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Argentina scrambles to avoid default, de la Rua under fire
Fri Dec 07 2001 16:27:45 ET
Buenos Aires (dpa) - The Argentine Casa Rosada executive mansion in Buenos Aires on Friday was in a frenzy of activity as President Fernando de la Rua and his officials frantically sought to stave off defaulting on Argentina's 132-billion-dollar debt.
The country was still reeling from Wednesday's announcement by the International Monetary Fund (IMF) that it would not disburse this month's 1.3 billion dollar loan de la Rua was counting on to meet debt payments.
Some opposition Peronist lawmakers were quietly demanding the resignation of de la Rua. Interior Minister Ramon Mestre warned against any movement to force de la Rua from office.
``Any attitude seeking to create a climate of instability is suicidal,'' he said. ``Those watching us from outside, those who are our creditors and those who potentially have to lend us resources for economic growth, cannot understand an attitude of this nature.''
Fearing the onset of devaluation, panicking citizens rushed to exchange firms on Friday morning to buy dollars, pushing the rate up to 1.25 to 1.40 pesos per dollar, a de facto devaluation although by law the peso is pegged to the dollar.
The money crunch forced some exchange firms to close because they ran out of dollars. Only the central Banco de la Nacion Argentina continued selling dollars at the one-to-one rate in place since 1991, limiting the amount sold per customer to 100 dollars.
Economic Minister Domingo Cavallo was in Washington on Friday after being urgently dispatched there the day before to try to negotiate a way out of the impasse with IMF officials as a default appeared imminent.
After early morning work meetings with aides, officials, and Peronist opposition leaders, Mestre told reporters that IMF aid was now hinging on a demand that the Argentine Congress approve next year an austere public budget with further spending cuts as well as a new law on joint federal-provincial financing.
Mestre said that in order to move forward with the plan, the IMF was seeking assurances from all of Argentina's political leaders supporting the planned stiff austerity measures.
``The central government is making contact with political, business and union representatives trying to reach the accords which are indispensable for overcoming the difficulties we are crossing through,'' Mestre said.
He added that the need to present a united front was such that President de la Rua might even be meeting on Friday afternoon with his predecessor, Carlos Menem, to forge a political agreement between the ruling Radical Civic Union party and the Peronists.
According to a report Friday in El Clarin daily, Argentina must cover 2.2 billion dollars in interest and debt servicing payments this month as well as 4 billion dollars in worker wages and retiree pensions in addition to other public spending.
Support for an alternative solution to avoid insolvency - taking money from the local privately-run retirement and pension management funds - appeared to wither Friday as sources close to the funds said they were preparing legal action to block the measure.
The IMF decision to cancel the disbursement continued to wreak havoc on local financial markets, although the Merval stock exchange was up 2.5 per cent at midday.
Since Monday, the index has been gradually making a recovery, rising 25-per-cent after weeks of losses. But market analysts said heavy buying was linked to the banking restrictions implemented this week, which made investors afraid that their personal bank accounts could be frozen by the government because of the crisis.
As a sign of increased international investor unease as the country seemed on the brink of financial collapse, the Argentina risk premium, which measures the difference in local debt bond rates compared to similar U.S. bonds, shot up early on Friday by more than 120 points to reach 4,118 points.
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