ECON - Argentina to negotiate with IMF

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Argentina's economy minister off to Washington to negotiate with IMF

By Laurence Norman, Associated Press, 12/7/2001 03:02

BUENOS AIRES, Argentina (AP) Argentina's economy minister set off for Washington to negotiate with the International Monetary Fund after the agency refused fresh financial aid to the recession-wracked nation.

At a news conference Thursday night, Domingo Cavallo played down the importance of the IMF's decision to withhold a $1.26 billion loan that had been scheduled for release this month. The loan would have been part of a $22 billion credit line the international lending agency had set aside for Argentina.

Cavallo predicted his trip Friday would bring results for the struggling Argentine economy, now mired in a $132 billion debt, going on its fourth year of recession and deep in a crisis of confidence involving the peso.

''The people have to remain calm. Nothing new has happened,'' Cavallo declared before embarking on his mission to the IMF headquarters in Washington and meetings with key U.S. government contacts.

He seemed to suggest the IMF might be persuaded to shift its stance.

''In any negotiation, at one moment there's no agreement but then it can arrive days later or weeks later. I can assure you that we are going to arrive at an accord,'' Cavallo said.

Cavallo scoffed at reports suggesting the IMF's decision, disclosed Wednesday, might trigger an economic disaster, saying those were ''misinterpretations.''

Nonetheless, the cash-strapped government has $950 million in interest payments coming due on its debt burden this month alone a sum it had hoped to pay using the IMF money.

Analysts have suggested that if the IMF refuses to release funds before Dec. 19 when one of the bigger payments comes due the government could be forced to raid pension funds to pay its debts. Cavallo denied the government would do that.

Asked if he could guarantee that Argentina would meet the $950 million payment due this month, Cavallo told one reporter bluntly, ''What does that matter to you? Are you a creditor of Argentina?'' He then refused to answer the question.

Cavallo made clear Thursday that the government would not devalue the peso, calling such a move ''unthinkable,'' though he stated once again he would not rule out adopting the U.S. dollar as the national currency.

''As to dollarization, I can't say it is not going to happen,'' he said.

Argentina's currency has been pegged one-to-one with the dollar since the introduction of a 1991 convertibility law. The system is based on having the same number of pesos in circulation as dollars in reserve.

Heavy withdrawals from bank deposits in recent days have fueled fears about the peso's future and led Cavallo on Monday to impose a partial freeze on cash withdrawals from accounts.

That ratcheted up frustration among Argentina's 36 million populace as Argentina heads toward a fourth year of recession amid 16 percent unemployment.

The discontent has boiled over into public protests, with irate depositors hurling eggs outside the Buenos Aires Stock Exchange and spray-painting ''Give us our money!'' on bank windows.

On the Buenos Aires stock exchange, leading shares on the benchmark Merval Index surged 10.6 percent higher, up 24.27 points to 253.45 as investors continued to shift cash from partially frozen bank accounts to blue chip stocks amid concerns the government won't lift new controls on the bank accounts in coming months.

Meanwhile, union leaders announced plans for a 24-hour national strike beginning on Wednesday.

-- Anonymous, December 07, 2001


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