Argentina braced for economic turmoil

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Monday, 29 October, 2001, 18:11 GMT

Argentina braced for economic turmoil

The Argentine President is set to announce a fresh economic package

Argentina's delay in announcing an economic package has renewed fears among investors that the country may default on its debt. The government was expected to release details of its economic plans this weekend, but an announcement is now expected on Tuesday or Wednesday.

After three years of recession, the government is struggling to meet payments on its debt and is widely expected to announce plans to restructure it.

President Fernando de la Rua will announce a "voluntary restructuring" of external debt either Tuesday or Wednesday, government spokesman Juan Pablo Baylac told news agencies on Monday.

This could mean investors are paid less interest, and will get their money back over a longer period of time.

"We are looking to lower the cost of the provincial and public debt... creating confidence and offering better guarantees of payment," economy minister Domingo Cavallo told local television at the weekend.

Default?

Shares have fallen nearly 3% in Argentina, amid renewed nerves that the delay could mean a default is imminent.

"The market sees more likelihood of a default," Esteban Gonzalez Carreto, an analyst for BBVA Banco Frances said.

"Investors fear this could all end up in a no- voluntary restructuring of the debt," said Pedro Rabasa, an analyst for Scotiabank Quilmes.

However, the delay is widely attributed to continued wrangles between central government and local governors over cutbacks.

The government's package is also expected to include measures to boost consumer spending.

This may help contain the social unrest seen in Argentina in recent months, as people have come to terms with wage and pension cuts.

http://news.bbc.co.uk/hi/english/business/newsid_1626000/1626699.stm

-- Martin Thompson (mthom1927@aol.com), October 29, 2001


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