underlying calculation that it could prove easier to draw a line in the sand for Argentina - a near-model IMF pupil with a relatively small economy - than has proved possible for wayward Brazil. That does not mean that the peso is wholly immune to attack,"
"___  Document 234 of 400  The Americas: Mercosur's malaise  Author: Anonymous  Publication info: The Economist 351.8116 (Apr 24, 1999): 31-32.  http://search.proquest.com/docview/224065437?accountid=28034  Abstract: Since its founding in 1991 as a putative common market, Mercosur has been a beacon of economic promise for South America. Mercosur is under more stress than ever before because of recessions in its two largest members, Brazil and Argentina. Last year, for the first time, intra-Mercosur trade fell. This year it will fall much more, perhaps by a fifth. Brazil's January devaluation of its currency has also hit Mercosur trade. For Argentina, it was a long-dreaded nightmare. This does not mean that Mercosur is about to fall apart.  Full text: Headnote South America's biggest trade block will survive Brazil's devaluation and a regional recession. But unless Carlos Menem and Fernando Henrique Cardoso, the presidents of Argentina and Brazil, give it a push, Mercosur will never achieve its bold ambitions SINCE its founding in 1991 as a putative common market, Mercosur has been a beacon of economic promise for South America. The value of the trade among its four founding members-Argentina, Brazil, Paraguay and Uruguay-had leapt to $18 billion by 1997 from just $4 billion in 199o. Success attracted followers: Chile and Bolivia signed free-trade agreements with the group, expanded political co-operation and accelerated the integration of road and energy networks. The prospect of a large regional market stimulated outside investment and attention, including the idea of free-trade talks between Mercosur and the European Union, whose leaders will gather in Rio de Janeiro in June. Yet that meeting comes as Mercosur is under more stress than ever before because of recessions in its two largest members, Brazil and Argentina. Unless the presidents of both countries, Brazil's Fernando Henrique Cardoso and Argentina's Carlos Menem, give the trade pact a push, Mercosur is in danger of floundering. Last year, for the first time, intra-Mercosur trade fell. This year it will fall much more, perhaps by a fifth. For the first time in Mercosur's short history, output in both its main economies has been falling simultaneously, and recovery before the second half of this year is unlikely. Brazil's January devaluation of its currency, the real, has also hit Mercosur trade. For Argentina, the real's devaluation was a long-dreaded nightmare. Thanks to its previous overvaluation, between 1995 and 1998 the share of Argentina's total exports going to its giant neighbour had jumped from"
"ernment is reasonable, as our decision was taken within the rules guaranteed by Mercosur,"" Roque Fernandez, the Argentine economy minister, said. Mercosur, founded in 1992, has prompted a huge increase in trade between its members and has been one of the foundations of closer political co-operation in the region. However, progress on trade integration was already slowing before the Brazilian currency crisis in January. The devaluation has had a significant impact on Argentina, which used to send over a third of its exports to Brazil. With a presidential election in October and an economy expected to shrink by around 3 per cent this year, the government has come under heavy pressure from industry and trade unions to limit imports. Diplomats said the growing number of disputes between Brazil and Argentina required the development of better conflict-resolution procedures in Mercosur. In the past, the countries have relied on the close relationship between their presidents, Fernando Henrique Cardoso of Brazil and Argentina's Carlos Menem, to resolve disputes. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"___  Document 74 of 600  Argentina edges forward in its project to embrace the dollar: Officials get down to detailed study of possible dollarisation, but there is much to be decided - and in the end it will be up to the next government and Washington, writes Ken Warn:  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 21 May 1999: 06.  http://search.proquest.com/docview/248665794?accountid=28034  Abstract: The linguistic battle, at least, is already won. When Argentines talk of small amounts, "". . . say, one hundred, we probably refer to one hundred pesos, but if we talk about one million, it is certain to be one million dollars,"" says the country's central bank president, Pedro Pou. Indeed, Argentine officials are pressing ahead with preparatory work on the project in the hope that it will survive presidential elections in October. They aim soon to finish a paper reviewing the main options, which will be then discussed with US Treasury and Federal Reserve officials. Conversations with the US on the issue will gradually become more formal, Argentine officials hope, developing into a structure for taking the project forward. They also believe they are laying a groundwork which will be useful not only to the new government taking office in December, but also to other countries considering dollarisation.  Full text: The linguistic battle, at least, is already won. When Argentines talk of small amounts, "". . . say, one hundred, we probably refer to one hundred pesos, but if we talk about one million, it is certain to be one million dollars,"" says the country's central bank president, Pedro Pou. The next step would be always to refer to dollars - so-called ""dollarisation"" of the economy. Indeed, Argentine officials are pressing ahead with preparatory work on the project in the hope that it will survive presidential elections in October. They aim soon to finish a paper reviewing the main options, which will be then discussed with US Treas"
"ilateral agreement establishes a high external tariff and provides for trade in cars between Brazil and Argentina to be kept in broad balance. In addition, at least 40 per cent of the parts used to manufacture a car in Argentina must be made in the country for it to be considered locally produced. ""The regime has definitely helped to fuel both demand and production,"" says Fiat Argentina president Vincenzo Barello. But he adds: ""The Brazilian devaluation has created a problem of disequilibrium."" This could be compensated for in the short term by giving manufactures more flexibility over their imports and exports while tariffs on parts from outside the region should be cut to help competitiveness, he says. Sticking points in negotiating new Mercosur regulations have been reform of the rules on local content, while Argentina has long been critical of fiscal incentives given to motor manufacturing by some Brazilian states. If the two countries fail to thrash out a new regime for the industry, the existing regulations may simply be extended. The sector's array of problems led analysts at Santander Investment to warn earlier this year that the future of the sector in Argentina was ""in doubt"". Yet there are still some grounds for optimism. Argentina, despite its higher labour costs, has an abundance of skilled labour and a long history of vehicle manufacture, especially in the Cordoba area. Labour relations, once a big drag on the industry, are much improved. In addition, the country has only one car for every 5.5 inhabitants, a low figure by international standards, and economic reactivation could be expected to lift domestic sales. Car quality has been improving, with locally made models ""approaching international standards and gaining in reputation"", according to Santander Investment. But much depends on the evolution of the wider Argentine and Brazilian economies. It is not clear how long Brazil can retain its present yawning price advantage. ""The development of prices relative to Brazil will be key for the future of industry,"" says Nadin Arganaraz, of economic thinktank Fundacion Mediterranea. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"ter leeway in the face of higher borrowing costs and sagging tax revenues as a result of recession. Mr Fernandez did not specify what the new target would be. To bridge its growing financing gap, Argentina has already boosted this year's borrowing programme from $14bn to $16bn. The latest spending rise will also be financed through additional borrowing, Mr Fernandez said. While the $150m increase is relatively modest, analysts saw it as a step in the wrong direction. ""This definitely shows that political necessities are taking priority over the country's economic needs,"" said Walter Molano, analyst at BCP Securities. ""The government looks like it is going down the slippery slope on the fiscal front."" Copyright Financial Times Limited 1999. All Rights Reserved.  "
" growth of around 2% in the second quarter. The absence of loan demand -- and loan supply as banks retreat from lending -- is worrisome because Argentina's recession appears to be deepening as business confidence and investment spending sag on uncertainty over October presidential elections. Economists estimate Argentina's gross domestic product will decline at least 3% this year. Bank credit is key to Argentine economic growth because the central bank's monetary-policy powers were restricted in the early 1990s in an effort to end a horrendous cycle of hyperinflation. Though the government and the provinces run their own banks, private-sector lending remains the most important source of credit to the economy. Unlike the U.S. Federal Reserve, the Argentine central bank doesn't have a policy of influencing bank credit by retrieving or injecting money into the banking system. Argentine bankers say they continue to renew loans for long-term corporate clients. But rising interest rates and job insecurity have shut down consumer loan demand. While bankers don't like to admit it, they have also retreated from the mortgage- and personal-loan segment by removing most of their advertising for these products, for example. ""It isn't the time to discuss whether there is a lack of demand or supply,"" said an executive at Banco de Galicia SA, one of the top private Argentine banks. ""Consumers are very prudent right now"" with interest rates increasing. Annual mortgage rates are 12% to 15% currently, and personal-loan rates are above 20%. Economists don't expect a pickup in broad-scale lending until after the elections. Even then, ""the prospects for a recovery remain fragile,"" says Vladimir Werning, an ec"
"___  Document 276 of 600  Presidential initiative pays off: ARGENTINA by Ken Warn in Buenos Aires: Carlos Menem's statement outlining a long-term plan aimed at 'dollarising' the economy was seen as a shrewd move  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 12 Mar 1999: 05.  http://search.proquest.com/docview/248143558?accountid=28034  Abstract: ""Differentiation"" has become the name of the game for Argentina. In the series of emerging market crises which have followed the Asian devaluations of 1997, Argentina has sought to underline what it sees as its advantages over the rest of the pack. It appears to be working. Within three weeks of Brazil's January 15 floating of the real, Argentina was back borrowing in the international capital markets, alongside Mexico. Shortly afterwards, it launched a $1bn 20-year global dollar bond, in a clear demonstration of continued investor confidence. But president Carlos Menem pulled an ace from his sleeve in January when he went public with a long-term initiative aimed at dollarising the economy under the terms of ""monetary association treaty"" with the US. The move was interpreted as a signal to investors that, whatever the position in neighbouring Brazil, Argentina was determined not to devalue.  Full text: ""Differentiation"" has become the name of the game for Argentina. In the series of emerging market crises which have followed the Asian devaluations of 1997, Argentina has sought to underline what it sees as its advantages over the rest of the pack. It appears to be working. Within three weeks of Brazil's January 15 floating of the real, Argentina was back borrowing in the international capital markets, alongside Mexico. Shortly afterwards, it launched a $1bn 20-year global dollar bond, in a clear demonstration of continued investor confidence. Emphasising Argentina's financial fundamentals has been a key part of the differentiation strategy, along with lining up fall-back sources of finance, especially from the multilateral lenders. But president Carlos Menem pulled an ace from his sleeve in January when he went public with a long-term initiative aimed at dollarising the economy under the terms of ""monetary association treaty"" with the US. The move was interpreted as a signal to investors that, whatever the position in neighbouring Brazil,"
"___  Document 364 of 600  Peronists see jump in support  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 05 Feb 1999: 05.  http://search.proquest.com/docview/248671530?accountid=28034  Abstract: Argentina's ruling Peronist party has benefited from the regional economic crisis to pull almost level with the opposition Alliance ahead of October's presidential elections, according to an opinion poll published yesterday.  Full text: Argentina's ruling Peronist party has benefited fr"
"olls yesterday in the fourth-consecutive presidential election since military rule ended in 1983. It was a vote unmarked by political violence or widespread claims of fraud as expectations build for an economic recovery. In addition, 116 of 257 seats in the lower house were up for election, as well as six provincial governorships. The orderliness of the transition contrasts sharply with the election-year traumas that marred presidential transitions in Mexico, and, more recently, Brazil and Venezuela. The steady maturation of Argentine institutions suggests that democratic capitalism is taking root. ""All indicators show that democracy is solid and here for the long term,"" said Carlos Acuna, a political scientist at the University of San Andres. ""This is excellent news."" Mr. de la Rua's apparent victory represents a vote for economic stability, whose anchor is a peso rigidly fixed to the dollar in a scheme known as convertibility; but Argentines also want him to deliver on his promises to complement the market-oriented model with greater social justice and transparency in government. While Argentines are supportive of the economic reforms accomplished by President Carlos Saul Menem over two presidential terms spanning 10 years, they are also tired of an inefficient state that has failed to curb inequality. ""The quality of democracy is [what is] at stake"" in this election, adds Mr. Acuna, the political scientist. Mr. de la Rua will bring a different style to Argentina's presidential palace, which changes hands on Dec. 10, partly because his low-key, conservative demeanor contrasts sharply with President Menem's brashness. He will also be a president elected by a coalition vote, and a president who faces a Peronist-party majority in the Senate. Rather than ruling"
". Mr Cavallo suggested that if these trends continued, the peso might appreciate against the dollar, allowing the authorities to free the currency from its one to one peg. ""Convertibility doesn't eliminate the national currency, it simply submits it to a tutor that makes it stronger,"" said Mr Cavallo. During the immediate post-war era, both the yen and the D-Mark had originally strengthened under the tutelage of the dollar, said Mr Cavallo. Mr Cavallo said an eventual currency union between Brazil and Argentina, as well the two smaller Mercosur members, Paraguay and Uruguay, could also be possible on the basis of convertibility. Although a dollar link is likely to be unacceptable to Brazil, a new single South American currency might be backed by a basket of stronger currencies which could also include the euro, for example. Dollarisation, however, was still an option for Mexico and the smaller countries of the Caribbean and Central America which have more trade ties with the US. ""If I were Mexican I would be in favour of a currency union with the United States,"" said Mr Cavallo. During the first half of last year, less than 25 per cent of the trade of Argentina and Brazil was with the US, compared with a figure of about three quarters for Mexico. Copyright Financial Times Limited 1999. All Rights Reserved.  "
" dollarisation is more than just a wheeze to calm investors' nerves. Brazil's crisis affects Argentina in two main ways. A recession there reduces demand for Argentine exports, while the devaluation makes Brazilian exports much cheaper. Even though exports to Brazil account for only 3 per cent of gross domestic product, this will reduce growth. The other danger is that of contagion through a drying up of international lending to the region, and punishingly high real interest rates - currently above 10 per cent. This was a major cause of Argentina's deep recession following the 1994 Mexican devaluation. It is encouraging that Argentina has already been able to access international capital markets, launching a $1bn bond just a month after the Brazilian devaluation. After Mexico, capital market were closed for six months. However, the government will have to revise its growth forecast of 3 per cent this year. Private sector forecasters project a recession, with output falling by up to 2 per cent. Much depends on what happens next in Brazil. A recession - in an election year - is the last thing any government needs. But having toughed out the aftermath of the Mexica"
"he International Monetary Fund after official sources first confirmed, then denied, reports that the country was seeking to double the funds available from the IMF to about $6bn. An economy ministry spokesman said earlier in the day that senior officials, led by deputy economy minister Pablo Guidotti, flew to Washington on Wednesday to open negotiations with the IMF on the increase. Mr Guidotti also discussed with the US Federal Reserve the country's fast-developing plans to dollarise its economy, according to the spokesman. However, Mr Guidotti himself dismissed the reports last night. ""We have had discussions informally with the Fund on many occasions, and this was no exception. But we have never even initiated formal discussions with them on increasing the facility."" The IMF refused to comment. Argentina signed a $2.8bn extended fund facility with the IMF in February last year. In"
"___  Document 433 of 650  Argentina Has Few Weapons in Economic Crisis --- Other Latin Nations Appear Vulnerable to Shocks Outside Their Borders  Author: By Wall Street Journal staff reporters Craig Torres in Buenos Aires, Matt Moffett in Rio de Janiero and Thomas T. Vogel Jr. in Caracas, Venezuela  Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 15 July 1999: A10.  http://search.proquest.com/docview/398672262?accountid=28034  Abstract: Twice in the past five years, Argentina and its rock-solid peso have proved crucial in moderating global financial turmoil. In the wake of the 1994 Mexican financial collapse and in the immediate aftermath of Brazil's currency devaluation this year, Argentina's staunch defense of its dollar-pegged currency helped contain global crises. With presidential elections only three months away, Argentine markets have dropped amid doubts over the country's capacity to maintain its convertibility system, in which the peso and dollar can be used interchangeably. Consumption and investment may be starting to erode more rapidly than expected as Argentines turn more cautious. And a leading Argentine presidential candidate's suggestion that he might seek renegotiation of the country's big foreign debt has only made matters worse. Argentina's woes have shaken markets throughout the region. Many Latin American nations, especially the Andean countries of Colombia, Venezuela and Ecuador, are especially vulnerable to external shocks because their economies have already been weakened by high interest rates. The news from Argentina also has jolted the region's largest economy, Brazil, where the government is fighting an uphill battle against deficit spending that is deeply ingrained in the country's archaic political structures. By devaluing its currency and imposing an economic austerity program last January, Brazil to a certain extent inoculated itself from Argentina's ills.  Full text: Twice in the past five years, Argentina and its rock-solid peso have proved crucial in moderating global financial turmoil. In the wake of the 1994 Mexican financial collapse and in the immediate aftermath of Brazil's currency devaluation this year, Argentina's staunch defense of its dollar-pegged currency helped contain global crises. But having fended off financial problems that originated outside its borders, Argentina is struggling to cope with a crisis whose roots are largely internal. Worse, it has few weapons available. With presidential elections only three months away, Argentine markets have dropped amid doubts over the country's capacity to maintain its convertibility system, in which the peso and dollar can be used interchangeably. Consumption and investment may be starting to erode more rapidly than expected as Argentines turn more cautious. And a leading Argentine presidential candidate's suggestion that he might seek renegotiation of the country's big foreign debt has "
"only made matters worse. Argentina's woes have shaken markets throughout the region. Many Latin American nations, especially the Andean countries of Colombia, Venezuela and Ecuador, are especially vulnerable to external shocks because their economies have already been weakened by high interest rates. The news from Argentina also has jolted the region's largest economy, Brazil, where the government is fighting an uphill battle against deficit spending that is deeply ingrained in the country's archaic political structures. By devaluing its currency and imposing an economic austerity program last January, Brazil to a certain extent inoculated itself from Argentina's ills. ""This is Latin America's problem as well as Argentina's, but it's less of a problem for Latin America than it might have been a year or two ago,"" says Curtis McDonald, a Latin American economist at Bear Stearns Cos. Most of the region's stock markets and currencies ended slightly higher yesterday despite jitters earlier this week. The stock markets of Colombia and Peru posted the largest gains, about 1% each. Brazil's currency, the real, gained about 1.5% against the U.S. dollar and Colombia's peso strengthened a bit more than 1%. Most other currencies rose less than 1%. What's particularly scary for Argentina is that domestic politics are deepening the crisis of confidence in an already troubled economy. Eduardo Duhalde, a presidential candidate from the same party as the champion of dollar convertibility, President Carlos Saul Menem, invokes the writings of Pope John Paul II to justify a possible debt renegotiation. After jolting investors, such talk is also likely to unnerve consumers, who had already been tight with their pocketbooks. Pedro Lacoste, an independent economist in Buenos Aires, expects consumption to decline more than 5% in both the second and third quarters, from the year-earlier periods. The weak internal demand is particularly challenging for the Argentine government. The rigid exchange-rate system limits its ability to reflate the economy either through federal spending or central-bank monetary expansion. Argentina doesn't ""have any of the economic tools"" to counter the downturn, says Mr. Lacoste. ""The only way to turn this around is with a confidence shock."" During this year's economic crisis in neighboring Brazil, President Menem, a master of public perception, countered currency fears by saying that Argentina would link its peso to the U.S. dollar before it would devalue the currency. Merely talking about such a plan, which is still under study, helped settle markets. Even though Argentines are switching their bank deposits into dollars at an unprecedented rate, money isn't leaving the country and foreign reserves are stable at about $32 billion. Trouble is, Mr. Lacoste, the economist, doesn't think the country can muster any additional good news until after the October elections, when the winner can put forth a "
"ary, said yesterday. Mr Castro was speaking after a cabinet meeting in which dollarisation was one of the main themes discussed. Argentina's central bank last month revealed a plan to dollarise the economy through a ""treaty of monetary association"" to be negotiated with the US. While many analysts believe the move was intended partly to send a message to the markets, underlining Argentina's determination not to devalue, officials are eager to develop the plan further. They hope to complete a detailed study to show the US by next month. Whether the plan could advance depended a lot on market reaction, so far favourable, said Pablo Guidotti, deputy economy minister. ""In the future there will be fewer currencies. There is a dynamic in all this,"" he added. ""It would also be important if other countries joined in."" Many Argentine officials believe abolishing the peso - linked at par to the dollar under a currency board system since 1991 - would bring economic benefits through much lower interest rates. Central bank president Pedro Pou said last month it could take 2-3 years to negotiate a monetary treaty with the US. However, some officials imply the process could be "
"___  Document 167 of 400  Leaders: Argentina's next steps  Author: Anonymous  Publication info: The Economist 353.8142 (Oct 23, 1999): 18-20.  http://search.proquest.com/docview/224072599?accountid=28034  Abstract: Argentina's new president, Fernando de la Rua, is discussed. He seems to have more desire, and ability, to pursue much-needed changes.  Full text: Headnote Its new president-probably Fernando de la Rua-will need some nifty political footwork THE campaign has been boring and so, he himself admits in a self-deprecating way, is its likely winner. There seems little doubt, according to the opinion polls, that when Argentines vote this Sunday they will choose as their next president Fernando de la Rua, the grey and cautious mayor of Buenos Aires and leader of the opposition Alliance. The polls suggest that Mr de la Rua will win by a margin big enough to avoid a run-off ballot. For two big reasons, that is an outcome to be welcomed. The vote comes after a decade of rule by Carlos Menem, a rumbustious Peronist who turned into one of Latin America's firmest free-market reformers. For all his achievements, Argentina has had diminishing returns from Mr Menem. In his first term, he put Argentina's economy back on its feet, partly through a rigid currency board that pegs the peso by law at parity to the dollar (an arrangement known as ""convertibility""). But in his second term, since 1995, he has appeared loth to add to that record. Mr de la Rua seems to have m"
"___  Document 287 of 600  Moody's reduces Argentine rating  Author: Catan, Thomas; Sanghera, Sathnam  Publication info: Financial Times [London (UK)] 07 Oct 1999: 12.  http://search.proquest.com/docview/248758299?accountid=28034  Abstract: In the latest blow to Argentina's economic fortunes, Moody's Investor Service yesterday cut its rating on the country's foreign debt. With less than three weeks to go before Argentine presidential elections, the agency lowered the long-term foreign currency ceiling from Ba3 to B1, citing a deteriorating economic position.  Full text: In the latest blow to Argentina's economic fortunes, Moody's Investor Service yesterday cut its rating on the country's foreign debt. With less than three weeks to go"
"___  Document 334 of 600  Pulling through  Publication info: Financial Times [London (UK)] 19 Feb 1999: 15.  http://search.proquest.com/docview/248746046?accountid=28034  Abstract: The most important task for the Argentine authorities in the wake of Brazil's devaluation has been to distinguish their economy from their troubled neighbour in the eyes of investors. They are doing a good job. Argentina seems set to weather the Brazilian storm, albeit with a sharp slowdown in growth. Moreover, talk of dollarisation is more than just a wheeze to calm investors' nerves. Brazil's crisis affects Argentina in two main ways. A recession there reduces demand for Argentine exports, while the devaluation makes Brazilian exports much cheaper. Even though exports to Brazil account for only 3 per cent of gross domestic product, this will reduce growth.  Full text: The most important task for the Argentine authorities in the wake of Brazil's devaluation has been to distinguish their economy from their troubled neighbour in the eyes of investors. They are doing a good job. Argentina seems set to weather the Brazilian storm, albeit with a sharp slowdown in growth. Moreover, talk of"
"ay with the various political candidates and the fund; an IMF spokesman didn't return a call seeking confirmation of these reports. The new ""fiscal convertibility law"" aims to limit the fiscal deficit to 1.9% of gross domestic product this year and 0.4% in 2000, and achieve a balanced budget by 2003. In addition, the law establishes a reserve fund to cushion the treasury during economic downturns. Recognizing that the new president will face an immediate credibility test from financial markets after taking office, both parties pushed the bill through the Senate Wednesday. Whether the government abides by the new deficit limits remains to be seen, analysts cautioned. But Argentina, which has a rigid currency system under which the peso's value is fixed to the U.S. dollar's, must lower its costs to become a more competitive economy. One of the biggest costs for business is financing, with loan rates now above 20%. The new spending limits aim to restore confidence and lower interest rates in both domestic and foreign markets. So far, the reaction has been positive; Argentina's long-term debt has been rallying in financial markets since the law passed. Credit: Staff Reporter of The Wall Street Journal  "
"___  Document 22 of 500  Let the Dollar Reign From Seattle to Santiago  Author: By Robert J. Barro  Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 08 Mar 1999: A18.  http://search.proquest.com/docview/398654095?accountid=28034  Abstract: President Carlos Menem of Argentina recently proposed that his country give serious consideration to full dollarization -- the abandonment of its own currency, the peso, whose value is already fixed to the U.S. dollar. It's a good idea, not just for Argentina but for other countries in the Western Hemisphere. But the dollarization of the Americas won't happen without U.S. leadership. Argentina's disciplined monetary policy stands in stark contrast with that of some of its neighbors. At the beginning of the 1990s, Argentina enacted an array of economic reforms, including a currency-board type of monetary system. This regime ensured a fixed exchange rate -- one peso to the dollar -- and thereby promoted stability in prices and interest rates. Other Latin American countries, such as Brazil and Mexico, instituted some economic reforms but failed to make basic changes in monetary institutions. These countries adopted the worst-of-all-worlds system in which exchange rates neither float nor are genuinely fixed. Hence, they have suffered from volatility in exchange rates, inflation rates and interest rates. On some occasions, such as the Mexican debt crisis and devaluation of 1994-95 and the ongoing Brazilian fiscal crisis and devaluation, the financial markets have speculated that Argentina would deviate from its peg to the dollar. Argentina has withstood these pressures in the past, notably in 1995. But today's Brazilian situation is especially serious because Brazil is Argentina's largest trading partner. Argentina feels pressure to respond to Brazil's devaluation with a devaluation of its own. Anticipation of a devaluation raises interest rates, because of increases in currency risk and in related default risk. Consequently, the economy tends to contract.  Full text: President Carlos Menem of Argentina recently proposed that his country give serious consideration to full dollarization -- the abandonment of its own currency, the peso, whose value is already fixed to the U.S. dollar. It's a good idea, not just for Argentina but for other countries in the Western Hemisphere. But the dollarization of the Americas won't happen without U.S. leadership. Argentina's disciplined monetary policy stands in stark contrast with that of some of its neighbors. At the beginning of the 1990s, Argentina enacted an array of economic reforms, including a currency-board type of monetary system. This regime ensured a fixed exchange rate -- one peso to the dollar -- and thereby promoted stability in prices and interest rates. Other Latin American countries, such as Brazil and Mexico, instituted some economic reforms but failed to make basic changes in monetary institutions. These countries adopted the worst-of-all-worlds system in which exchange rates neither float nor are genuinely fixed. Hence, they have suffered from volatility in exchange rates, inflation rates and interest rates. On some occasions, such as the Mexican debt crisis and devaluation of 1994-95 and the ongoing Brazilian fiscal crisis and devaluation, the financial markets have speculated that Argentina would deviate from its peg to the dollar. Argentina has withstood these pressures in the past, no"
"opt the dollar under an agreement with the United States. If the Federal Reserve agreed to share the interest monies involved (after all, it would no longer have to pay interest on those $15 billion of Treasury bonds), then Argentina could use its share as collateral for a credit line from foreign banks to help local institutions when that becomes necessary. It is a neat idea, though putting it into practice could prove tricky, as a finance official admits. Argentina has discussed it ""informally"" with American officials, and is now preparing a technical study, he says. Dollarising is ""a long-term project, not crisis management"" and would require not just the agreement of the United States, but also a consensus in Argentina. At the Fed, officials say it is no longer on the near-term horizon. To many economists in Buenos Aires, dollarisation is anyway barely relevant to the country's policy dilemmas. Proponents of currency boards argue that they promote economic reform: denied the soft options of devaluation and inflation, governments must act to drive down costs in the economy. Yet Mr Menem's reformist drive has faltered. Argentina's labour markets, privatised monopolies and the government itself all need to become more efficient. Meanwhile, the government's inability to run a fiscal surplus in years of booming growth has precluded it from cutting taxes to ease a recession. Thanks to Argentina's wretched history of inflation and mismanagement, its currency board still enjoys broad support. But unless it is accompanied by reforms that drive down costs in nominal terms, it will become increasingly burdensome, especially as inflation falls elsewhere. As disinflation and even deflation take hold in much of the world, it will be ever harder for Argentine exports to stay competitive. Dollarisation would be of little help in this, and would remove all remaining flexibility from exchange-rate policy. The currency board may yet come to seem a self-made prison; to dollarise might look like throwing away the key.  "
" found they faced more Argentine red tape. To make matters worse, relations between Brazil and Argentina deteriorated in a more general way during 1998 and 1999, mainly because of Mr Menem's efforts to forge closer ties with the US. Brazil's efforts to win a seat on the United Nations Security Council irritated Argentina, while Mr Menem's bid to join the North Atlantic Treaty Organisation (Nato) caused consternation in Brasilia. By early last month, amid modest signs of recovery in Argentina's economy, some of the tensions appeared to have eased. Shoe manufacturers in Brazil and Argentina came to an industry-wide agreement, capping Brazilian shoe imports. A similar deal was reached in the paper industry, and Brazil rowed back on its threat to withdraw automatic import licences for 400 Argentine imports. The disputes have made it evident that new initiatives to consolidate the market are necessary if similar problems are to be avoided in the future. Convergence of macro-economic policies would make it less likely that the disputes would occur in the first place. Mr Giambiagi says that any move towards a single currency is unlikely to even begin until 2006 2010. But he says talks could begin sooner on Maastricht-style economic convergence. He suggests that inflation might be targeted at 3 per cent, while governments would undertake to hold both the current account and fiscal deficits below 3 per cent of GDP. Supranational institutions could arbitrate disputes avoiding costly and time-consuming high level political involvement. ""This is not about to go away,"" says a Brazilian diplomat. ""The point is to try to manage these problems to avoid having to debate them at the level of presidents."" Argentina's new government, which takes office on December 10, could possibly seek to give the market more impetus. Mr De la Rua has been highly critical of outgoing President Menem's government for taking unilateral actions in the dispute with Brazil. Such actions had ""created friction at the political level which were later translated to the economic level"", he said. He has publicly rejected the proposal to dollarise the Argentine economy, which Mr Menem backed, favouring the creation, in the long-term, of a Mercosur single currency. Ultimately, though, Brazil's position will be crucial to the success of integration efforts. As the biggest economy in the region, Brazil has more to lose from the creation of supernational institutions. * Additional reporting by Ken Warn in Buenos Aires Copyright Financial Times Limited 1999. All Rights Reserved.  "
"xporters are also burdened with cumbersome labor taxes and the high costs of services produced by oligopolies. Even bank-loan rates, usually low in Argentina compared with other Latin countries, are high today. Base lending rates for small businesses are about 17% in inflationadjusted terms. ""Argentina has to keep working on costs,"" Vice Minister of Finance Pablo Guidotti said in an interview. ""There is still a lot of deregulation to do."" The lack of competitiveness is also a concern because total debt levels and the cost of new debt are climbing. If Argentina were a company, it would be in the unhealthy situation of finding that its main export products command a lower price, or that there are fewer buyers of them, at a time when debt is rising and has a higher cost. Of course, other factors come into play. Foreign-currency fluctuations influence Argentina's overall debt level in dollar terms; and the government is prudently replacing short-term notes with longer-term bonds, which pushes up interest costs. Last Friday, for example, the government swapped $3.91 billion in existing debt for a series of new two-year and five-year notes. The swap reduces the government's financing needs by $1.85 billion through the year 2003. The deal shows that Argentina still enjoys ample access to credit markets. But investors are also expressing caution. ""We think convertibility is firmly entrenched,"" says Wayne Lyski, chief investment officer at Alliance Capital Management L.P., which has $6.5 billion in emerging market bonds under management. ""But there is a growing concern about the inability to bring debt levels down, and about Argentina's ability to create labormarket flexibility and a vibrant export sector."" Alliance has lightened up on Argentine bonds, ""and we expect to continue to be underweight for the foreseeable future,"" Mr. Lyski adds. Credit: Staff Reporter of The Wall Street Journal  "
"___  Document 208 of 400  The Americas: Agentina, not as big as it seemed  Author: Anonymous  Publication info: The Economist 351.8124 (Jun 19, 1999): 30.  http://search.proquest.com/docview/224064807?accountid=28034  Abstract: Argentina's economy is some 11% smaller than previously thought, according to new national accounts unveiled by the Economy Ministry. The new figures use 1993 instead of 1968 as their base year.  Full text: FOR all their apparent precision, national accounts are no more than highly educated guesses about economies. From time to time, the statisticians revise their guesswork. Curiously, changes in the way GDP is calculated have often led to miraculous increases (as happened in several European countries battling to fulfil the euro's entry criteria). But in Argentina, they have now produced the opposite result. Argentina's economy is some 11% smaller than previously thought, according to new nation"
"much quicker. One of the most difficult issues to be negotiated would be getting the Federal Reserve to shoulder a ""lender of last resort"" function. Under a negotiated, as opposed to unilateral, switch to the dollar, Argentina would require access to the Fed's discount window. Another issue is seignorage, the interest earned by Argentina on its dollar reserves. This interest totals about $750m a year. But one option which may be discussed with US officials would be to collateralise the seignorage in order to underwrite access to the discount window. This would make Argentine dollarisation financially risk-free for the Fed and possibly overcome some political objections from the US side. The opposition Alliance has attacked the dollarisation initiative. However, rising voter caution in the face of the Brazilian crisis appears to have helped the ruling Peronist party pull almost level with the Alliance ahead of October's presidential elections. An opinion poll in the daily La Nacion yesterday showed the Peronists on 32 per cent support, against 33 for the Alliance, previously favoured to win in October. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"___  Document 307 of 650  Argentine Candidate Backs Dollar Peg --- De la Rua Plans Budget Cuts To Boost Investor Faith If He Wins Presidency  Author: By Craig Torres  Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 29 Sep 1999: A18.  http://search.proquest.com/docview/398790329?accountid=28034  Abstract: BAHIA BLANCA, Argentina -- Fernando de la Rua, the man favored by the polls to win Argentina's Oct. 24 presidential election, says he will preserve the rigid dollar-pegged currency system and strive to drive down the country's troublesome fiscal deficit in an effort to restore international confidence as Argentina seeks some $16 billion in financing next year. ""Parity (with the dollar) will be maintained,"" Mr. de la Rua says in an interview, promising not to tamper with Argentina's dollarpegged currency system that has reduced inflation to zero today from nearly 5000% during 1989. ""We have to reduce the (fiscal) deficit,"" he says, and adds that his government will be ""austere, predictable, and serious, and one that meets its international obligations."" Mr. de la Rua's position contrasts sharply with the populist slogans of his opponent, Eduardo Duhalde, the Justicialista Party (known as Peronists) governor of Buenos Aires province, and the support for his proposals is an important message to foreign investors: Despite a painful recession and stubbornly high unemployment, the majority of Argentines still favor orthodox economic solutions. ""This is a vote for stability and pragmatism, and that is what we need,"" says Aldo Abram, partner at Exante, a Buenos Aires consulting concern.  Full text: BAHIA BLANCA, Argentina -- Fernando de la Rua, the man favored by the polls to win Argentina's Oct. 24 presidential election, says he will preserve the rigid dollar-pegged currency system and strive to drive down the country's troublesome fiscal deficit in an effort to restore international confidence as Argentina seeks some $16 billion in financing next year. ""Parity [with"
"valuation has alarmed Argentine business groups, and they have pressured Mr. Menem for protection or new measures that will enhance their competitiveness. ""The Brazilian devaluation changes the competitive situation for many industries in Argentina,"" said Javier Tizado, executive vice president of Argentine steel producer Siderar. ""We have to take transitory measures. We are going to see an avalanche of products."" Mr. Menem faces the intricate task of placating top industrialists and keeping unemployment down during a presidential election year, while avoiding protectionist measures that might jeopardize Mercosur, one of Latin America's largest free-trade zones. The four-country trade bloc, comprising Brazil, Argentina, Paraguay and Uruguay, exchanged more than $20 billion of goods and services in 1997. Chile and Bolivia are associate members, which means they partake in some regional accords but aren't fully integrated into the Mercosur regime. Last week, Mr. Menem dispatched Jorge Campbell, secretary of international economic relations, to Brasilia to begin a series of talks on compensatory steps. In an interview, Mr. Campbell said many trade issues are unclear because nobody is sure where the Brazilian real will settle. But he said the ministry has a list of several industries that are in obvious jeopardy. He declined to elaborate, but analysts say textiles and shoes, as well as food products such as milk and chicken, will face difficulties. The steel industry is already in dire condition because of cheap Asian exports. ""We will look at all the ways trade is being slowed, and at subsidies, and try to clear them up,"" Mr. Campbell said. The talks resume today. Officials from Uruguay and Paraguay, whose economies are relatively small, are likely to go along with measures that will help their trade advantage with Brazil. Brazilian officials sai"
" about the safety of their deposits because of the transfer of much of the Argentine bank sector to international banks, he said. The most immediate pain could be felt in the corporate sector. ""While the government may be able to continue its borrowing, companies will suffer on this score and we could see some corporate defaults,"" said Christopher Ecclestone, chief analyst at Buenos Aires Trust. Jose Angel Gurria, the Mexican finance minister, said he expected market turbulence to continue in coming weeks, but he said Mexico's narrow fiscal deficit set it apart from Brazil. Mexico had already ""taken decisions regarding its economic policy, its 1999 budget. We are not half-way through, we are not in the middle of a legislative process in which we have uncertainty, as they have in Brazil,"" Mr Gurria said. Economists said the impact on Mexico would be felt chiefly through currency volatility, likely to complicate central bank efforts to rein in inflation. They also said growth was at risk throughout the region. In Ecuador the central bank raised its benchmark bank lending rate yesterday to 130 per cent from 87 per cent. The currency, the sucre, closed for the second successive day above its trading band limit. Although the sucre has weakened significantly during the past week, the bank insists it will maintain the current trading bands. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"___  Document 418 of 600  Mercosur feeling the pinch since Brazil's devaluation: Disputes grow as Argentina and Brazil, the trade group's biggest economies, go into recession, write Geoff Dyer and Ken Warn:  Author: Dyer; Warn, Ken  Publication info: Financial Times [London (UK)] 13 Aug 1999: 06.  http://search.proquest.com/docview/248733392?accountid=28034  Abstract: Since Brazil was forced to devalue its currency in January, Mercosur, the South American trade bloc, has become the focus of economic discontent. Disputes over subjects ranging from Argentine quotas on textiles to Brazilian subsidies for car factories have left the two countries' diplomats at loggerheads. An emergency summit last week in Montevideo, Uruguay, resolved little. The rows have left Mercosur, which also includes Uruguay and Paraguay, facing its most serious crisis since it started in 1992. The market of 220m consumers that Mercosur brings together has proved a huge attraction for multinationals. ""Most of the big foreign investments in the region over the last few years have not been based on the market in Brazil or in Argentina, but on Mercosur,"" said Jose Roberto Mendonca de Barros, a former economics secretary at the Brazilian finance ministry.  Full text: Since Brazil was forced to devalue its currency in January, Mercosur, the South American trade bloc, has become the focus of economic discontent. The region's two principal economies - Brazil and Argentina - were already struggling before the currency crisis: now they are in recession. In Brazil unemployment is at a record high and the government hugely unpopular. In Argentina, gross domestic product is estimated to have slumped more than 4 per cent in the second quarter, and the recession has provided the backdrop to a bitter presidential election campaign. Disputes over subjects ranging from Argentine quotas on textiles to Brazilian subsidies for car factories have left the two countries' diplomats at loggerheads. An emergency summit last week in Montevideo, Uruguay, resolved little. The rows have left Mercosur, which also includes Uruguay and Paraguay, facing its most serious crisis since it started in 1992. However, the long-term future of the bloc seems to be secure, "
"s are tentatively feeling their way around the net. ""People want access to content in their own language,"" says Roberto Cibrian, chief executive of El Sitio. ""We are trying to build something that is partly a portal and partly a community-driven site, with lots of country-specific content."" E-commerce openings can then be grafted on to a network of sites that users know and trust, according to El Sitio's business model. The profile of El Sitio's users underlines the novelty of the internet in Argentina. ""Some 65 per cent of Argentine users are men, against a more even balance in the US. But a year ago it was 85 per cent men,"" says Mr Cibrian. Users are overwhelmingly aged 20-30. About 1.6m Argentines have the economic power to connect to the net, according to the BCG study, compared with 3.8m Brazilians and 2.1m Mexicans. However, the Argentine and Brazilian market could double if telecoms companies adopt PC leasing schemes and flat telephone rates to reduce access costs. Argentina's giant neighbour has a lower per capita income, but a bigger pool of well-off individuals, concentrated around the economic powerhouse of Sao Paulo. Brazilians also appear to be more willing to adopt new technology. However, Argentines are showing some signs of catching up. A handful of entrepreneurs has already set up operations which are being exported into the region, such as online brokerage service Patagon.com. In June El Sitio announced a $44m (£27m) capital injection from mainly US investors to help it expand into other Latin American countries and the Spanish-speaking community in the US. Other Argentine trailblazers include one of the region's first virtual auction sites, Mercado Libre, and bookseller Yenny's online sales operation for books in Spanish. Argentina's powerful media groups have also been quick to adopt the internet, with leading newspapers such as La Nacion and Clarin running sophisticated web operations. This being Argentina, Clarin's search engine unearths hundreds of sites connected with the tango. *E-Commerce in Latin America: From Opportunity to Reality. The Boston Consulting Group, Bouchard 547, Piso 10, 1106 Buenos Aires, Argentina. Tel 5411 4314 2228. This article is one of an occasional series on internet usage around the world Copyright Financial Times Limited 1999. All Rights Reserved.  "
"___  Document 56 of 600  Argentina secures IMF loan approval  Author: Baker, Gerard  Publication info: Financial Times [London (UK)] 27 May 1999: 07.  http://search.proquest.com/docview/248744273?accountid=28034  Abstract: It approved the revision of the Argentine government's $2.8bn EFF programme, which included an increase in the ceiling for the federal government deficit to $5.1bn (1.5 per cent of gross domestic product) from $2.95bn (0.8 per cent of GDP). The approval allowed Argentina to draw on another $1.3bn of the EFF loan.  Full text: The Inter"
"barriers. Local calls are charged per pulse in Argentina, making surfing the net an expensive proposition. But telecoms deregulation is already cutting phone costs and further falls are likely. The price of personal computers is dropping too. With the highest level of cable television penetration outside North America - some 60 per cent of households are subscribers - Argentina could also be well placed to leapfrog more developed markets and quickly adopt cable access to the net, according to the BCG report. However, much of the existing infrastructure allows only one-way access, and will need to be replaced. Despite the constraints, there are already some 300,000 to 350,000 internet users in Argentina, says Jorge Becerra of BCG, or about 1 per cent of the population. Of these, some 10-15 per cent have already made a purchase over the net, either from a US or Latin American site. Online sales are forecast to be worth less than $2m this year. However, take-off is likely to be fast and sales could grow 200-300 per cent a year during the next few years, Mr Becerra believes. Cultural constraints may also have played a part in holding back online commerce. Argentina, with recent memories of hyperinflation and low levels of bank penetration, is overwhelmingly a cash society. Take-up of credit cards remains low, fraud is common and local banks - again lagging Brazil - are still working on systems for processing online payments. Even for those who successfully place an order for a book or compact disc over the net, the postal service is only gradually overcoming its reputation for slowness and unreliability, while private courier services are more costly. Apart from the supermarkets, Argentine retailing is highly fragmented, and most store chains lack the scale and the resources to set up effective internet operations. However, internet portals may come to their aid and may play a bigger role in facilitating e-commerce than in more developed markets. Some portals are already offering to set up retailers' web sites free of charge, says Mr Becerra, with the aim of bundling small sales operations together to create more choice for consumers. El Sitio, a Buenos Aires portal and site network, also believes portals can play a critical role in the Latin American market, where largely non-English speaking consumer"
"___  Document 325 of 600  A year they will want to forget: ARGENTINA by Ken Warn in Buenos Aires: Next month's presidential election, which will end President Menem's 10 years in power, is adding to the uncertainty  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 24 Sep 1999: 10.  http://search.proquest.com/docview/248792017?accountid=28034  Abstract: The economy is expected to decline by 3 per cent or more this year, the worst recession since 1995, when Argentina's financial system was shaken by the ""Tequila effect"" unleashed by Mexico's mishandled December 1994 devaluation. Argentina managed to bounce back quickly from the 1995 recession, buoyed by high commodity prices and strong exports to Brazil. But this time around, recession has produced a more uneasy mood, and at least in some sectors a questioning of convertibility, the currency board system that since 1992 has linked the peso at par to the dollar. Doubts over convertibility appear to be strongest among manufacturers who have been hit by the domestic slowdown and by the Janaury devaluation in Brazil, Argentina's main trading partner. However, manufacturing, long a stronghold of protectionist sentiment, accounts for an ever-smaller share of the economy. The local consensus remains overwhelmingly that the benefits of convertibility continue to outweigh its drawbacks.  Full text: This is turning out to be a year many Argentines would probably rather forget. The economic slowdown that became apparent in July 1998 has developed into a full-blown recession, with little prospect of a rapid recovery. Exports began slowing last year, while domestic demand has sunk in 1999. Bank lending for business and consumers has seized up while low commodity prices have continued to put pressure on the agricultural sector. As if that were not enough, foreign investors, in a general flight from emerging markets, appear to have grown disenchanted with Argentina, adding to the government's borrowing costs. The October 24 presidential elections, which will end 10 years in power of President Carlos Menem, have added yet another layer of uncertainty. The economy is expected to decline by 3 per cent or more this year, the worst recession since 1995, when Argentina's financial system was shaken by the ""Tequila effect"" unleashed by Mexico's mishandled December 1994 devaluation. Argentina managed to bounce back quickl"
" as Mr Fernandez admitted last week. But the main line of defence for convertibility remains the strength of the financial system. The country has fewer, and better capitalised, banks than during the 1995 ""tequila crisis"" when almost a fifth of deposits fled the banking system after Mexico's sudden devaluation at the end of 1994. Nonetheless, the now largely foreign-owned banking system is likely to witness a ""flight to quality"", plus some shifting of deposits out of pesos into dollars, and a fall in the overall level of deposits from their near-record $77.8bn (£47bn). The central bank's international reserves, at over $26bn, have so far not wavered. On the trade front, the Brazilian devaluation spells trouble for Argentine exporters and manufacturers. Mr Fernandez got an ear-bashing from industrialists yesterday. Some investors fret about Argentina's trade exposure to Brazil - the destination for about a third of its exports - and its longer-term competitiveness now Brazil has devalued. ""The Argentine peso looked fairly valued while Brazil's Real was at $1.20. But at say, $1.50, it would be a different story,"" said Mr Ades. ""The government and central bank will do everything in their power to defend convertibility, but foreigners will worry and that will be reflected in higher interest rates."" However, Argentina's central bank has waged a long campaign against what it considers the ""myth of Brazil dependency"". Argentina's total exports still only represent about 8 per cent of GDP, the argument runs. Of exports to Brazil, the bulk are commodities or commodities related, and could easily find fresh markets. Argentina also managed to live with sharp fluctuations in the real exchange rate between the two countries, even while they built up trade links in the 1990s. But the Brazilian crisis looks set to exert further downward pressure on global economic activity and hence on commodity prices, making life that much harder for commodity exporters such as Argentina. Further tests of Mr Fernandez's composure appear to lie ahead. Braving uncertainty, Page 23 Copyright Financial Times Limited 1999. All Rights Reserved.  "
"___  Document 276 of 650  Buenos Aires Mayor Leads in Argentine Vote --- Early Returns Show Victory For Center-Left Alliance In Presidential Election  Author: By Craig Torres  Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 25 Oct 1999: A25.  http://search.proquest.com/docview/398671592?accountid=28034  Abstract: Buenos Aires Mayor Fernando de la Rua, the 62-year-old candidate for the center-left Alliance coalition, was headed for a victory in Argentina's presidential election with 49.5% of early returns compared with 36.6% for the Justicialist or ""Peronist"" Party candidate, Eduardo Duhalde. By yesterday evening, the government had counted about 55% of the votes. Mr. de la Rua's apparent victory represents a vote for economic stability, whose anchor is a peso rigidly fixed to the dollar in a scheme known as convertibility; but Argentines also want him to deliver on his promises to complement the market-oriented model with greater social justice and transparency in government. While Argentines are supportive of the economic reforms accomplished by President Carlos Saul Menem over two presidential terms spanning 10 years, they are also tired of an inefficient state that has failed to curb inequality. ""The quality of democracy is (what is) at stake"" in this election, adds Mr. (Carlos) Acuna, the political scientist.  Full text: BUENOS AIRES -- Buenos Aires Mayor Fernando de la Rua, the 62-year-old candidate for the center-left Alliance coalition, was headed for a victory in Argentina's presidential election with 49.5% of early returns compared with 36.6% for the Justicialist or ""Peronist"" Party candidate, Eduardo Duhalde. By yesterday evening, the government had counted about 55% of the votes. More than 24 million Argentines went to the p"
"e cheaply. That is because Argentina has other worries, which adopting the dollar either would not soothe or might even aggravate. One is fiscal policy. Officially, this year's deficit will be 1.5% of GDP-not huge, considering the recession. But in election years, public spending in Latin American countries has a habit of outstripping all forecasts. And since Argentina failed to achieve fiscal surpluses during its years of booming growth, its public debt has risen steadily. Another worry has been Mr Menem's disappointing failure in his second term to maintain the pace of structural change of his first term. The banking system has been cleaned up and strengthened. But government remains largely unreformed, tax evasion is widespread, labour laws are rigid and some privatisations have created private monopolies. That all adds to the costs of Argentine exporters, only 8% of whose sales are in the United States. Cutting those costs has become even more urgent since many of Argentina's competitors now enjoy similarly low inflation rates but are not tied to the strong dollar. Pushing through further structural economic reform will be the trickiest task facing the next president. Succeed, and Argentina could return to economic growth. Only then should it consider whether to allow itself more flexibility by, say, linking its exchange rate to a broader basket of currencies and thus abandoning the precious currency board. But first Argentina must get to December. If Mr Menem wants his departure to be more tranquil than his arrival, he must redouble his efforts to keep public spending under control. And his would-be successors would be well-advised to lend that effort more than token support.  "
" Argentina was determined not to devalue. The plan sparked interest across the region, promoting debate about the costs and merits of smaller economies preserving their own currencies. While negotiating such a treaty could take two to three years, according to Central Bank president Pedro Pou, unveiling the initiative had an immediate public relations benefit. It reminded investors that Argentina, which has pegged its currency to the dollar since 1991 under a currency board system, could dollarise its economy quickly and unilaterally if it wished, without waiting for an accord with the US. The country appears to have weathered well the financial storm unleashed by Brazil. In sharp contrast to the 1995 ""Tequila crisis,"" triggered by Mexico's botched devaluation, bank deposits have stayed solid at about $78bn, while the Central Bank's reserves have also proved resilient, standing at more than $26bn in late February. However, the solidity of the financial system cannot disguise that the real economy is in the midst of what could be a sharp contraction. The timing of any recovery also depends largely on events outside the control of policymakers - not least in Brazil. The recent economic numbers make grim reading. The Brazilian shock came on top of an already slowing economy, and industrial production fell 6.3 per cent in January, year on year, according to government figures. The government is, for the moment, sticking to its 1999 growth forecast of up to 3 per cent, banking on a rapid pick-up later in the year. But many private sector analysts are predicting a drop in GDP of around 2 per cent for 1999, possibly followed by a rebound in 2000. While the Tequila crisis saw a sharp drop in money supply and a fierce domestic downturn, the impact of the current regional turbulence is going to be felt most strongly through the tradeable goods sector, says Walter Molano, head of research at BCP Securities. Argentina remains a relatively closed economy. Exports account for only about 8 per cent of GDP, of which 30 per cent goes to Brazil. The bulk are commodities or commodities-related, and could find markets elsewhere. However, some sectors, such as the motor industry, are already suffering. ""Net exports to Brazil could fall by about half. Add in the multiplier effect as jobs and spending fall, and there you ha"
"___  Document 467 of 600  Tough times in Argentina NEWS DIGEST:  Publication info: Financial Times [London (UK)] 27 July 1999: 05.  http://search.proquest.com/docview/248730339?accountid=28034  Abstract: Moody's Investors Service, the international ratings agency, yesterday said the prolonged effects of several shocks related to recent world financial turmoil would continue to affect Argentina's economy and, consequently, the asset quality, liquidity, funding profile and bottom line of the nation's banks.  Full text: MOODY'S Tough times in Argentina Moody's In"
"om the regional economic crisis to pull almost level with the opposition Alliance ahead of October's presidential elections, according to an opinion poll published yesterday. The poll, in the daily La Nacion, showed the Peronists on 32 per cent support, against 33 for the Alliance, the long-time favourites to win in October. At the start of December, the Alliance had a lead of 21 points. However, last month's Brazilian devaluation appears, at least temporarily, to have heightened voters' caution a"
"gress and two-thirds of the provinces controlled by the defeated Peronists, Mr de la Rua may have trouble pushing through necessary labour and tax reforms. A new revenue-sharing agreement with the spendthrift provinces is also needed. Yet without structural progress, Argentina will find it harder to persuade investors to stump up $17bn next year to cover its external financing needs. Meanwhile, with a tightening fiscal policy and no flexibility to cut interest rates due to the dollar link, recovery from recession is likely to be anaemic. Argentina's growth, at around 2 per cent next year, will be half that of Mexico or Brazil. There are more attractive markets in Latin America. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"the new economic team will be the financing of about $16 billion in Argentine debt in global markets next year. The second challenge is to regain momentum on economic reforms. The Argentine peso is fixed to the U.S. dollar, and without additional policies that enhance productivity or lower costs, Argentine companies risk losing competitiveness. Mr. De la Rua's top pick for the Finance Ministry post appears to be 53-year-old Jose Luis Machinea, who heads a center-left think tank in Argentina. Mr. Machinea has a doctorate in economics from the University of Minnesota, and his peers say he is a smart economist steeped in economic theory. Nevertheless, he is overshadowed by Argentina's instability during the late 1980s when he was central bank president. He left that post in March 1989, and shortly thereafter, following a failed stabilization plan, Argentine inflation spiraled out of control. Mr. Machinea doesn't have the unqualified support of Argentine businessmen or international investors, but he is working to gain their confidence. There are concerns about whether his center-left tendencies might translate into an acceptance of mild forms of protectionism or subsidies, but few doubt his macroeconomic orthodoxy. ""He wouldn't generate applause,"" says Aldo Abram, general-director of Exante, an economic consulting firm here, but ""it wouldn't worry me a bit if he was minister."" Mr. Machinea attended International Monetary Fund meetings in Washington recently where, as the designated economist for Mr. de la Rua, he began informal talks with officials that will prepare the way for a new credit facility to serve as a backstop for next year's bond financings. He is focused on cutting the federal budget deficit because Mr. de la Rua's economic-recovery plan calls for fiscal austerity that is expected to result in falling interest rates and a subsequent expansion in consumption, investment and credit"
" and 21 per cent ""moderately pessimistic"". The companies polled, which notched up 1998 sales of over $95bn, believed the economy would continue to grow this year, but at a rate ""below 4 per cent"". The economy grew an estimated 4.8 per cent in 1998, and 8.6 per cent in 1997. Private sector analysts forecast growth could slow to 2 per cent or less this year. Ken Warn, Buenos Aires Copyright Financial Times Limited 1999. All Rights Reserved.  "
"ary Fund to about $6bn (£3.6bn) to bolster its defences against the fallout from the Brazilian devaluation crisis. Senior Argentine officials, led by Pablo Guidotti, deputy economy minister, flew to Washington on Wednesday to open negotiations with the IMF on the increase. Mr Guidotti also discussed with the US Federal Reserve the country's fast-developing plans to dollarise its economy, according to Argentine officials. Argentina signed a $2.8bn extended fund facility with the IMF in February last year. Increasing the funds available under the accord would signal strong IMF support for Argentina in the wake of the Brazilian crisis. It would also underline the multilateral lending agencies' determination to minimise the risks of ""contagion"" in the region from the Brazilian Real's devaluation in January. Argentina has not drawn down any of the existing $2.8bn contingency funding. Officials believe the IMF will be receptive to their request to increase the facility, and will not set any radically new conditions, nor alte"
"___  Document 217 of 400  The Americas: Argentina's awkward transition  Author: Anonymous  Publication info: The Economist 351.8121 (May 29, 1999): 31-32.  http://search.proquest.com/docview/224076112?accountid=28034  Abstract: The air of invincibility which used to surround Argentina's President Carlos Menem has dissipated. Since a presidential election is less than five months away, and Menem is due to step down on December 10, advancing powerlessness was inevitable. But it has come suddenly, and at an awkward moment in Argentina.  Full text: Headnote The developing power vacuum in Argentina has unsettled the financial markets. But though President Carlos Menem is down, he is not yet quite out IN THE ten years since he became Argentina's president, Carlos Menem has been nothing if not resilient. An instinctive and normally unerring sense of political timing combined with sheer animal cunning has enabled him blithely to escape from setbacks and scandals that might well have derailed a lesser politician. Yet now, at long last, the air of invincibility which used to surround Mr Menem has dissipated. Since a presidential election is less than five months away, and Mr Menem is due to step down on December loth, advancing powerlessness was inevitable. But it has come suddenly, and at an awkward moment for Argentina. The economy is in recession, and political uncertainty is clouding the financial markets. The desertion of former friends and allies appears to have left the president depressed and isolated. Some Argentines have begun to wonder whether disorder might yet force Mr Menem out of office early, the fate that befell his predecessor, Raul Alfonsin. That still looks unlikely. But intimations of a power vacuum seem to have been the main factor driving Argentina's financial markets down. In the three weeks to May 25th, the Buenos Aires stockmarket index fell by almost a fifth and the yield on Argentina's bonds widened sharply (from around 6% to around 8% above those of the United States Treasury). Jitters about Argentina dragged down markets in Brazil and elsewhere in Latin America. But they had steadied by the middle of this week, even in Argentina itself. One of the causes of the bout of nerves was an ambiguous comment about changing the rigid rules of Argentina's currency board, known locally as ""convertibility"". The remark was made by Domingo Cavallo, who as Mr Menem's economy minister from 1991 to 1996 set up the system. Convertibility pegs the peso"
"___  Document 216 of 400  Leaders: Menem's final days  Author: Anonymous  Publication info: The Economist 351.8121 (May 29, 1999): 15-16.  http://search.proquest.com/docview/224085561?accountid=28034  Abstract: After a decade of President Carlos Menem, Argentina is now much stronger. Both the main candidates in the country's October presidential election - Fernando de la Rua of the opposition alliance, and Eduardo Duhalde of the ruling Peronists - would build on Menem's achievements rather than destroying them.  Full text: Headnote Rather than adopting the dollar, Argentina needs structural reform and a credible fiscal policy WHEN Carlos Menem took over as Argentina's president in 1989, he did so amid chaos. His hapless predecessor stepped down five months early, overwhelmed by hyperinflation. After a decade of Mr Menem, Argentina is now much stronger. Its currency board, which pegs the peso at par to the dollar and limits the money supply to the level of hardcurrency reserves, killed inflation years ago. Huge swathes of the economy have been privatised and modernised, and the country has recorded spurts of rapid, albeit jerky, growth. Despite its problems, notably of corruption, Argentine democracy is also far more solid than it was. Both the main candidates in October's presidential election-Fernando de la Rua of the opposition Alliance, and Eduardo Duhalde of the ruling Peronists-would build on Mr Menem's achievements rather than destroying them. But the new president will not take office until December. Meanwhile, Mr Menem's power is ebbing, and fast (see page 31). He is struggling to make the public-spending cuts his government has promised to the IMF. He has just lost two of "
"___  Document 99 of 600  Determined drive to press ahead: MOTOR INDUSTRY by Ken Warn: Long-established industry boasts some of the most modern manufacturing plants  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 15 Dec 1999: 04.  http://search.proquest.com/docview/248793634?accountid=28034  Abstract: International motor manufacturers have piled into Argentina since the country achieved financial stability in the early 1990s, investing about $5bn in the industry. From having only three large car manufacturers in 1991, Argentina now hosts eight, including the giants of the global motor industry. Their investments were based on upbeat market forecasts for Mercosur, the customs union which groups Argentina, Brazil, Paraguay and Uruguay. The economic downturn and consumer uncertainty in both Argentina and Brazil, the destination for most Argentine car exports, led to a collapse in demand which sent many factories into short-time working.  Full text: International motor manufacturers have piled into Argentina since the country achieved financial stability in the early 1990s, investing about $5bn in the industry. But since Brazil's January devaluation, which sharply reduced the dollar costs of manufacturing there, some at least must be wondering if they did the right thing. From having only three large car manufacturers in 1991, Argentina now hosts eight, including the giants of the global motor industry. Their investments were based on upbeat market forecasts for Mercosur, the customs union which groups Argentina, Brazil, Paraguay and Uruguay. The region's new-found financial stability was expected to lift personal incomes and lead to ever higher demand for high value durables such as cars. But this year sales and production have slumped as the region has struggled to leave behind a recession which began before the Brazilian devaluation but was intensified by it. The economic downturn and consumer uncertainty in both Argentina and Brazil, the destination for most Argentine car exports, led to a collapse in demand which sent many factories into short-time working. In the first 10 months of this year vehicle production fell 41.9 per cent to"
"tween the Argentine Global 2027 bond and its Brazilian equivalent stood at over 500 basis points. Last month it fell to less than 60 basis points. ""The convergence between the two assets should continue as we get closer to the electionsand we expect Argentina to carry a higher risk premium than Brazil by the middle of the fourth quarter,"" said Walter Molano, economist at BCP Securities. The latest Latin American Consensus Forecasts suggested that Brazil's economy would shrink only 1 per cent this year, despite the devaluation trauma, while Argentina's would contract 2.5 per cent. It was inevitable that the political transition, and the drawing to an end of President Carlos Menem's 10 years in power, would increase uncertainty and add to the Argentine risk premium. Whichever party wins, there will be changes of personnel at all levels. But Eduardo Duhalde, candidate for the ruling Peronist party, and his rival Fernando de la Rua from the opposition Alliance, have both been adding to the jitters by suggesting that Argentina could benefit from some form of relief on its $140bn external debt. Their words followed a period in which both men had not strayed much from economic orthodoxy. But in a controversy at the end of last month which contributed to a slump in share values, neither candidate was able to clarify what they were suggesting on the debt. Both, however, emphasised they were not suggesting non-payment. The local financial press roasted the candidates, not least for apparently not knowing - or choosing to ignore - the fact that most of Argentina's debt is in the hands of countless bondholders. Some of them are Argentines. Some of them are voters. Who could Argentina even start negotiating debt relief with? Worse, the controversy came with Argentina still needing to raise about $2bn from the international markets to meet this year's financing needs. Mr Menem added fuel to the fire by warning that an incoming Alliance government might be tempted to devalue. Investors may still be able to dismiss even the uttering of the dreaded ""d-word"" as election knock-about. Bond spreads at least did not deteriorate further amid last week's hostilities. ""Much of the election risk appears to be already priced in,"" said one senior official. "
"n Argentina's economic prospects is less clear. In the short term, things are improving. Mr de la Rua's commitment to stability and the peso's one-to-one peg to the dollar are beyond question. His fiscal stance may be even tougher than his predecessor's - necessarily so, since Argentina's budget deficit will rise to about 2.5 per cent of gross domestic product if left untamed. The new government is expected rapidly to announce spending cuts and tax increases that should win warm praise (and possibly more money, if needed) from the International Monetary Fund. Happily, the economy appears to have bottomed out, though it will still shrink by 3-4 per cent this year. But the long-term outlook is less bright. Without an absolute majority in Con"
"interest-bearing Argentine pesos, which the Fed would then hold as a form of collateral. The deal is that Argentina would remain on the dollar standard, or else the peso notes would become redeemable one-to-one for U.S. dollars. This arrangement would cost the U.S. nothing, aside from paper and printing. Moreover, the Fed would enjoy substantial seigniorage income because economic growth in client countries would lead to expansions of desired holdings of U.S. currency. A rough estimate is that the overall value of this flow equals the initial stock of currency -- $16 billion in the case of Argentina and much more if the dollar zone were spread throughout the Americas. More important than the seigniorage revenue would be the U.S. role in promoting economic stability in North and South America. To some extent, the dollar zone would parallel and compete with the recently established euro area. In fact, if the U.S. does not create a dollar zone, some Latin American countries might defect to the euro. One difference from the euro arrangement, which was roughly a merger of equals, is that the U.S. would be the clear leader of the new zone. The currency ought still to be called the dollar, rather than, say, the america. Also, one concern about the European common currency was that it would encourage the spread of antimarket economic and social policies, especially to Britain. The spread of U.S. policies to the rest of the Americas would likely be a plus. Another issue is whether the U.S. would become the lender of last resort for its dollar-zone clients. A country's use of the dollar would eliminate part of this problem by removing some sources of economic crisis, namely those that relate to actual and potential devaluations of the currency. But possibilities would remain for defaults by banks or governments. The main consequence of a dollarization here is that it would eliminate the potential for a country to deal with problems by devaluing, that is, by engineering a partial and perhaps concealed default on domestically denominated debts of government or banks. Defaults would have to be explicit, but there is no reason to think that open default is worse than hidden default. It may be desirable for the U.S. to provide a specified line of credit to countries that are members of the dollar zone. This borrowing potential is not so different from the one that applies less systematically at present. For example, the U.S. and international organizations provided substantial funds to Mexico in 1995, smaller sums to Argentina in 1995, and large amounts to Brazil recently. In recent years, the U.S. has dealt with international financial crises in a reactive and ad hoc manner, its Treasury responding to crises with bailouts. More constructive, perhaps, have been the policy recommendations and conditionality that accompanied these bailouts. But it would be better if these countries made basic changes in monetary institutions to avert crises in the first place. Dollarization in the Americas is one such change. Washington ought to take the lead in promoting this monetary integration. For the Clinton administration, the improvement in international economic policies would build on the impressive economic record at home. Hence, it is an opportunity for the president to leave a great overall economic legacy. --- Mr. Barro is a professor of economics at Harvard University and a senior fellow of the Hoover Institution.  "
"___  Document 354 of 600  Confusion surrounds Argentine discussions with IMF  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 13 Feb 1999: 24.  http://search.proquest.com/docview/248201368?accountid=28034  Abstract: Confusion yesterday surrounded Argentina's relations with the International Monetary Fund after official sources first confirmed, then denied, reports that the country was seeking to double the funds available from the IMF to about $6bn. An economy ministry spokesman said earlier in the day that senior officials, led by deputy economy minister Pablo Guidotti, flew to Washington on Wednesday to open negotiations with the IMF on the increase. Mr Guidotti also discussed with the US Federal Reserve the country's fast-developing plans to dollarise its economy, according to the spokesman.  Full text: Confusion yesterday surrounded Argentina's relations with t"
" to the dollar at par and limits the money supply to the level of hard-currency reserves. Not only did it kill the hyperinflation that brought down Mr Alfonsin, but it has given Argentina a new era of stability and growth. And also, say its critics, two recessions in four years. Even so, almost nobody in Argentina wants to abandon it soon. Nor, as he made clear, does Mr Cavallo, who is now an anti-Menem presidential candidate. In the past, Mr Menem and Argentina would confidently have brushed aside such minor diversions. Now this is proving much harder to do. The suddenness of Mr Menem's conversion into a lame duck owes much to his injudicious efforts to stretch Argentina's constitution to allow him to run for an unprecedented third term. That pitched him into a bruising battle inside his Justicialist (Peronist) Party, against the supporters of Eduardo Duhalde, who as governor of Buenos Aires province holds his country's second most powerful elected post. Though Mr Duhalde has not yet been officially proclaimed as the Peronists' presidential candidate, in recent weeks it has become clear that he has prevailed in his war against Mr Menem. First, a Menem ally was trounced in a party primary on May 9th to choose a candidate for the Buenos Aires governership. Next, faced with a wave of protests from students and teachers, Mr Menem backed down over a proposal to cut education spending, but only after his education minister had resigned over the issue. Then on May 21st he lost another minister. Erman Gonzalez, a long-serving Menem crony from the president's time as governor of the remote province of La Rioja, stepped down as labour minister after it was revealed that he was drawing a government pension of $8,000 a month on top of a generous official salary. That was damaging, but not illegal, and in the past Mr Menem would have vigorously defended his friend. This time he preferred to evade battle. The decline in Mr Menem's influence comes just when his finance officials most need it, to help them staunch a deterioration in the public finances. The recession has cut tax revenues, and Congress has snipped away at proposed spending cuts which Roque Fernandez, the economy minister, last month promised the IMF. The government now estimates this year's fiscal deficit at $5 billion, or 1.8% of GDP. Given the recession that amounts to a ""spectacular job"" said the IMF this week. But others are more sceptical. Martin Redrado of Fundacion Capital, a think-tank, reckons "
"he continent that an Argentine devaluation was imminent created annoyance and bewilderment in Buenos Aires. ""Anyone who knows how the economic team thinks, and how our possible [post-election] replacements think, would know the rumour was total nonsense,"" said Pablo Guidotti, deputy economy minister. Veronica Berger Collins, director of Marcuard Asset Management, said: ""No-one here wants to devalue, not the government, not industry, not the people in the streets."" Bank deposits and international reserves have been unaffected, but the jitters have had a powerful impact on the electoral campaign, making it more measured, sober and boring. Politicians from the ruling Peronist party and the opposition Alliance have all repeatedly sworn undying allegiance to convertibility - the currency board system that pegs the peso to the dollar at par. Eduardo Duhalde, the likely Peronist presidential candidate, abruptly halted his rhetorical attacks on the International Monetary Fund. As trading opened yesterday, most believed the devaluation concerns had all but evaporated. But more concrete worries were all assuredly still with them. Ken Warn Copyright Financial Times Limited 1999. All Rights Reserved.  "
"___  Document 67 of 500  Assembly Speaker Wants California To Open a Trade Office in Argentina  Author: By Shirley Leung  Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 10 Feb 1999: CA4.  http://search.proquest.com/docview/398661901?accountid=28034  Abstract: Hoping that Gov. Gray Davis's trip to Mexico last week will open doors in the Latin American market, Assembly Speaker Antonio Villaraigosa plans to introduce legislation this session to establish California's first trade office in Argentina. Mr. Villaraigosa, who accompanied the governor and business leaders on the Mexican trade mission, says he was persuaded that untapped opportunities for California business await in Latin America. The trip marked the first time in six years a Mexican president and a California governor met, and aimed to mend relations with Mexican officials, who were offended by former Gov. Pete Wilson's hostility to illegal immigrants. The speaker plans to seek about $500,000 in the 1999-2000 state budget to open a three-person office in Buenos Aires. The current budget allots $5.7 million to run seven trade offices and open five smaller ones, in Calgary, Alberta; Manila, Philippines; Sao Paulo, Brazil; Seoul, South Korea; and Shanghai, China. According to the state Trade and Commerce Agency, the seven trade offices now operating -- in London, Mexico City, Tokyo, Frankfurt, Johannesburg, Hong Kong and Taiwan -- brought California more than $6 for every $1 invested in 1997-98, generating over $26 million in tax revenue.  Full text: LOS ANGELES -- Hoping that Gov. Gray Davis's trip to Mexico last week will open doors in the Latin American market, Assembly Speaker Antonio Villaraigosa plans to introduce legislation this session to establish California's first trade office in Argentina. Mr. Villaraigosa, who accompanied the governor and business leaders on the Mexican trade mission, says he was persuaded that untapped opportunities for California business await in Latin America. The trip marked t"
"___  Document 498 of 600  Argentines to be allowed to visit Falkland Islands  Author: Lapper, Richard  Publication info: Financial Times [London (UK)] 15 July 1999: 03.  http://search.proquest.com/docview/248697327?accountid=28034  Abstract: The ban on Argentines visiting the Falkland Islands is to be lifted, marking the most significant thaw in relations between Argentina and the British overseas territory since the 1982 war. The measure - one of a package negotiated by the British and Argentine governments with the participation of the Falkland Islands Council - is designed to reduce tension and paves the way for the possible development of closer economic and business ties. Other steps include the resumption of direct flights between Punta Arenas in Chile and the Falklands and British-Argentine co-operation over fisheries conservation in the South Atlantic.  Full text: The ban on Argentines visiting the Falkland Islands is to be lifted, marking the most significant thaw in relations between Argentina and the British overs"
"eas territory since the 1982 war. The measure - one of a package negotiated by the British and Argentine governments with the participation of the Falkland Islands Council - is designed to reduce tension and paves the way for the possible development of closer economic and business ties. Other steps include the resumption of direct flights between Punta Arenas in Chile and the Falklands and British-Argentine co-operation over fisheries conservation in the South Atlantic. ""It marks a change from an era of confrontation to a new chapter of dialogue and co-operation,"" said Robin Cook, the British foreign secretary. Mr Cook insisted, however, that British sovereignty over the islands was not compromised by the agreement. The deal, which follows a steady improvement in UK-Argentina relations during the 1990s, was welcomed by Guido di Tella, the Argentine foreign minister, as marking ""the beginning of an element of trust"". He also said however that the deal had no effect on Argentina's claims of sovereignty. Flights from Chile to "
"any other functions of local government have slowed or ground to a halt. The provincial debt problem is complicating the de la Rua team's need to find $7 billion in savings or spending cuts to meet a fiscal-deficit target of $4.5 billion next year. The risk is that unrest in the provinces will also make it more difficult for Argentina to finance about $11 billion in maturing foreign debt next year in international markets. Interest rates shot up in Argentina amid election-year tensions, although rates have been drifting lower. Discussions have been going on since July about the need for some kind of large financial backstop to reassure international investors. One package that may come under consideration is a jumbo rescue package known as a contingent credit line, which Mr. Summers and the Clinton administration designed in response to the international financial crisis that began in mid-1997. So far no country has applied for the program, which has proved embarrassing to the White House. Mr. Summers recommended the IMF loan program to the departing presidential economic team yesterday, but didn't specifically discuss it with the new team. Nevertheless, a de la Rua economic adviser said, ""What we need is an agreement with the IMF. What shape or form it takes"" is still being debated. Credit: Staff Reporters of The Wall Street Journal  "
"___  Document 219 of 600  Argentina LEX COLUMN  Publication info: Financial Times [London (UK)] 26 Oct 1999: 28.  http://search.proquest.com/docview/248795895?accountid=28034  Abstract: The victory of Fernando de la Rua, a low-key conservative, in Argentina's presidential elections is good for democracy in a country that has long favoured flamboyant strongmen. Whether it will be enough to restore international investors' faith in Argentina's economic prospects is less clear.  Full text: Argentina The victory of Fernando de la Rua, a low-key conservative, in Argentina's presidential elections is good for democracy in a country that has long favoured flamboyant strongmen. Whether it will be enough to restore international investors' faith i"
"ore desire, and ability, to pursue much-needed changes in the judiciary and the police force, for example. And he is better placed to crack down on the corruption that many Argentines believe has flourished in dark comers of the current regime. But the second big reason for welcoming a victory for Mr de la Rua is that it would be a vote for continuity as much as for change. While Eduardo Duhalde, his Peronist opponent, has made rash public-spending promises, and suggested that Argentina should default on its foreign debt, it has been Mr de la Rua who has responsibly promised to maintain the main thrust of current economic policies, including convertibility. That reflects a broad consensus in Argentina on the importance of maintaining economic stability-a consensus that may seem surprising, since the country is currently deep in recession. The slump has not been caused by the currency board. Blame instead a combination of (mainly outside) circumstances, including investors' fears about emerging markets, low prices for commodity exports and Brazil's devaluation. But it has raised a worrying question: will its fixed exchange rate condemn Argentina to years of stagnation? In 1995, when Mexico's devaluation pushed Argentina into a similar (though shorter) recession, it quickly surged back to a boom. But recovery may be slower this time (see pages 23-26). The fiscal position has deteriorated, and that has worried financial markets: Argentina can no longer count on c"
" under which the money supply is limited to the stock of hard-currency reserves, was set up in 1991, and leaves the government with few policy tools to deal with such external blows: it can neither devalue nor ease monetary policy. The supposed advantage-besides low inflation-is that investors will be less scared of devaluation, and so less likely to withdraw their money, than in a floating exchange-rate system such as Mexico's. Argentina's currency board has withstood recent adversity well. In contrast to the 1995 recession, this time there has been no flight of capital. Though a few small banks failed, a reformed financial system, in which foreign banks now hold more than half of total deposits, has barely blinked. And renewed growth is expected. Roque Fernandez, the economy minister, reckons that output will grow at an annualised rate of 5-6% in the second half of the year. The whole hog? Yet this is not quite the end of the story. Since its inception in 1991, Argentina's currency board has not only killed hyperinflation but also allowed the country to grow after two decades of stagnation. But it clearly makes the country especially vulnerable to external shocks. The government's answer, announced by President Carlos Menem in January, is a proposal to take the currency board a step further, and formally adopt the dollar (which already accounts for around 7o% of Argentina's money supply). Officials argue that by eliminating all possible risk of devaluation, this would reduce Argentina's borrowing costs (only marginally, say critics, since it would not get rid of the risk of default). But dollarising unilaterally has costs of its own. First, the central bank would have to spend $15 billion of its reserves to withdraw pesos from circulation. Since those reserves are currently invested in American Treasury bonds, that means losing $75om a year in interest income. Second, the bank would lose its current-limited-role as a lender of last resort for troubled local banks. So what Argentina would like is to ad"
" a quarter to a third, many of them manufactures. Since Argentina is wedded to a fixed exchange rate pegged to the dollar, those exports now cost 25-30% more in reais, and risk being priced out of the market. Meanwhile, Argentine firms fear an invasion of cheap Brazilian imports. So far, that has not happened. The best estimates suggest that in the first three months of this year, Argentina's exports to Brazil plunged by 20-25%. At the same time Argentine firms now complain about surging imports from Brazil of products as varied as steel, paper and chicken meat. Yet, overall, in dollar terms, Argentina's imports from Brazil have fallen sharply, too. Officials from both countries stress that, though trade has suffered, their commitment to Mercosur has not. They point out that Brazil's devaluation has not prompted a rash of unilateral new barriers to its exports. Instead, Argentine officials have preferred to seek ""voluntary"" agreements among producers in industries where there has been a sudden surge of Brazilian imports. However, on April 19th Argentina announced anti-dumping duties on some Brazilian steel products. Brazil, for its part, has made some concessions: it has scrapped subsidised credits for exports to Mercosur, and a rule that in practice required many Brazilian importers to pay in advance for Mercosur products. And, says Luiz Felipe Lampreia, the foreign minister, Brazil will continue to monitor closely the aftershocks of the devaluation. But in Buenos Aires the devaluation has reawakened fears that Mercosur is failing to guarantee problem-free access to Brazil's huge market. The biggest risk for Argentina, says Felix Pena, its deputy trade minister, is that businesses decide they must put their factories in Brazil. ""We have to send clear signals that it can't be like that,"" he says. Such fears reflect how far Mercosur is from realising its lofty ambitions. It has achieved most of the easy part. Since the start of this year trade between Argentina and Brazil has been tariff-free (except for cars and sugar). Nevertheless, for the past three years, it has made almost no progress in removing myriad non-tariff barriers to intra-group trade. It still lacks a common internal customs code, for example, and many imports still require licences. Talks on freeing trade in services and on government procurement are stalled. Mercosur claims to be not just a NAFTAstyle free-trade area but an incipient customs union in the manner of the Eu, which means that all members should apply common external tariffs on imports from third countries and adopt a common foreignt"
"ast,"" says Leandro Fernandez, Argentina's trade attache in Los Angeles. ""We are very happy with this announcement -- there are very important trade opportunities between (Argentina) and California."" Latin American specialists agree that California and Argentina make a good match. Among California's biggest exports are computers, software and medical supplies -- sectors that rank among Argentina's biggest imports, says Michael Liikala, who heads the U.S. Commercial Service in Buenos Aires. At the same time, California and Argentina share several major industries -- particularly tourism, agriculture and viticulture -- that might lead to collaborations between businesses. (Or, for that matter, competition; this week California growers protested the importation of Argentine citrus.) But Carlos Valderrama, director of Latin American operations for Honolulu-based law firm Carlsmith Ball, questions the wisdom of operating two separate trade offices in the Mercosur countries. Mr. Valderrama, who was tapped by Republican Gov. George Deukmejian to open the state's Mexico City office in 1989, argues that California should scrap plans to open a Sao Paulo office, and instead concentrate resources in Buenos Aires. He says the Argentine capital would be a better hub because of its central location. ""You will dilute the resources if you have offices in Sao Paulo and Buenos Aires,"" warns Mr. Valderrama. But with Brazil in economic crisis, Latin American experts say the time might be right to secure a foothold there for California. After all, the Brazilian economy will eventually recover, opening a market in South America's largest nation. ""We have a good crack at getting a big chunk of the business,"" says Jose de la Torre, a professor of international business at the University of California-Los Angeles and director of its Center for International Business Education and Research. ""But not next year. Everybody (in Latin America) is going to be in a recession."" Credit: Staff Reporter of The Wall Street Journal  "
"tanley Fischer, IMF first deputy managing director, said Argentina was doing a ""spectacular job"" in maintaining fiscal discipline in the teeth of a severe economic slowdown. ""Argentina had had to bear the adverse consequences of external shocks, which have taken a significant toll on economic performance. Nevertheless sound macroeconomic management, the strengthening of the banking system have had beneficial effects on confidence and allowed it to deal with these challenges,"" Mr Fischer said. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"___  Document 350 of 600  Argentina seeks more IMF funds  Author: Dyer, Geoff; Newsome, Justine; Warn, Ken  Publication info: Financial Times [London (UK)] 13 Feb 1999: 04.  http://search.proquest.com/docview/248641114?accountid=28034  Abstract: Senior Argentine officials, led by Pablo Guidotti, deputy economy minister, flew to Washington on Wednesday to open negotiations with the IMF on the increase. Mr Guidotti also discussed with the US Federal Reserve the country's fast-developing plans to dollarise its economy, according to Argentine officials. Argentina signed a $2.8bn extended fund facility with the IMF in February last year. Increasing the funds available under the accord would signal strong IMF support for Argentina in the wake of the Brazilian crisis. It would also underline the multilateral lending agencies' determination to minimise the risks of ""contagion"" in the region from the Brazilian Real's devaluation in January.  Full text: Argentina is seeking to double funds available from the International Monet"
"g goal: improving competitiveness. Many existing taxes, such as those on payrolls, hinder economic efficiency. Few Argentine economists doubt that tax cuts, in the medium run, are a vital component of better competitiveness. Feeling flexible Other measures to improve competitiveness are not going to be easy. Argentina has already done many of the obvious productivity-enhancing reforms, such as privatisation and trade liberalisation. With the exception of two big banks, for instance, almost everything that the state owned-and managed badly-has been privatised. The reforms that remain are politically far harder. One is labour markets. Even during the boom years, unemployment remained painfully high-strong evidence that something is wrong with the jobs market. The problem is not high unemployment benefits: there is no unemployment insurance to speak of, and many of the officially unemployed work in the huge ""black"" economy. Moreover, although Argentine businesses cannot rely on inflation to reduce the real value of wages, anecdotal evidence abounds that a lot of firms have been cutting nominal wages during the current recession. So the labour-market problems seem to lie in a myriad of excessive regulations that hit smaller firms hard, and in high payroll taxes (including big mandatory payments by employers to trade-union health schemes) that discourage the hiring of new workers. New laws to make it easier to sack workers, to hire temporary workers and to make contracts more flexible would help. But cutting the cost of employment will be far harder. Although payroll taxes were reduced under Mr Menem, they are still too onerous. So are the huge sums paid to trade unions as mandatory dues and for union-run benefit plans. These schemes yield few services (many big firms pay for private health insurance because the unions' efforts are so inadequate) and they foster corruption. So a big reduction in such employment costs means tackling union power. Another, politically easier, way to reduce business costs would be to reform the regulation of Argentina's public services. Many of the early privatisations-of telecoms, electricity distribution and roads, for example-- came with regulatory frameworks that restricted competition or, at least, were too generous to the new owners. Road tolls were indexed to inflation in the United States. That was perhaps plausible in the early 199os, but not now that Argentine consumer prices are falling. Since 1991, the prices of privatised services have increased 55% more than those of goods, according to Pedro Lacoste, an economic consultant. Since many Argentines believe that some of these privatisations were tainted by corruption, their reform would be politically popular, though it might also turn out to be legally complicated. The confidence factor Over time, these reforms would improve Argentina's flexibility and competitiveness. But they will not be decisive in the shortrun.Whether Argentina faces economic stagnation or a return to growth depends immediately on whether market confidence can be regained. Given its dependence on external savings, the biggest influence on its fortunes will be foreign investors. Of course, foreign investors' confidence depends on their views about the country's future, which in turn depend both on whether Argentina's terms of trade improve and on investors' assessment of the new govemment's commitment to reform. But two other factors could affect international confidence in the short term: a decision to abandon the peso entirely in favour of the United States dollar, and the promise (or lack) of financial support from official international institutions such as the IMF. To its proponents, dollarisation offers Argentina an instant route to greater foreign confidence. By adopting the dollar, it would eliminate the devaluation risk that swells the interest rates which foreign lenders demand. Foreigners would be prepared to lend for longer periods, and they would stop worrying about the size of the current-account deficit. The costs of giving up the peso, it is argued, would be low, since Argentina is already in effect dollarised. The impact of opting for the dollar would depend on how it was done. Unilateral dollarisation-in which Argentina simply adopted the dollar without any formal involvement of the United States-might reduce the risk premium demanded by lenders. But most Argentine economists question whether these benefits would be large, since a unilateral decision on Argentina's part could always be reversed (admittedly, at great cost). To go for the dollar via a formal monetary treaty with the United States could bring far greater benefits. The trouble is that, though the Clinton administration has promised to give the idea serious consideration, next year's presidential election in the United States means that it is not an option right now. More important for short-term market confidence is the potential for Argentina to tap official funds, especially from the IMF. Such support was important in helping ""convertibility"" survive Mexico's 1995 devaluation. It is proving important now: the credit agencies awarded an investment-grade rating to a new $1.5 billion Argentine bond partly backed by a World Bank guarantee. Nobody in Buenos Aires doubts that a new government which shows reasonable appetite for reform will receive money from the IMF; it would be a terrible blow to the institution's already battered credibility if Argentina ""failed"". At issue is only how much money, and on what terms. Given all the uncertainties, Argentina's future is hard to predict. Recent history cautions against excessive pessimism. In less than ten years, Argentina's model has suffered-and survived-shocks that would have tested far stronger economies. And, as commodity prices strengthen, Brazil recovers and emerging markets regain some of their shine, the world outside may start to smile once more on Argentina. But there is no cause for exuberant optimism. The country has already reaped the rewards of its early reforms, while building up debts that will continue to make investors nervous. Where Argentina ends up will depend on its new president's economic good sense, political acumen-and good fortune.  "
"___  Document 359 of 650  Argentina Seeks To Limit Spending, Balance Its Budget  Author: By Craig Torres  Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 27 Aug 1999: A7.  http://search.proquest.com/docview/398690797?accountid=28034  Abstract: Argentina's Congress approved legislation that aims to limit government spending and guide the country toward a balanced budget by 2003, a move aimed at reassuring financial markets and providing policy continuity during an election year. The legislation isn't ironclad, because each annual budget is a new law in itself, but analysts hailed the bill as a critical disciplinary guideline at a time when Argentina's public debt is under intense scrutiny by investors, rating agencies and the International Monetary Fund. ""This is a good signal about the intentions of policy makers, particularly Congress,"" said Vladimir Werning, an economist at J.P. Morgan & Co. ""And it provides a budget guideline during the political transition.""  Full text: BUENOS AIRES -- Argentina's Congress approved legislation that aims to limit government spending and guide the country toward a balanced budget by 2003, a move aimed at reassuring financial markets and pro"
"___  Document 109 of 600  Temperature set to rise in run-up to Argentine election: With voters going to the polls in October, the government is under pressure to perform well economically, writes Ken Warn:  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 13 May 1999: 06.  http://search.proquest.com/docview/248697625?accountid=28034  Abstract: With students and teachers taking to the streets and forcing a government climbdown over education spending cuts, this cannot have been the happiest of weeks for Roque Fernandez, Argentina's economy minister. The convulsion over education has convinced analysts that the political temperature is set to rise before October's presidential elections, and that the government faces an ever tougher battle to make ends meet. Added to these concerns are nagging worries over Argentina's long-term competitiveness in the light of devaluations in Asia and Brazil. Mr Fernandez said on Tuesday the government would raise spending by $150m from planned levels and restore at least part of the $280m in education cuts, formulated as part of a $1bn spending reduction agreed last month with the International Monetary Fund. He also said Argentina would again seek to renegotiate its fiscal deficit target with the IMF from the $4.95bn agreed last month, itself $2bn up on the previous target.  Full text: With students and teachers taking to the streets and forcing a government climbdown over education spending cuts, this cannot have been the happiest of weeks for Roque Fernandez, Argentina's economy minister. Mr Fernandez, a spending hawk, clearly does not like having to backtrack on spending curbs. But the sheer scale of the protests appears to have forced the government's hand. The convulsion over education has convinced analysts that the political temperature is set to rise before October's presidential elections, and that the government faces an ever tougher battle to make ends meet. Added to these concerns are nagging worries over Argentina's long-term competitiveness in the light of devaluations in Asia and Brazil. Mr Fernandez said on Tuesday the government would raise spending by $150m from planned levels and restore at least part of the $280m in education cuts, formulated as part of a $1bn spending reduction agreed last mont"
"herited by the next government. The recession is also hitting companies in the bottom line and most are expected to publish poor first-half results over the coming weeks. ""I can't see too much upside until after the elections,"" says Mr Costa Buck. ""The oil companies have done relatively well, but apart from that there are very few winners."" Foreign investors have been sidelined, reducing their Argentina weightings after Spain's Repsol took over YPF, the largest oil and gas company and previously the most heavily traded stock on the market. The market saw the entry of a new stock on Monday with a $55m offering by the Roggio group's Autopista del Oeste. Ecogas, a leading gas distributor, will also list in the coming weeks. But these IPOs do little to offset the virtual disappearance of YPF from the market. The prospect of oil company Perez Companc, which makes up 30 per cent of the market, suffering a similar fate sends shivers down spines. Mr Costa Buck hopes that a rumoured takeover would be a deal between the buyer and the company's controlling shareholders. But if a bidder also wanted to buy up shares in the market, as Repsol did with YPF, it would be ""terrible"", he says. ""The Argentine market could disappear."" Peter Hudson Copyright Financial Times Limited 1999. All Rights Reserved.  "
" Full text: ARGENTINE ECONOMY Business upbeat on prospects The directors of Argentina's biggest companies are relatively upbeat about prospects for the economy this year, despite the sharp slowdown in growth seen in the second half of 1998, according to a new survey. A poll of 211 businesses by Price Waterhouse-Argentina, a member firm of PwC, found 77 per cent ""moderately optimistic"" about the economy, with 2 per cent ""strongly optimistic"""
"e on December 10. ""The new government will have to launch a large amount of reforms in its first 12 months,"" said Mr Lacoste. However, the external context is finally providing some better news for Argentina. Continued worries over the Brazilian real, and the Ecuadorean debt crisis weigh on the region. But the stronger oil price, firmer agricultural commodity prices, and the weaker dollar all play in Argentina's favour over the medium term, as does economic recovery in Asia and Europe. But recovery, even without further external shocks, looks like it may at best be slow. ""Only by the end of next year is the economy likely to have regained the levels of July 1998, when the recession started,"" said Martin Redrado, president of economic think tank Fundacion Capital. One of the new government's earliest challenges will be on the fiscal front. The outgoing administration has already renegotiated this year's fiscal deficit target with the IMF from $2.95bn up to $5.1bn - a target it will struggle to meet. The widening fiscal gap has only served to underline Argentina's dependence on foreign capital, and its vulnerability to changes of mood among international investors. Both the leading presidential candidates, Fernando de la Rua, of the opposition Alliance and Eduardo Duhalde, of the ruling Peronist party, have fuelled investor doubts with campaign rhetoric suggesting the possibility of ""renegotiating"" Argentina's external debt. Mr Duhalde, in particular. insisted with the theme - sending the stock market sliding in July - although both candidates' economic teams made clear there was no question of not meeting debt obligations. Despite the campaign fireworks, Argentina's economic fundamentals remain pretty solid, according to a recent study by Goldman Sachs. Compared with a sample of 24 emerging economies, Argentina had one of the lowest public sector deficits and one of the longest average debt maturities. It had the fifth lowest public sector borrowing requirement as a percentage of GDP, and an external financing requirement at about the average for emerging economies. However, Goldman Sachs warned that an aggressive fiscal tightening might be advisable to reduce vulnerability to external shocks. The new administration looks like it will not be entirely without ammunition to turn investor perceptions around. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"ought to ease investor fears over both its fiscal deficit and its future financing needs. Roque Fernandez, economy minister, said next year's budget, to be presented on September 15, would allow for a fiscal deficit of about $4.5bn, or 1.5 per cent of GDP, down from this year's $5.1bn target set with the IMF. The budget document will also forecast a return to growth of 3.5 per cent next year - in excess of most private sector forecasts. Mr Guidotti rejected suggestions from several local analysts that Argentina needed to line up additional contingency financing from the IMF to see it through the period of political transition. ""Our existing $2.8bn facility [with the IMF] remains in place. We are going to meet our third-quarter objectives with the Fund and it is not necessary to ask for additional funds,"" he said. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"rade policy. But there has been even less progress towards a common external tariff Beatriz Nofal, of Eco-Axis, a Buenos Aires business consultancy, points out that all the Mercosur countries, especially Brazil, have used such devices as tax credits on capital-goods imports, which break the principle ofa customs union. And after two years of fruitless talks on a free-trade agreement between Mercosur and the Andean countries, Brazil announced this month that it would start fresh negotiations on its own. By June it hopes to have agreed on lower tariffs for its manufactured goods in the Andean countries. Any tariff cuts it might make in return would be ""illegal"", says Jorge Campbell, Argentina's chief Mercosur negotiator. None of this means that Mercosur is about to fall apart. The politicians in both Brazil and Argentina have too much invested in the agreement for that to happen; so do many businessmen. But it does leave the group with two big tasks. First, it has to find a way for Brazil's now-floating currency to cohabit with Argentina's rigid currency board. A common currency for Mercosur, an idea promoted by Argentina's Mr Menem, is decades away, says Mr Cardoso in Brazil. In any event, Mr Menem now wants to adopt the dollar instead. Even so, some sort of common macroeconomic targets might help. The second task is to accept that, if they are serious about being a customs union, Mercosur's members must accept that they no longer have complete freedom to change their own trade rules. Even the more modest goal of a free-trade area, if it is to be a credible one, means that they can no longer shirk agreement on a few common laws (on matters such as competition policy) and some minimal common institutions, including a permanent tribunal to settle trade disputes. But little progress is likely soon, not least because Paraguay, which will play host to the next Mercosur summit in June, has just ousted its president, and Argentina has a presidential election in October. Much, as always in Mercosur, rests on Brazil. While it was struggling to prevent a devaluation, it preferred to avoid debate on deepening the block, as Mr Cardoso admits. ""Now, after the crisis, I think it's our responsibility to give more impetus to Mercosur,"" he says. By forcing Mercosur to take a more honest look at its problems, Brazil's devaluation could yet serve to relaunch the project on a more realistic basis. Delay in doing this could be costly. As Roberto Bouzas, an economist at Flacso, a Buenos Aires graduate school, argues, the risk facing Mercosur is not one of rupture but of irrelevance.  "
"___  Document 198 of 600  Common market weathers the disputes: MERCOSUR by Richard Lapper: A change of president in Argentina is expected to lead to warmer international relations, which have been strained within the community by differences over trade  Author: Lapper, Richard; Warn, Ken  Publication info: Financial Times [London (UK)] 02 Nov 1999: 05.  http://search.proquest.com/docview/248874581?accountid=28034  Abstract: Mercosur will end 1999 in better shape than many Brazilians would have thought possible at the end of January. The South American common market has survived intact in spite of a series of trade disputes, and Argentina's new president, Fernando de la Rua, is expected to be more enthusiastic about building better relations with Brazil than was his predecessor, Carlos Menem. Nevertheless, the crisis triggered by the devaluation of the Real is prompting some long-term strategic thinking about the market's future. Increasingly, government officials and diplomats from both Brasilia and Buenos Aires recognise that a greater degree of economic convergence among this region's economies - as well as some kind of more durable institutional framework - will be necessary if Mercosur is not to be bogged down by trade tensions. Trade within the union has grown fivefold since 1991; Brazil is now Argentina's biggest trading partner. The development of a bigger internal market has been attractive to foreign investors, partially explaining the very significant flows of foreign direct investment that both Argentina and Brazil have attracted during the 1990s.  Full text: Mercosur will end 1999 in better shape than many Brazilians would have thought possible at the end of January. The South American common market has survived intact in spite of a series of trade disputes, and Argentina's new president, Fernando de la Rua, is expected to be more enthusiastic about building better relations with Brazil than was his predecessor, Carlos Menem. Nevertheless, the crisis triggered by the devaluation of the Real is prompting some long-term strategic thinking about the market's future. Increasingly, government officials and diplomats from both Brasilia and Buenos Aires recognise that a greater degree of economic convergence among this region's economies - as well as some kind of more durable institutional framework - will be necessary if Mercosur is not to be bogged down by trade tensions. ""The fact that we haven't had institutions means we weren't weighed down by a Brussels-style bureaucracy,"" says Fabio Giambiagi, head of planning at the"
" National Bank of Economic and Social Development (BNDES). ""But some kind of institutionalisation is necessary. Either you create a supranational framework or you run into the kind of problems we have faced in the past few years."" The growth of trade and investment in the region has demonstrated the value of the customs union, which also includes Uruguay and Paraguay. Chile and Bolivia have associate membership. Trade within the union has grown fivefold since 1991; Brazil is now Argentina's biggest trading partner. The development of a bigger internal market has been attractive to foreign investors, partially explaining the very significant flows of foreign direct investment that both Argentina and Brazil have attracted during the 1990s. ""The spectacular growth of intra-bloc trade in the first few years is a previously unimaginable reality which has helped transform Mercosur into one of the world's most dynamic emerging markets and a magnet for foreign investment,"" says a recently-published analysis by the Madrid-based Institute for European-Latin American Relations (Irela). This year's trade disputes, however, have shown that further integration is necessary if these advances are to be consolidated. Brazilian subsidies on sugar and steel exports have been a bone of contention for some time, while Argentina claims its motor manufacturers are at a disadvantage compared with Brazilian rivals who are able to import raw materials and supplies at special tariff rate of 2 per cent. Argentina-based motor companies import raw materials under the common external tariff of between 12 and 22 per cent. Brazil's devaluation of the Real in January triggered a series of other disputes. Burdened with their own one-to-one exchange rate - secured by the country's currency board - some sectors of Argentine industry, particularly in less-competitive areas such as textiles, paper, and footwear, panicked as the Real plummeted, and pressed for emergency measures to protect them against a feared avalanche of Brazilian products. According to Irela, Argentine exports to Brazil fell by 25 per cent in the first six months of 1999, with industrial exports falling by as much as 35 per cent. Tensions over trade came to a head when Argentina established quotas for textiles and threatened to do the same on shoes, prompting a series of tit-for-tat measures. Brazil, for example, reintroduced price subsidies for rice producers, accusing Argentina of dumping, and launched a dumping investigation of Argentine dairy products. In turn, Brazilian exporters of machinery"
"behind a proposal to abolish the peso in favour of the US currency. In response, former president Raul Alfonsin grumbled that adopting the dollar would make Argentina ""an appendage"" of the US, like Puerto Rico. But behind its rejection of ""dollarisation"", the opposition is watching events with mounting alarm. Presidential elections will be held in October and the political debate is shifting away from its favoured campaign themes. Mr Menem has pushed the debate into an area of visceral importance for Argentines - how to ring-fence the economy from external shocks, such as the chaos that has descended on Brazil in the wake of devaluation. Memories of the hyper-inflation of the 1980s and early 1990s run deep. ""The fact that this plan throws the opposition on the defensive is doubtless just one of its attractions for Menem,"" said one official. Another attraction is that the plan reminds nervous international investors that Argentina has a weapon in its policy armoury denied to most other emerging economies. With or without a negotiated accord with the US, Argentina could dollarise in the face of a speculative attack, officials said. But beyond these short-term considerations, senior central bank and Economy Ministry officials are increasingly persuaded that dollarising under a ""treaty of monetary association"" with the US would provide real long-term benefits for the economy. Convertibility, the currency board system that has pegged the peso at par to the dollar since 1991, has worked well, but not quite well enough, they say - investors still demand a premium for the perceived risk of devaluation. Argentina, which must "
" inflation and provided a base of stability that allowed the economy to grow at an average annual rate of 5.8% between 1991 and 1998. But because the dollar peg means Argentina can't weaken its currency to make its exports more competitive, it has to find ways to lower the cost of production. Economists say the government hasn't complemented the currency system with policies that lower costs for businesses, and that may be delaying economic recovery. ""If the government is going to say that convertibility is a sacred cow, they have to build competitiveness,"" says Pedro Lacoste, whose Buenos Aires economic-research firm bears his name. ""It's a tough agenda with powerful interests against it. But whoever the next finance minister is, he better be very convinced about these issues."" In the early 1990s, Argentina increased competitiveness, Mr. Lacoste says, by slashing export taxes and liberalizing port regulations. But the government's attention now seems to be diverted by political shadow plays in a presidential election year. Some new tax policies appear to be working against competitiveness. In an announcement of default yesterday, power generator Central Termica Guemes SA said it wouldn't make a $3.6 million interest payment in part because of ""new taxes levied by the Argentine government on assets and on cash interest payments."" Mr. Lacoste estimates that gross domestic product will fall 3% this year, while exports decline around 12%. Yesterday, the government said auto production fell 51% in April from the same month a year earlier; electricity consumption fell 9% in the same period. ""The government and some economists were betting on a recovery in the second quarter; it is just not happening yet,"" says Martin Lousteau, an economist who works with Mr. Lacoste. When demand is weak at home, companies in emerging markets often try to sell to stronger economies abroad. But Argentine e"
" the dollar] will be maintained,"" Mr. de la Rua says in an interview, promising not to tamper with Argentina's dollarpegged currency system that has reduced inflation to zero today from nearly 5000% during 1989. ""We have to reduce the [fiscal] deficit,"" he says, and adds that his government will be ""austere, predictable, and serious, and one that meets its international obligations."" Mr. de la Rua's position contrasts sharply with the populist slogans of his opponent, Eduardo Duhalde, the Justicialista Party (known as Peronists) governor of Buenos Aires province, and the support for his proposals is an important message to foreign investors: Despite a painful recession and stubbornly high unemployment, the majority of Argentines still favor orthodox economic solutions. ""This is a vote for stability and pragmatism, and that is what we need,"" says Aldo Abram, partner at Exante, a Buenos Aires consulting concern. Mr. Duhalde shook up global markets in June by suggesting that Argentina's foreign debt be renegotiated. He has recently lashed out at the International Monetary Fund and proposed interest-rate caps for small businesses and a firing freeze. But Argentines appear to be dismissing these messages as fantasy. If Mr. de la Rua wins, however, he will face a grueling test. Argentina is in a grinding recession, and confidence has weakened. Just about everybody, from the IMF to foreign investors, is concerned about the country's ability to access international credit markets next year. But Mr. de la Rua doesn't seem worried. ""We have to lower Argentine costs and Argentina's risk"" in the perception of international markets, says the 62-year-old lawyer whose Radical Party has formed a coalition known as the Alliance with a center-left party. His economic team is betting heavily on a basic assumption: Drastic budget cuts will restore confidence, lower interest rates and thus boost domestic demand, which continues to be a big driver of Argentine economic growth. But economists are quick to n"
"y from the 1995 recession, buoyed by high commodity prices and strong exports to Brazil. But this time around, recession has produced a more uneasy mood, and at least in some sectors a questioning of convertibility, the currency board system that since 1992 has linked the peso at par to the dollar. Doubts over convertibility appear to be strongest among manufacturers who have been hit by the domestic slowdown and by the Janaury devaluation in Brazil, Argentina's main trading partner. However, manufacturing, long a stronghold of protectionist sentiment, accounts for an ever-smaller share of the economy. The local consensus remains overwhelmingly that the benefits of convertibility continue to outweigh its drawbacks. Argentina's high levels of de facto dollarisation would make devaluation exceedingly painful, with financial mayhem outweighing any competitiveness gains, according to many local analysts. But continued recession could sap support for the fixed exchange rate policy further. ""I think there has been something of a psychological change,"" said economic consultant Pedro Lacoste. ""We used to try and list all the things that could possibly go wrong and hit convertibility. Now we are thinking about all the things that need to go right for it to remain sustainable."" Following the Tequila shock, the Argentine authorities worked hard to fortify the financial system and make it immune to possible contagion. Deep-pocketed foreign banks now account for 50 per cent of the deposit base. Despite the recession, total bank deposits have grown 8 per cent since the Russian debt crisis last August to stand at more than $81bn, indicating high levels of confidence in the system. Bank loans, however, fell 1 per cent in the same period. Argentina has found itself with a solid financial system, but an economy less prepared to face the terms-of-trade shock unleashed by tumbling commodity prices, the strong dollar and the slide in the Brazilian real. The International Monetary Fund has long urged Argentina, with no exchange rate flexibility, to push ahead with fresh structural reform to make the economy more resilient to external shocks. The IMF's shopping list centres on liberalisation of the country's inflexible labour laws and reform of often chaotic provincial finances. This burden of unfinished business is set to fall on a new, and inexperienced government, which will take offic"
"___  Document 40 of 600  Buenos Aires shocks subside EMERGING MARKET FOCUS:  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 01 June 1999: 42.  http://search.proquest.com/docview/248712299?accountid=28034  Abstract: Argentina is used to feeling shock waves from Brazil, so it has proved an unwelcome novelty for Buenos Aires to be the epicentre of regional financial uncertainty. A devaluation scare that began rumbling two weeks ago has shaken equity values at home and in the region, and produced almost unprecedented unanimity among local politicians as they vie to see who can back current economic policies most convincingly. By the end of last week, the scare appeared to have subsided. The Merval leading share index was trading at 522.77 at midsession yesterday, after rising 2.4 per cent on Friday to 518.76, albeit in thin volume. Banks, castigated in the sell-off because of their big Argentine bond holdings, led Friday's recovery.  Full text: Argentina is used to feeling shock waves from Brazil, so it has proved an unwelcome novelty for Buenos Aires to be the epicentre of regional financial uncertainty. A devaluation scare that began rumbling two weeks ago has shaken equi"
"___  Document 441 of 600  Argentina to defend dollar peg LATIN AMERICA:  Author: Tricks, Henry; Warn, Ken  Publication info: Financial Times [London (UK)] 14 Jan 1999: 02.  http://search.proquest.com/docview/248657788?accountid=28034  Abstract: Argentine officials yesterday vowed to defend the currency's one-for-one peg to the US dollar, the linchpin of the country's economic policy, as Latin American markets tumbled in the wake of the Brazilian devaluation. Argentina's Merval share index closed 10.23 per cent down at 356.16. In Mexico the free-floating peso tumbled against the dollar, triggering an automatic $200m hard currency sale by the central bank that helped check its fall. The stock market fell sharply. Many analysts believe Argentina's economic fundamentals are sufficiently strong to allow it to maintain the dollar peg and ultimately to differentiate itself from Brazil in the minds of investors. While Brazil has seen a haemorrhaging of foreign reserves recently, Argentina this week announced that net international reserves had reached a record $27.7bn.  Full text: Argentine officials yesterday vowed to defend the currency's one-for-one peg to the US dollar, the linchpin of the country's economic policy, as Latin American markets tumbled in the wake of the Brazilian devaluation. Across the region, governments struggled to differentiate their economies from that of Brazil. Argentina's Me"
"___  Document 83 of 500  Brazilian Turmoil Threatens Argentine Car Exports --- Volkswagen, Fiat Cut Production  Author: By Craig Torres  Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 01 Feb 1999: A15.  http://search.proquest.com/docview/398705849?accountid=28034  Abstract: CORDOBA, Argentina -- The Brazilian devaluation will slash auto production in neighboring Argentina between 20% and 50% this year, put several Argentine parts suppliers out of business and could undermine the trade ties crafted by the two countries in the past four years, auto executives and union officials say. ""Brazil continues to devalue, and nobody can compete with the real at two to the dollar,"" said Volkswagen Argentina SA spokesman Jorge Olivieri. ""We know if this continues, it will damage the (auto sector), but it has to calm down."" Argentine auto executives say they won't be able to hold production even at today's reduced levels because of a deeperthan-expected recession in Brazil, Argentina's top auto-export market. The chill settling across Argentina's motor works threatens the government's 3% economicgrowth forecast for this year because auto production and related industries account for 8% of industrial production. The knockon effects of thousands of suspended workers worried about long-term job security will broaden the impact.  Full text: CORDOBA, Argentina -- The Brazilian devaluation will slash auto production in neighboring Argentina between 20% and 50% this year, put several Argentine parts suppliers out of business and could undermine the trade ties crafted by the two countries in the past four years, auto executives and union officials say. ""Brazil continues to devalue, and nobody can compete with the real at two to the dollar,"" said Volkswagen Argentina SA spokesman Jorge Olivieri. ""We know if this continues, it will damage the [auto sector], but it has to calm down."" Brazil's currency, the real, weakened again Friday, to 2.06 to the U.S. dollar, bringing its total loss to more than 41% since Jan. 13, when the government first allowed it to devalue. Brazil's greatly weakened currency distorts its trade relations with Argentina and other countries with harder currencies, making Brazil's own exports cheaper abroad but undermining its ability to import what are more-expensive foreign products. Argentine auto executives say they won't be able to hold production even at today's reduced levels because of a deeperthan-"
"___  Document 430 of 650  Loan Demand, Supply in Argentina Dry Up; Fears Rise on Apparently Deepening Recession  Author: By Craig Torres  Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 16 July 1999: A10.  http://search.proquest.com/docview/398664601?accountid=28034  Abstract: Bank credit, the raw material of economic growth in Argentina, is running dry, and there are few signs lending will pick up anytime soon, according to analysts. Total private-sector bank credit rose only 1.2% in the first quarter, and analysts expect growth of around 2% in the second quarter. The absence of loan demand -- and loan supply as banks retreat from lending -- is worrisome because Argentina's recession appears to be deepening as business confidence and investment spending sag on uncertainty over October presidential elections. Economists estimate Argentina's gross domestic product will decline at least 3% this year. Bank credit is key to Argentine economic growth because the central bank's monetary-policy powers were restricted in the early 1990s in an effort to end a horrendous cycle of hyperinflation. Though the government and the provinces run their own banks, private-sector lending remains the most important source of credit to the economy. Unlike the U.S. Federal Reserve, the Argentine central bank doesn't have a policy of influencing bank credit by retrieving or injecting money into the banking system.  Full text: BUENOS AIRES -- Bank credit, the raw material of economic growth in Argentina, is running dry, and there are few signs lending will pick up anytime soon, according to analysts. Total private-sector bank credit rose only 1.2% in the first quarter, and analysts expect"
"ican country. In a meeting nine days before Mr. de la Rua takes the presidential sash, Mr. Summers told him that only by cutting the massive Argentine budget deficit, easing restrictive labor laws and ensuring that contracts are honored will Argentina regain investors' favor. ""Argentina has a very manageable economic situation that has to be managed,"" Mr. Summers told reporters on the first leg of a three-country South American tour. ""The emphasis has to be on taking steps to establish confidence in private markets."" Mr. Summers's agenda is largely in line with the thinking of Mr. de la Rua's economic team. But while fiscal probity sounds good, it won't come easy in Argentina. The country faces a simmering problem with the insolvency of some provinces that are smothering under a total debt load of $17 billion ranging from bank loans to foreign bonds. Yesterday, a member of Mr. de la Rua's economic team said provincial solvency is a more urgent priority for the new government than labor or judicial reform. Most of Argentina's 24 provinces have secured these debts with the receipts from a revenue-sharing scheme with the federal government. However, as overall tax revenues declined during Argentina's recession this year, little cash has been left over for ordinary needs. So teachers have stopped teaching for weeks in some provinces, and m"
"ty values at home and in the region, and produced almost unprecedented unanimity among local politicians as they vie to see who can back current economic policies most convincingly. By the end of last week, the scare appeared to have subsided. The Merval leading share index was trading at 522.77 at midsession yesterday, after rising 2.4 per cent on Friday to 518.76, albeit in thin volume. Banks, castigated in the sell-off because of their big Argentine bond holdings, led Friday's recovery. A complex mix of elements lay behind the devaluation worries, some real, some phantom. The government's difficulties in pushing through spending cuts were real enough. The struggle focused investors' minds on the uncertainties up to and beyond October's presidential elections. President Carlos Menem, who has presided over Argentina's economic transformation, is to leave office after failing to reform the constitution to allow him to run for a third term. Another complicating factor was the US Federal Reserve's shift to a bias towards tightening rates. The market was also swept by a series of rumours, including that the economy minister was set to resign. However, the insistent whisper that spread around t"
"his ministers and seemed to risk losing a third, Roque Fernandez, the economy minister. And, worse, his decline coincides with Argentina's second deep recession in four years. So Argentines are starting to wonder whether this year's political transition will be as traumatic as that of 1989. They are not alone. Investors have started to worry that Argentina's exchange rate, even though its parity with the dollar is written into law, could yet go the way of its much less rigidly pegged counterpart in Brazil, whose January devaluation has added to its neighbour's problems. Such fears look overblown, but they are not groundless. They must be taken seriously, both by Mr Menem and by his would-be successors, if Argentina is to avoid disaster. First, that means reassuring doubters that Argentina will indeed stick to its currency board. For all its costs, which include a lack of policy flexibility and thus a tendency to turn economic sneezes elsewhere into flu in Argentina, it has worked well for a country with a wretched history of monetary mismanagement. Abandoning it under duress would do far more damage than Brazil suffered from its (long-expected) devaluation-not least since nearly all the debts of Argentina's government and private firms are in hard currency. From here to December, and beyond Sensibly, Mr de la Rua and Mr Duhalde have both defended the currency board. But can they be believed? Mr Menem wants to eliminate all doubt by speeding up a plan for Argentina to adopt the dollar. It is argued that by embracing the dollar, and thus eliminating the risk of devaluation, foreigners would be persuaded to lend at cheaper rates to Argentina's government and its firms. But not much mor"
"___  Document 373 of 600  Quickstep after slow tango: IT INTERNET IN ARGENTINA: Argentina has been slower than Brazil to adopt the new technology but - with the highest GDP in Latin America - it is now poised to leapfrog more developed economies, says Ken Warn  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 01 Sep 1999: 10.  http://search.proquest.com/docview/248267993?accountid=28034  Abstract: Argentina looks like it should be fertile ground for the internet and electronic commerce. It has the highest gross domestic product per capita in Latin America, relatively even income distribution, modern telecommunications systems and high literacy levels. With the highest level of cable television penetration outside North America - some 60 per cent of households are subscribers - Argentina could also be well placed to leapfrog more developed markets and quickly adopt cable access to the net, according to the BCG report. However, much of the existing infrastructure allows only one-way access, and will need to be replaced. Despite the constraints, there are already some 300,000 to 350,000 internet users in Argentina, says Jorge Becerra of BCG, or about 1 per cent of the population. Of these, some 10-15 per cent have already made a purchase over the net, either from a US or Latin American site.  Full text: Argentina looks like it should be fertile ground for the internet and electronic commerce. It has the highest gross domestic product per capita in Latin America, relatively even income distribution, modern telecommunications systems and high literacy levels. Yet Argentina lags neighbouring Brazil in the adoption and exploitation of the internet. With a few exceptions, its entrepreneurs have been slow to explore the technology's potential. Many users are still at the ""hobby"" stage of internet exploration and do not yet see it as a practical tool. For all but the most technologically advanced Argentine businesses, an internet presence is more a badge of modernity than an engine to generate new business or new ways of doing business. That is likely to change as obstacles to internet use steadily diminish. High access costs, one of the main obstacles for the consumer, are about to fall, according to a recent report from the Boston Consulting Group*. Telephone costs are one of the biggest "
"the Falklands were suspended in March as a result of the detention in Britain of Augusto Pinochet, the former Chilean dictator. Mr Di Tella said the Chilean authorities had indicated the once-a-week Lan-Chile flight could resume. Mike Summers, one of two Falkland Islands councillors at the talks, said the agreement brought practical advantages to the Falklands, including the development of tourism, but the concession over access had been ""a very painful decision"" and would be opposed by some islanders. Larger economic benefits for the Falklands could be derived from the co-operation in the fishing industry, the islands' most important economic activity. The agreement provides for the construction of a memorial to Argentine armed servicemen killed during the war, in the Argentine cemetery on the islands. In addition, the Argentine government is continuing its review of Falkland Islands place names adopted by the military rulers who invaded the islands 17 years ago. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"ounts give more weight to services (which now account for 64% of GDP, up from 55%). One of the effects of this change is to smooth out some of Argentina's recent apparent economic volatility: in its last recession in 1995, GDP fell by only 2.8% (not 4% as thought). All of this leaves individual Argentines neither richer nor poorer. But it is not without consequences, since many economic indicators are expressed as percentages of GDP. Argentina's fiscal deficit (now 1.9% instead of 1.7%), current-account deficit (5.Io/, not 4.5%) and foreign debt (43.4%, up from 38.7%) all now look worse than they did. And it is not clear that the new figures will help Argentina's current recession: they show output falling by 3% between January and March compared with the same period last year. This seems a poor reward for what independent economists in Buenos Aires praise as a welcome improvement in the quality of official statistics.  "
"rval share index closed 10.23 per cent down at 356.16. In Mexico the free-floating peso tumbled against the dollar, triggering an automatic $200m hard currency sale by the central bank that helped check its fall. The stock market fell sharply. In an effort to stem inflationary pressures from the sliding currency, the Mexican central bank said it had tightened monetary policy by restricting liquidity by 30m pesos, prompting interest rates to soar. Rogelio Frigerio, Argentina's economic planning secretary, said: ""The one-for-one parity is not a government matter but a demand and requirement of the people. We will not change this policy for anything in the world."" Nonetheless, the Brazilian policy shift caused deep dismay among policymakers. Many analysts believe Argentina's economic fundamentals are sufficiently strong to allow it to maintain the dollar peg and ultimately to differentiate itself from Brazil in the minds of investors. While Brazil has seen a haemorrhaging of foreign reserves recently, Argentina this week announced that net international reserves had reached a record $27.7bn. ""Argentina is in for a rough ride in the day and weeks ahead,"" said Walter Molano at BCP Securities. ""The Brazilian move will raise the cost of capital and bring more downsizing and more pain for Argentina - but it will not be anything near the pain that's going to be felt in Brazil."" People were less concerned"
"itration,"" said Murillo de Aragao, a political analyst in Brasilia. The devaluation has also exposed the problems of managing a close trade relationship when countries have independent economic policies. Not only are Brazilian goods 40 per cent cheaper than they were a year ago, but Brazil now has a floating exchange rate and Argentina a fixed one. This has heightened Argentina's two overlapping fears of Brazil. The first is of Brazilian instability, and its inevitable impact on the regional economy. But the second fear is of Brazil's industrial might, which could over the long term undermine development of Argentina's own industries and leave it as little more than a provider of raw materials to the bigger economy. ""There cannot be distinct roles within Mercosur, with one country producing primary products while another is industrialised,"" said Fernando de la Rua, opposition Alliance presidential candidate and current frontrunner to succeed Mr Menem, this week. Hence Argentina's desire to bind Brazil into a system of macro-economic co-ordination and to set up a mechanism to compensate the other countries for any sudden economic changes in a Mercosur partner. Paraguay and Uruguay, themselves suffering from reduced exports in the wake of the Brazilian devaluation, also back some form of compensatory mechanism. But with just 10 weeks until the Argentine elections, Brazil feels under no pressure to negotiate with the outgoing government, and more conflicts can be expected. This week Argentina increased the paperwork involved in importing shoes, while Brazilian rice growers protested about alleged Argentine dumping. When the elections are over, however, observers believe the governments will need to sit down and plot a new strategy for Merco-sur. ""We need a new set of targets and goals for the next 10 years if we are to recover the political will,"" said Luis Fernando Furlan, chairman of Sadia, the Brazilian foods group and one of the private sector's most enthusiastic Mercosur supporters. And who should launch this new Mercosur project? ""It has to be Cardoso,"" said Mr Furlan. ""After the Argentine elections, he will become the dean of Mercosur."" Copyright Financial Times Limited 1999. All Rights Reserved.  "
"___  Document 114 of 600  Argentina to reduce spending cuts after angry protests  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 12 May 1999: 08.  http://search.proquest.com/docview/248700760?accountid=28034  Abstract: Argentina will raise spending and seek to renegotiate its fiscal deficit target with the International Monetary Fund, Roque Fernandez, economy minister, said yesterday. The moves come only weeks after Argentina agreed a new deficit target with the IMF.  Full text: Argentina will raise spending and seek to renegotiate its fiscal deficit target with the International Monetary Fund, Roque Fernandez, economy minister, said yesterday. The moves come only weeks after Argentina agreed a new deficit target with the IMF. The decisions "
"strong new economic program. Until then, weak consumption, and morefundamental problems such as high interest payments and inefficient labor laws, create a perilous situation. ""There are some serious structural problems in Argentina, and the recession is going to last longer than people expect,"" said Eric Anderson, a portfolio manager at ING Investment Management in Atlanta. While the Argentine crisis is largely home-grown, the devaluation earlier this year of Brazil's currency, the real, hasn't helped. Brazil is Argentina's largest trading partner, and the economic slowdown triggered by the real's fall resulted in a decline in Argentina's manufactured exports, primarily autos. But as Argentina's government officials had predicted, other exports have found alternative markets. Exports to Brazil are down about 30% in the first four months of the year compared with a year earlier, but total exports are down only 13%. Meanwhile, analysts say Brazil's overvalued currency before its devaluation helped cover up the Argentine economy's weaknesses. ""When Brazil adjusted its currency, problems in Argentina that had been there for years were exposed,"" says Brazilian banker Igor Cornelsen. For its part, Brazil's economy seems to be bouncing back from the real's devaluation more quickly than anticipated a few months ago. Still, in the medium term, Brasilia must take firm steps to deal with the government's chronically unbalanced budget. The country's privatization program is lagging, and its Congress has shown no appetite for firm measures to control public spending. With his popularity waning, President Fernando Henrique Cardoso seeks to strengthen his hand by restructuring his cabinet. Meanwhile, the Argentine crisis is deepening the economic gloom in some Andean nations, which had boosted interest rates last year to defend their currencies. The strategy hasn't worked. Ecuador had to abandon a foreign-exchange band system and allow the sucre to float earlier this year. Colombia has devalued twice since September and could allow the peso to float in the coming weeks. In many cases, Andean governments and central bankers underestimated how badly consumers, banks and companies would be hurt by the higher rates. Low international commodity prices, last year's global credit crunch, a drop in domestic consumption, and lower-thanexpected tax revenues have added to woes. The result is that some of the Andean countries are struggling to finance huge government budget gaps with less revenue in an environment of lower investor confidence. That's causing big problems with foreign creditors. Colombia is at risk of losing its coveted investment-grade credit rating. Analysts are worried that Ecuador may have trouble meeting its foreign debt obligations next month. Venezuela will probably have to pay a startling 15% to persuade investors to lend it the $2 billion it needs to partially bridge a government budget gap this year.  "
"___  Document 393 of 600  Menem forces dollar plan to top of political agenda in Argentina: The opposition is wary but officials see benefits in proposal to abolish peso in favour of US currency, writes Ken Warn:  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 27 Jan 1999: 03.  http://search.proquest.com/docview/248749238?accountid=28034  Abstract: Ask nicely enough and the grumpy newspaper vendors in downtown Buenos Aires will swap a $100 bill for 100 Argentine pesos, even though dollars are not - as yet - the country's legal tender. The vendors never liked the look of the Brazilian Real, devalued earlier this month after weeks of suspense. Dollars are already widely accepted in shops and restaurants throughout Argentina. And, since the Real's fall, President Carlos Menem has thrown his weight behind a proposal to abolish the peso in favour of the US currency. Mr Menem has pushed the debate into an area of visceral importance for Argentines - how to ring-fence the economy from external shocks, such as the chaos that has descended on Brazil in the wake of devaluation. Memories of the hyper-inflation of the 1980s and early 1990s run deep.  Full text: Ask nicely enough and the grumpy newspaper vendors in downtown Buenos Aires will swap a $100 bill for 100 Argentine pesos, even though dollars are not - as yet - the country's legal tender. The vendors never liked the look of the Brazilian Real, devalued earlier this month after weeks of suspense. Dollars are already widely accepted in shops and restaurants throughout Argentina. And, since the Real's fall, President Carlos Menem has thrown his weight "
"al accounts unveiled by the Economy Ministry. Last year's GDP was only $298 billion, not $335 billion; GDP per person was thus only $8,3o0, not $9,316, What has changed? The old accounts took 1986 as their base; for subsequent years, indices were used to calculate GDP at current prices. But since i986 Argentina has suffered first hyperinflation, then price stability and a trade opening. Relative prices have changed, and so has the importance of different sectors of the economy. By taking 1993 as their base year, the new figures recognise some of the changes. One big difference is in investment. The old figures showed the value of investment growing by 50% between 1993 and 1998; under the new system, the increase was only 35%. The reason: imported machinery has been cheaper since Argentina pegged its currency to the dollar. So a given level of physical investment has cost less than had been thought. Secondly, the new acc"
"arket crisis forced Brazil, its largest trading partner, to devalue its currency. Under its rigid currency board system, which pegs the value of the peso to the dollar, Argentina has been unable to respond, driving the economy into a recession. Yesterday the government was forced to concede it had failed to bring the unemployment problem under control after leaked data showed a jobless rate of 14.5 per cent. Concerns over rising unemployment and crime have become the dominant themes in the presidential campaign. Fernando de la Rua, the opposition Alliance party candidate, has successfully used them to gain a commanding lead over Eduardo Duhalde, his Peronist party rival. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"___  Document 480 of 600  Argentina drifts before elections EMERGING MARKET FOCUS:  Author: Hudson, Peter  Publication info: Financial Times [London (UK)] 21 July 1999: 46.  http://search.proquest.com/docview/248627571?accountid=28034  Abstract: After an 8.7 per cent slump on Monday last week - the worst one-day fall since January - the Merval index rebounded to close last week only 0.8 per cent down. But with the index falling nearly 3 per cent again in early trading on Tuesday, analysts took little heart from the rally. ""Friday [when the index leapt 4.7 per cent] was a flash in the pan,"" says Christopher Ecclestone, head analyst for Buenos Aires Trust Co, a local investment boutique. ""Overall, the market is in drift, with a negative overtone."" Few expect a significant improvement before October's presidential elections, given the uncertainty over Argentina's future economic management. ""Investors are jumpy,"" Mr Ecclestone says. ""Roque Fernandez [the Argentine economy minister] is a lame duck, and they don't know who they should be listening to.""  Full text: Gloom hangs over the Buenos Aires stock exchange, with little hope of anything but more bad news in the coming months. After an 8.7 per cent slump on Monday last week - the worst one-day fall since January - the Merval index reboun"
"___  Document 225 of 400  Finance and economics: Down to earth  Author: Anonymous  Publication info: The Economist 351.8119 (May 15, 1999): 87-88.  http://search.proquest.com/docview/224053442?accountid=28034  Abstract: For the second time in four years, Argentina finds itself in a sharp recession, with output likely to fall by as much as 2% this year. Since its inception in 1991, Argentina's currency board has not only killed hyperinflation but also allowed the country to grow after two decades of stagnation. But it clearly makes the country especially vulnerable to external shocks.  Full text: TALK about hard landings. In 1997 Argentina's economy grew at a bounteous 8.6%. As recently as the middle of 1998, government officials were still talking confidently of having entered a new era, where GDP would grow by a steady 5-6% a year. Instead, for the second time in four years, Argentina finds itself in a sharp recession, with output likely to fall by as much as 2% this year. That is barely better than in devaluation-hit Brazil. But whereas its neighbour's policy shortcomings have been well-aired, Argentina, with its rigidly fixed exchange rate, is still held up by many economists as an example to be emulated by more feckless emerging economies. So what went wrong? ""The rest of the world,"" is how one might paraphrase the official answer: unusually low world prices for Argentina's agricultural commodities; recession and devaluation in Brazil, which bought a third of its exports, and more of the manufactured ones; and the appreciation of the American dollar, to which Argentina's peso is by law pegged at par. On top of this, Russia's default last August caused investors to flee emerging markets, and raised the cost of Argentina's foreign borrowing. The difference between the interest rate it pays on its bonds and the rate paid on American Treasury bonds rose from two percentage points before Asia's troubles began to a peak of 14 points, before easing to around five points. Argentina's currency-board system,"
"given the benefits that it has brought the member states. Total trade between Brazil and Argentina grew fivefold from 1991 to 1998 to $15bn (£9.3bn). Despite the January devaluation, Argentina forecasts trade with Brazil may still end in modest surplus this year. But the downturn both at home and in Brazil has left several Argentine industries, including shoes and textiles, struggling for sales in a shrinking market. The market of 220m consumers that Mercosur brings together has proved a huge attraction for multinationals. ""Most of the big foreign investments in the region over the last few years have not been based on the market in Brazil or in Argentina, but on Mercosur,"" said Jose Roberto Mendonca de Barros, a former economics secretary at the Brazilian finance ministry. Argentine analysts estimate that about 70 per cent of recent direct foreign investment in the country has been aimed at the wider Mercosur market - in effect Brazil. The dairy and vehicle industries among others have restructured to take advantage of the relative advantages of the bloc's two biggest economies. Mercosur has also fostered the large number of cross-border energy projects under way in the region. Less vocal than the Argentine voices now calling for protection, there is still a powerful private sector lobby in favour of Mercosur. As a unit, the bloc's partners have also been a more effective negotiator in trade talks with the US and the European Union. ""Mercosur is a world-recognised trade mark. We must defend and protect it,"" said Argentina's President Carlos Menem last week. However, the recent disputes have highlighted very real problems. Even before the Brazilian devaluation, businessmen were grumbling that the political impetus behind further trade integration had slowed. Recession has made governments even less willing to compromise. Past conflicts have been smoothed out by the personal intervention of Mr Menem and his Brazilian counterpart, Fernando Henrique Cardoso. However, with Mr Menem leaving office soon and Mr Cardoso politically weakened, diplomats have found themselves without well-tried institutional mechanisms to resolve conflicts. ""The last few weeks have revealed the need to develop procedures for arb"
"tor. ""The investments we have [in plants] are efficient."" The auto trade is unusually integrated in this region because it has grown up within Mercosur, a broad free-trade agreement among Brazil, Argentina, Uruguay and Paraguay. Auto producers have set up shop in Argentina and Brazil to try to exploit each country's specific advantages. Argentina has a stable economy, no inflation and competitive assembly-line wages that run about $2.85 an hour. There is plenty of sales potential in the domestic market in which half of the six-million-car fleet is more than 10 years old. The auto industry has invested $10 billion in new plants and equipment here over the past decade, making the sector an icon of Argentina's industrial renovation. Cordoba, an inland provincial capital about 300 miles northwest of Buenos Aires, has absorbed about half that investment because of its strong metal-working tradition. ""We talk about pistons the way a Florentine talks about art,"" says Mr. Bischoff, the Fiat spokesman. Brazil has even larger consumer possibilities and a well-developed parts sector. Auto makers try to rationalize their presence on both sides of the border by making specific models in each country. Five-door station wagons may be produced in Brazil, the three-door version in Argentina, for example. Brazil and Argentina will probably focus their protectionist measures on external competitors. Any plan to lower the 35% common external tax on imported cars and parts will be shelved. ""Protection will be in place for a couple years to come,"" says Armin Schmiedeberg, a partner at Boston Consulting Group. But if Argentina's auto recession is long, officials can expect weakening support for Mercosur. In Cordoba, political officials, businesspeople and union leaders are starting to look askance at the industry's heavy reliance on Brazil. ""In some areas, Mercosur is dangerous,"" says Emilio Graglia, president of Cordoba's metallurgic industries chamber that represents many auto-parts companies. ""A regional accord implies economic policies that are similar."" Brazil's bloated fiscal deficit and tumbling real have no similarity at all to economic policies in Argentina. So, Mr. Graglia ventures a prediction from his conference room full of engine blocks, pistons and ball bearings on display: ""Argentina will put tariffs on Brazil; this will cause a reaction by the Brazilians; it isn't going to be nice."" Credit: Staff Reporter of The Wall Street Journal  "
"vestors Service, the international ratings agency, yesterday said the prolonged effects of several shocks related to recent world financial turmoil would continue to affect Argentina's economy and, consequently, the asset quality, liquidity, funding profile and bottom line of the nation's banks. Moody's said the development of the fundamentals of the Argentine banking system would depend on the magnitude and duration of the recession in the country. It said: ""As is the case throughout the Latin American financial systems, 1999 and beyond will continue to be a "
"___  Document 462 of 600  Brazil halts talks in clash with Argentina  Author: Dyer, Geoff  Publication info: Financial Times [London (UK)] 28 July 1999: 05.  http://search.proquest.com/docview/248654724?accountid=28034  Abstract: Mercosur, the South American trade bloc, is facing one of the most serious disputes in its seven-year history after Brazil said it would suspend trade talks with Argentina in protest at new restrictions on its exports. Brazilian diplomats were yesterday lobbying the other two Mercosur members, Uruguay and Paraguay, for support against what they view as the growing protectionist attitude of the Argentinian government. Argentina issued a decree on Monday allowing it to take measures against excessive imports from any country, including its Mercosur partners. Earlier this month Argentina placed restrictrions on imports of Brazilian textiles and is considering similar measures for shoes and paper.  Full text: Mercosur, the South American trade bloc, is facing one of the most serious disputes in its seven-year history after Brazil said it would suspend trade talks with Argentina in protest at ne"
"challenging period for the banking sector in Argentina."" It said the country's economy ""will be subjected to a protracted recovery due to a less-favourable external environment characterised by low commodity prices and weak regional growth."" However, improvements in the institutional and regulatory framework have minimised the potential for crises in the financial sector brought on by system-wide liquidity and funding crunches and, ultimately the insolvency of weaker banks, Moody's said. AFX, London Copyright Financial Times Limited 1999. All Rights Reserved.  "
"ted immediately and largely completed within 30 days. A schedule of 30 days is realistic; other countries have made more complex monetary reforms in less time. The first step would be to ensure that the liquid reserves of the central bank are at least equal to the monetary base. Argentina meets this requirement. The second step would be to announce that effective immediately the dollar would replace the peso as the unit of account; all peso wages, prices, assets, and liabilities would become dollar wages, prices, assets, and liabilities at the rate of one dollar to one peso. Because the exchange rate is 1-to-1, no transition period would be necessary. No commission fees would be permitted for converting values in pesos into their equivalents in dollars. Bank deposits and loans bearing fixed interest rates would continue to bear the same interest rates until they expire, except the principal and interest would be payable in dollars. Interest rates in dollars would be lower than rates were in pesos just before dollarization. Borrowers would be able to benefit from lower interest rates if they can refinance their debts; if not, they would be no worse off than they would have been under the currency board-like system, because, in terms of dollars, they would be paying equivalent amounts at the same rates of interest as they were paying in pesos. Dollarization would cause some redistribution of income: In general, new borrowers of dollars would pay less and lenders would earn less than they do now because they would be unable to lend in pesos. But lenders would enjoy some benefit because there would no longer be any possibility of a devaluation. The government would also immediately replace peso deposits at the central bank with dollar assets. In 1995 Argentina already took a step in this direction by moving settlement of payments from peso accounts at the central bank to a dollar account at a bank in New York. This step would simply complete the process. Peso notes and coins would then be retired from circulation; the bulk of them preferably should be retired during the transition period. How quickly that can be accomplished depends on how quickly the central bank can obtain dollar notes. Once retirement of peso notes begins, banks would not be allowed to charge commission fees for replacing them with dollars. Finally the government would need to reorganize the central bank to act only in regulating financial institutions and gathering financial statistics. Some people may think that dollarization, if adopted, should only be temporary. But historical experience indicates that dollarization in the form I have proposed should be permanent. I propose to continue allowing Argentines to use any currency but to prevent the government from issuing a currency again. For Argentina, a country with a history of hyperinflation, government-issued currency has almost always been a curse. --- Mr. Hanke is a professor of applied economics at The Johns Hopkins University in Baltimore.  "
"r the principal economic targets. Earlier this month, Argentina and Mexico launched the first Latin American sovereign bonds since Brazil floated the Real. But Buenos Aires is eager to create the largest possible funding cushion in case of further interruptions in financing. Argentina can meet its funding needs through the first half of this year, even without resort to the IMF facility, according to officials. While in Washington, Argentine officials also sought to advance the dollarisation plan. * Ecuador yesterday became the latest Latin American economy to bow to pressure and float its currency. The country ended a system of crawling peg exchange rate bands for the sucre, in force since 1995, in an attempt to protect its reserves. The move follows congressional approval of the 1999 government budget late on Thursday, and the resignation of the finance minister, Fidel Jaramillo. Additional reporting by Justine Newsome in Quito and Geoff Dyer in Sao Paulo Copyright Financial Times Limited 1999. All Rights Reserved.  "
"back every peso in circulation with a dollar in its central bank reserves, has renounced an independent monetary policy and handed the setting of interest rates over to the markets. The markets have not exactly been kind in return. Every time a crisis breaks in an emerging economy, Argentine interest rates spike higher. It took three months for Argentina to differentiate itself from other emerging market borrowers in the wake of last year's Russian debt crisis and regain access to the capital markets. Then came Brazil. The country, helped by the restraints imposed by convertibility, easily meets the European Union's Maastricht convergence criteria in terms of its fiscal deficit, inflation and public debt, officials point out. ""But it's like we've gone through the discipline of convergence without the pay-off in terms of interest rates,"" said one official. ""In 50 years perhaps the credibility would be there. But why wait that long, suffering high spreads and volatility in the meantime?"" said another. Negotiation of a monetary treaty with the US is seen as a more stable option than unilateral dollarisation. It could take two to three years, according to central bank president Pedro Pou, and would involve US agreement to undertake a ""lender of last resort"" function for Argentina. But the plan's future depends on the politicians. Mr Menem, barred from seeking a third term, must leave office in December. Unless the incoming government, of whatever party, can be persuaded to back it, there is nothing central bank technocrats can do to push the proposal forward. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"e South American Common Market (Mercosur), said Mr Cavallo, who dismissed the idea of replacing the peso with the US dollar as ""historically not a viable solution"". Argentina's government said earlier this year that it would examine the possible dollarisation of its currency rather than abandon convertibility - under which one dollar is held in reserves for every peso in circulation. Critics say that the scheme - which currently underpins a one-to-one fixed exchange rate - puts the economy at a disadvantage following the devaluation in January of the Real, the currency of Brazil, Argentina's biggest trading partner. The proposed combination of convertibility and a floating exchange rate would depend on a steady improvement and continued growth of international confidence in the Argentine economy, said Mr Cavallo during a visit to a regional meeting of the World Economic Forum in Santiago, Chile, last week. Although the Argentine economy is expected to contract this year, gross domestic product has grown by more than 50 per cent since the introduction of convertibility eight years ago. In spite of an economic slowdown this year, the Argentine government has been able to raise large sums on the international capital markets at gradually lower rates this year, helping keep domestic interest rates relatively low"
"tably in 1995. But today's Brazilian situation is especially serious because Brazil is Argentina's largest trading partner. Argentina feels pressure to respond to Brazil's devaluation with a devaluation of its own. Anticipation of a devaluation raises interest rates, because of increases in currency risk and in related default risk. Consequently, the economy tends to contract. It was to counter this speculation and to reaffirm the commitment to a fixed exchange rate that Mr. Menem floated the idea of full dollarization. Since much of Argentina's financial system already operates in terms of the dollar, the main change would be a switch of the hand-to-hand currency from pesos to dollars. Then, as in Panama, it would be virtually impossible for the government to devalue -- in effect, there would be no peso assets whose value could be reset in terms of the dollar. Thus the financial markets would have no currency risk on which to speculate. In Argentina, the currency board has become highly popular, and a further move toward dollarization might also be popular. Nevertheless, a proposal to dollarize involves political peril. For one thing, Argentina's presidential election this fall makes it difficult for the opposing political parties to agree on a major change in the monetary regime. Domingo Cavallo, the principal architect of the Argentine economic miracle, opposes a move soon toward dollarization. One concern is that a proposal for a modified monetary regime might foster the idea that the existing fixed-exchange-rate system is fragile. This uncertainty would be especially costly when the economic crisis in Brazil threatens to diminish Argentina's exports. Another issue is the income (known as seigniorage) that the Argentine central bank receives from earnings on its interest-bearing reserves, principally in the form of U.S. government securities. The bank would have to use about $16 billion of its reserves to provide for a circulating stock of U.S. dollar bills. This reduction in reserves means that the bank would lose roughly $750 million in annual interest income. Because of these concerns, dollarization will likely not happen in Argentina unless the initiative comes from the U.S. But the situation is actually an opportunity for the U.S. to promote a dollar zone throughout the Americas by using Argentina as its first client. Such a move would not eliminate all potential economic problems in the region. But a stable monetary system removes some sources of difficulty, notably those that involve currency speculation, which tends to generate volatility in interest rates and inflation. The benefits would be even greater if the system were extended from Argentina to less reliable countries, such as Brazil and Mexico. Eventually, the monetary union could even encourage extensions of the North American Free Trade Agreement throughout the Americas. Nafta could become AFTA. There are several ways in which the U.S. could compensate joiners of the dollar zone for the lost seigniorage. It could provide transfer payments each year to make up for the central bank's lost interest revenue. A simpler method, which does not require payments each year, would be to provide a one-time allotment of U.S. dollar bills. For Argentina, this could be accomplished by giving the Argentine central bank $16 billion in newly issued U.S. currency. The Federal Reserve could, for example, exchange this currency for 16 billion non-"
"g scarce and expensive, domestic investment plummeted. Worse, this liquidity squeeze took place just when the country was also suffering a sharp deterioration in its terms of trade. Some 60% of Argentina's exports are commodities, mainly farm products. Over the past two years, their prices have plunged. Third, Argentina's problems have been made even tougher by those of Brazil, its largest export market (accounting for a third of the total). Brazil itself went into recession last year. Then, in January, it devalued its currency by 40%. That hit Argentina's manufacturers particularly hard: for many, Brazil is their main export market. Car production, for instance, is running at only half the level of last year. At current exchange rates, car making has a bleak future in Argentina. Other manufacturers suddenly face fierce competition from cheap Brazilian imports, such as the shoes at Puente de la Noria. Recession has exacerbated flaws that previously seemed manageable. The fiscal deficit has risen, as tax revenues have fallen and the govemment's interest bill has soared (see chart 2). The debt profile has worsened sharply. While the economy was growing fast, it was easy to borrow abroad, and the country's deficits seemed affordable. No longer. Total public-sector debt has risen from 39% of GDP at the end of 1997 to, probably, 46% by the end of 1999. Include the private sector, and the total external debt is a hefty 52% of GDP. Argentina's debt-service ratio (the relation between debt payments and exports, a figure closely watched by markets) is over 60%. No other big emerging economy's is so high. That exposes the underlying fragility of Argentina's economic model: its reliance on external financing to deliver a return to growth. How foreigners feel matters a lot. As almost every other country in Latin America has moved to a floating currency, Argentina is increasingly the odd man out. This uniqueness was once an asset, but, since Brazil's devaluation, many investors have come to see convertibility as a millstone, which risks consigning Argentina to years of stagnation. There are signs that the recession may have reached bottom:on a monthly basis, industrial production began to edge up in July, and consumers are a shade less depressed. As a result, foreigners have become slightly less nervous, and interest rates on Argentina's debt have fallen recently (see chart 3). Nonetheless, earlier this month Moody's, a credit-rating agency, downgraded Argentina's debt, citing among its reasons the debt burden and the strictures of the currency board. And Wall Street's sternest pessimists still whisper that it is a question of when, not whether, Argentina faces another crisis. The gloom may prove wrong. But the new gov-- ernment, when it takes office in December, will face an unenviable combination of low market confidence, lost economic competitiveness and worsening fiscal accounts. A tough slog In many countries, a conventional response to all this might include a tough fiscal policy and a devaluation of the currency to improve competitiveness. In Argentina, however, devaluation-which means abandoning ""convertibility""-is not seen as a serious option. Though a few local economists rail against the currency board, they are a lonely minority. No policymaker wants to scrap it. That is because devaluation would bring few benefits and huge costs. Argentines use the dollar as their unit of account for all but the most immediate purposes. Some 60% of bank deposits and almost all saving accounts are in dollars. All long-term contracts such as mortgages or leases are denominated in dollars. Peso prices would immediately jump to reflect any new exchange rate. This would risk a resurgence of inflation and, given Argentina's history, a collapse of confidence in the peso. Even if inflation remained moderate, many firms as well as the government would default on loans, since 90% of government debts and 80% of private-sector debts are in foreign currency. Not only does Argentina lack the option of a ""quick fix"" devaluation, but the currency board means that it forswears monetary policy, too. This means that Argentina's path to restoring market confidence and improving competitiveness lies in a tough slog of tight fiscal policy and structural reforms to make the economy more flexible. The consensus in Buenos Aires is that, for now, fiscal discipline matters most. In a striking display of toughness in an election campaign, the country's Congress has approved a ""fiscal responsibility"" law which mandates a declining deficit until the federal budget reaches balance in 2003. Can such excellent intentions be put into practice? There is much scope for cutting waste and improving efficiency in the public sector. But cutting public spending quickly will be hard. Much depends on provincial governments, over which the centre has little immediate control. At the federal level, four-fifths of spending goes on wages, pensions, the government's rising interest bill and transfers (some constitutionally mandated) to the provinces. Trimming these is difficult. The other fifth goes on public services, from health care to the police, and has already been squeezed. Last month, in its draft budget for 2000, Mr Menem's team suggested spending cuts of $1.8 billion, including cuts in payments to the provinces. That seemed brave, but it risks jeopardising the complete overhaul of the federal system that is crucial to the country's medium-term fiscal stability. Under the current labyrinthine system of tax-sharing, about half of the revenue raised by the central government goes to the provinces, which have little incentive to raise their own taxes-or to manage spending prudently. But reform of this system requires not only approval by Congress but ratification by the provinces. Since most provinces are run by Peronists, that would be an extra difficulty for Mr de la Rua. Nor can the new government rely on more revenue to plug its fiscal hole. Tax evasion is rife: barely half of potential valueadded tax is collected. Tackling that will take time as well as determination. Of course, when the economy bounces back, tax revenues will rise. But levying new taxes could jeopardise Argentina's second bi"
"viding policy continuity during an election year. The legislation isn't ironclad, because each annual budget is a new law in itself, but analysts hailed the bill as a critical disciplinary guideline at a time when Argentina's public debt is under intense scrutiny by investors, rating agencies and the International Monetary Fund. ""This is a good signal about the intentions of policy makers, particularly Congress,"" said Vladimir Werning, an economist at J.P. Morgan & Co. ""And it provides a budget guideline during the political transition."" Argentina's fiscal deficit is expected to be around 2% of gross domestic product this year. While that is relatively modest for an emerging-market economy, the country's overall level of public debt has grown substantially over the past decade to around $115 billion. Consequently, the country faces a daunting refinancing task each year that has been complicated lately by nervousness over Latin American risk and the Argentine presidential election. Argentina will attempt to finance about $16 billion in public debt next year, and Finance Ministry officials say a new pact with the IMF to help backstop those efforts is likely. Officials say early discussions are under w"
"d they may scale back an export-finance program, Proex, under which the government provides credit to exporters at below-market rates. ""The revision of Proex for the countries of Mercosur and the revision of terms of credit for importing are subjects that could be on the negotiating table,"" said Joao Alfredo Graca Lima, trade subsecretary for the Brazilian foreign ministry. Argentina's economy ministry has already taken some steps to protect businesses. The implementation of a 5% wagetax cut was sped up and targeted more specifically to companies involved in international trade. A plan to cut import taxes on certain capital-goods imports, such as computers, is on the table. Argentina and Brazil exchanged $15 billion of goods and services in 1997, which represented about 75% of all Mercosur trade. From 1995 through 1997, Argentina enjoyed a trade surplus with its giant neighbor. Brazil's economic instability made it a costly place to work, so many companies set up plants in Argentina. Of the estimated $14.4 billion Argentina received in foreign investment last year, one third was directed toward the exportoriented manufacturing sector. Nobody is sure whether the Brazilian devaluation will dissolve the Argentine advantage. But all the new industrial capacity oriented toward Brazil will have to either slow or new markets will have to be found. ""We are faced with a very difficult situation,"" said Federico Zorraquin Jr., chief executive of the Argentine conglomerate Garovaglio & Zorraquin, which sells plastics in Brazil. Aside from falling demand, long-term contracting is another problem. Mr. Zorraquin's exports are priced in reals, but when the money is repatriated into Argentina, it now risks being clipped by foreign-exchange losses. --- Matt Moffett in Rio de Janiero contributed to this article. Credit: Staff Reporter of The Wall Street Journal  "
"___  Document 371 of 600  'Better debt rating possible' NEWS DIGEST  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 04 Feb 1999: 04.  http://search.proquest.com/docview/248621861?accountid=28034  Abstract: Argentina could qualify for higher sovereign debt ratings, possibly even investment grade, if it fully dollarised its economy, according to Duff & Phelps credit rating agency. However, other steps, such as continued fiscal restraint, would also be required.  Full "
"would fare, Mr Fernandez said in an interview that exports accounted for just 9 per cent of gross domestic product, and only a third of that went to Brazil. The minister, in London yesterday for meetings with the Bank of England and UK Treasury, said he was sticking with the official growth forecast of 3 per cent for this year, although that would be reviewed in April when economic figures for the first quarter were collated. The forecast, made in December, is itself lower than the 7-8 per cent that the country managed in the first half of last year. Argentina had already accounted for a slowdown in the region precipitated by Brazil's economic problems, the minister said. Financing needs for the year were well advanced, he said, pointing out that this week's $1bn bond issue took the country as far as the third quarter in terms of the money it would need to service its debt payments. The transaction, originally intended to raise $750m (£460m) was increased due to strong investor demand. ""We are not using our contingent funds from the multilateral organisations. We believe we are going to be using the market for the full year."" Mr Fernandez thought that the worst was over in terms of "
"___  Document 389 of 600  Argentina seeks loan guarantees  Author: Warn, Ken  Publication info: Financial Times [London (UK)] 25 Aug 1999: 03.  http://search.proquest.com/docview/248755962?accountid=28034  Abstract: Argentina is examining ways of using World Bank funds to guarantee its commercial borrowing, in efforts to reduce financing costs. It has had informal talks on using $200m (£125m) of coming World Bank loans to underwrite fresh borrowing, said Pablo Guidotti, deputy economy minister. Using World Bank guarantees could generate both cheaper borrowing and more leverage, Mr Guidotti said. In the next few weeks the World Bank and the Inter-American Development Bank are each due to disburse $1bn of loans agreed with Argentina last year.  Full text: Argentina is examining ways of using World Bank funds to guarantee its commercial borrowing, in efforts to reduce financin"
"But investors' concerns reach beyond the hustings to the gloom-ridden real economy and the fiscal deficit. Argentina has raised this year's deficit limit set with the International Monetary Fund three times to stand at $5.1bn, almost double the original target. However, officials maintain they are doing a good job in restraining this year's deficit to around 1.7 per cent of gross domestic product (GDP), given the severity of the recession, the sharp fall in tax revenues and rising financing costs. Helped by almost $1.3bn from auctioning digital mobile phone licences, the government met its revised first half fiscal target with the IMF ""with ease"", said Pablo Guidotti, deputy economy minister. Preliminary numbers were also showing signs of a turnaround in economic activity in the second quarter compared with the first, he added. A poll of leading businessmen last week suggested some were seeing light at the end of the tunnel. The Argentine political machine has also not completely lost the knack of sending positive signals to the markets. The lower house of Congress last week gave outline approval to the so-called fiscal convertibility bill, which would legally require a balanced budget by 2002, a worthwhile sign of intent to start reining in the deficit. Crucially for Argentina, the keystone of its differentiation strategy, the strength of the financial system, is still in place. While savers have been steadily shifting into dollars rather than pesos, total deposits have remained steady at just under $80bn. International reserves have not wavered. Local banks are awash with liquidity, which could accelerate an eventual upturn. Despite the candidates' apparent willingness to risk spooking the markets, the run-up to the polls has so far been sweetness and light compared with the disastrous transition of 1989, when Argentina stumbled into economic and social chaos and hyperinflation. Also playing in Argentina's favour, many investors still appear willing to give it the benefit of the doubt. ""It's a credit to the immense amount of credibility that Argentina has built up in recent years,"" said Mr Molano. But the new government may not have long to start polishing the halo. Copyright Financial Times Limited 1999. All Rights Reserved.  "
"heap and abundant foreign lending to fuel growth. Furthermore, many of its manufactured exports are uncompetitiveespecially now that they are no longer helped by an overvalued currency in Brazil, their largest market. Can the grey man push the state into the black? Scrapping the currency board would be costly: nearly all of Argentina's debts, both public and private, are in foreign currency. But living with the board will be painful, too: it requires the swift application of fiscal austerity, and of structural reforms aimed at driving down costs. Delivering such reforms-of the tax system, federalism, union privileges, and privatised monopolies-will be a huge task for Mr de la Rua (if it is he). For a start, he will have to resist some in his Alliance (such as Raul Alfonsin, a former president) who hanker after a less stringent economic diet. And whatever happens in the polling on Sunday, the Peronists will keep control of the Senate, many provincial governorships and of the trade unions, whose frequent strikes made life so hard for Mr Alfonsin in the 198os. Moreover, any deal under which Mr de la Rua sought Mr Menem's support for reforms is likely to come at the expense of a thorough investigation of corruption-and a consequent risk of popular disillusionment. The political calculus is perilous, and success is not guaranteed. Wish Argentina's new president a thumping mandate, and good luck. Without it, the country may be in for some unduly interesting times.  "