[stop-imf] State of Siege Declared in Argentina + other recent clips
Robert Weissman
rob@essential.org
Wed, 19 Dec 2001 18:45:32 -0800
State of Siege Declared in Argentina
By Kevin Gray
The Associated Press
Wednesday, December 19, 2001; 5:43 PM
BUENOS AIRES, Argentina ?? President Fernando De la Rua signed an order
declaring a state of siege Wednesday, seizing special powers after a day
of looting and violence engulfed recession-racked
Argentina, a ranking government official said.
De la Rua will address the nation Wednesday evening to explain why he
was taking special steps to quell violence in the capital and in major
cities across the country, the official told The Associated
President on condition of anonymity.
©
2001 The Associated Press
---------------
Wednesday December 19 5:15 PM ET
Argentina's Economic Crisis Erupts
By KEVIN GRAY, Associated
Press Writer
BUENOS AIRES, Argentina (AP)
- Jobless Argentines stormed supermarkets, shops and kiosks
Wednesday in an outburst of
looting that spread from the capital to several big cities, prompting
the
beleaguered president to
convene an emergency session of his Cabinet.
Riot police sent looters
fleeing amid a fusillade of rubber bullets and tear gas during unrest in
the
impoverished neigborhoods
fringing the capital, marking a troubling new chapter in the financial
crisis that has tormented
Argentina for more than four years.
It was the most furious
unrest after sporadic looting that has taken place daily since a
national
strike Dec. 13 - the eighth in two years. It also
marked the most serious challenge to the increasingly unpopular
government of
President Fernando De la Rua.
By midafternoon, looting erupted in at least a half
dozen cities across Argentina, including Mendoza, Rosario, Santiago del
Estero
and San Juan, as hundreds of people descended on
stores and carried away everything from bicycles and home appliances to
washing machines.
De la Rua met with his top aides in an emergency
session at the Casa Rosada presidential mansion to consider his next
step, as
police put up iron barricades ahead of a scheduled
march through downtown by hundreds of jobless.
The government sent federal police to back up the
local Buenos Aires police in cat-and-mouse games with angry crowds that
shifted from street to street, forcing shopowners to
shutter metal gates and flee.
In western Argentina, police stormed city hall in the
major city of Cordoba, 475 miles northwest of the capital, where rioting
workers had trashed their offices, smashing and
overturning furniture.
There were no reports of injuries in Cordoba, but in
Buenos Aires, police said five officers were hurt in the looting.
Argentines are desperate after four years of
recession that has stopped South America's second-largest economy in its
tracks. The
government, strapped to make payments on the
country's staggering $132 billion public debt, has partially frozen
accounts to halt a
run on the banks. The jobless rate has soared to near
record levels.
Violence erupted late Tuesday night, with some 2,000
people looting in the San Miguel commercial district in greater Buenos
Aires.
Police finally used tear gas to quell the crowd.
But thousands of angry, disgruntled Argentines
regrouped during the day Wednesday in poor and widely scattered
neighborhoods
around the capital.
``We want food and if the government won't give us
any, we'll just take it!'' shouted Liliana Gimenez, a 62-year-old woman
among
the crowd that massed outside a supermarket defended
by riot police and two tractor-trailer trucks blocking the gates.
Police brandished riot shields and rifles and stood
shoulder-to-shoulder outside the huge supermarket, where edgy managers
tried
to calm hundreds of people with promises to
distribute hundreds of bags of foodstuffs.
After a half hour of negotiations with supermarket
executives, an 18-wheeler supermarket truck was rolled out to the crowd
and
leaders of the mob hurled bags of rice, cooking oil,
even holiday sweet bread, to outstretched hands in the frenzied crowd.
``We are hungry and we are desperate. We will keep
looting. We need food for Christmas,'' said one man who only gave his
name
as Osvaldo. He hauled away milk, rice and jars of
mayonnaise. Others piled shopping carts with groceries or shoveled food
into
duffel bags - scenes that were repeated around the
country.
At Cinco Estrellas, a grocery near a Buenos Aires
housing project, the crowd fled as police waded in, firing rubber
bullets and tear
gas that left a stench wafting over the streets.
Crowds of teen-agers, some with their faces covered, hurled rocks at
supermarket
officials and passing trucks. Elderly people also
joined in the looting, picking up scattered goods.
The scenes recalled images of Argentina's last
financial crisis, in 1989, when supermarkets were looted amid
triple-digit
hyperinflation. Then-President Raul Alfonsin was
forced to leave office six months early.
Wednesday was the first time violence crept into the
capital, a move which bodes ill for De la Rua's embattled government.
Just two years after taking office, the president is
trying to implement his government's ninth austerity plan. So far, the
belt-tightening has included 13 percent cuts in state
workers' wages, higher taxes and moves to slash pensions.
Hoping to blunt the rising hunger and poverty, the
government this week began disbursing more than 400,000 pounds of food
aid.
The recession was triggered by years of public
overspending and heavy borrowing. The jobless rate has hit near-record
levels of
over 18 percent, with nearly 15 million of the 36
million population are living at or below the poverty line.
------------
Wednesday December 19, 4:04 pm Eastern Time
World Bank-Argentina lending depends on IMF relations
(UPDATE: Adds detail, background)
By Anna Willard
WASHINGTON, Dec 19 (Reuters) - The World Bank could lend more money to
struggling Argentina than it has earmarked, but first the country would
need to clear up
its relations with the International Monetary Fund, a bank official said
on Wednesday.
The bank has some
limited wiggle room on top of the $2 billion to $2.5 billion in planned
lending under Argentina's $3.5 billion
assistance project,
the senior official said. However, it is fast approaching its $13.5
billion country lending limit for Argentina.
``Should conditions
arise where we could step up even more to a program where things were in
firmer shape we would have a little bit of
room to do so,''
David de Ferranti, World Bank vice president for Latin America and the
Caribbean, said at a news briefing.
However, no
additional funding will be forthcoming until Argentina, which is trying
desperately to stem a worsening financial crisis,
improves its
relations with the IMF.
``The current
problems require us to allow time for the fund and the country to sort
things out,'' he said, adding that this does not mean
that loans to
Argentina are frozen.
Nevertheless, he
said a $200 million structural loan tranche and a $100 million loan
tranche for the province of Cordoba will not go ahead
until ``specific
action'' in the legal documents of the bank's agreement with Argentina
are met.
The IMF recently
put a freeze on lending to Argentina, holding up a much-needed loan
payment.
De Ferranti said
that any lending on top of the country assistance project would most
likely be subject to special approval by the bank's
decision-making
executive board.
``Our board would
... probably require us to do that on special terms,'' he said. Special
terms mean the country would pay interest of 400
basis points more
on their loans from the bank than their usual level.
De Ferranti said there is some concern on the board about the size of
outstanding loans to the cash-strapped country. Argentina currently has
$9.5 billion in outstanding borrowings from the World Bank,
compared to a limit of $13.5 billion that every country faces.
``There is concern about it but there is also a great deal of
sympathy,'' he said, adding that the board has had regular discussions
about Argentina even though they have not been decision-making meetings.
De Ferranti said investors should be aware that when talking about aid
packages for Argentina, international financial institutions like the
bank and the IMF do not have enough money to cover all of
Argentina's outstanding debt.
``Total public debt is $155 billion...but the amounts that are available
from the international financial instutions are not large, not large
enough to make a difference,'' he said.
Argentina is trying to reduce its debt burden by swapping some of it to
make it more manageable.
He declined to say what would be the most appropriate currency system
for Argentina, but said it should be one that enjoys broad support in
the country.
``You shouldn't try and lead the population in a direction they don't
want to go,'' he said.
The bank official said he welcomed a recent proposal by Anne Krueger,
the IMF's first deputy managing director, to set up a system allowing
countries to file for international bankruptcy in the way that
cash-strapped companies do.
``I think the world desperately needs a better way of managing these
crises,'' he said, adding that he does not think implementing such a
proposal would lead to the evaporation of capital flows to developing
countries.
-----------------
Tuesday December 18, 10:03 pm Eastern Time
IMF Blasts Argentina Economic Policy
IMF Decries Argentina's Economic Policy As Country Struggles to Pay Off
$132 Billion Debt
By TONY SMITH
AP Business Writer
BUENOS AIRES, Argentina (AP) -- The International Monetary Fund turned
up the heat Tuesday on debt-ridden Argentina, saying its current
economic policy was
unsustainable.
Speaking in Washington, the Fund's chief economist, Kenneth Rogoff,
told reporters ``it's clear that the mix of fiscal policy, debt, and the
exchange rate regime is not sustainable.''
Hobbled by a four-year recession that has sparked deflation, spiraling
unemployment and an 11 percent drop in industrial production in November
compared with a year earlier, Argentina is struggling to
pay off its $132 billion debt.
The IMF earlier this month held back $1.3 billion after Argentina failed
to meet previously agreed upon budget deficit targets.
Rogoff did not criticize any specific policy and said the mix was ``the
subject of ongoing negotiations'' with Argentina.
There was no immediate comment from the Economy Ministry.
But Finance Secretary Guillermo Mondino said in neighboring Uruguay that
Argentina desperately needed IMF support for an upcoming debt swap.
Argentina is asking creditors to exchange existing
government debt for longer-term bonds with lower interest rates.
``If the IMF does not support (the swap), it won't be successful,''
Mondino said in a speech ahead of a meeting of the four-nation Mercosur
trading bloc. ``It's clear that if we don't have an orderly debt
restructuring, we're dead meat,'' he added.
The second, international phase of restructuring Argentina's $132
billion debt is slated to begin in late January and should be over in
February.
Failure to renegotiate would likely result in a default and economic
chaos in South America's second-largest economy.
Rogoff's comments came a day after Economy Minister Domingo Cavallo said
he wanted to slash more than $9 billion from his 2002 budget, cutting
public spending from $49 billion to $39.6 billion.
But the proposed cuts have angered some opposition lawmakers, who worry
that further austerity measures could spark widespread social unrest.
Increasingly desperate Argentines have staged their eighth general
strike in two years, sacked supermarkets and trashed ATMs to protest a
partial bank freeze introduced Dec. 1 to prop up the financial
system.
President Fernando de la Rua called on all parties in Congress to pass
the budget as soon as possible for patriotic reasons.
``We have transmitted to lawmakers the patriotic need and urgency to
deal with the budget proposal as soon as possible,'' he said after a
meeting of his party, the Radical Civic Union.
Central to Cavallo's proposal is a plan to save $5 billion by lowering
costs through a debt swap with international investors.
Further, unspecified spending cuts would take care of the remaining $4
billion, he said. He did not rule out further cuts in public sector
wages.
Rogoff's comments raised a few eyebrows among foreign analysts. Some
said they showed the Fund was pressing for a relaxation of the peso's
one-to-one fixed exchange rate with the U.S. dollar.
The dollar peg, introduced by Cavallo in 1991, brought a decade of price
stability and initial economic growth.
But it has since been blamed for helping to make Argentina's economy
less competitive than neighboring Brazil's, which has a floating
currency.
``It's difficult to know if there is a hidden message that the exchange
rate is unsustainable,'' said Neil Dougall, chief Latin American
economist at Dresdner Kleinwort Wasserstein in London.
``But one gets a feeling there are certain people within the Fund who
want a change'' to the dollar peg.
Cavallo has insisted on maintaining the peg, forcing him to limit
Argentines' bank withdrawals to $1,000 a month, which in turn sparked
speculation savings could be confiscated to pay the country's debt
installments.
Despite the partial banking freeze, the financial system has continued
to bleed.
On Dec. 13, two weeks into the freeze, the central bank said net foreign
reserves were down $400 million to $19.57 billion and bank deposits were
down $940 million to $67.93 billion.
Two Wall Street analysts told The Associated Press the drain was more
serious than official figures suggested, meaning Argentina's financial
liabilities already outstripped its dollar reserves.
The analysts, who spoke on condition of anonymity, estimated total
``real'' reserves at $15.4 billion and total financial liabilities at
$16.97 billion -- a nearly $1.6 billion shortfall.
--------------------
Tuesday December 18, 2:54 pm Eastern Time
Creditors to Argentina: default already!
By Hugh Bronstein
NEW YORK, Dec 18 (Reuters) - Argentina's foreign creditors are calling
on the recession-plaged government to default on its debt by missing an
interest payment due
Wednesday, a move they say would clear the way for a thorough reform of
Latin America's third largest economy.
One creditor
likened Buenos Aires' current default-avoiding ploys to former President
Bill Clinton's
widely mocked
definition of sex during the Monica Lewinsky scandal.
By raiding pension
funds and taking other unorthodox steps which allow the government to
keep servicing bonds that are about to be
restructured
anyway, investors say that Economy Minister Domingo Cavallo is wasting
precious reserves in a misguided effort to save
face.
``It's like the
Clinton explanation for not having had sex with Monica Lewinsky,'' said
Abigail McKenna, a principal at Morgan Stanley
Investment
Management, which holds Argentine debt. ``Maybe, technically as per some
letter of the law, Cavallo can convince himself
that he is not
defaulting. But he certainly is.''
Argentina is due on
Wednesday to pay about $87 million in interest due on its global bonds
due 2008.
McKenna and other
holders of Argentine debt said it would be a mistake for the government
to continue spending money to maintain
the illusion of
solvency while increasing numbers of ordinary Argentines are having
trouble feeding themselves.
The government has,
among other measures, stopped paying some of its suppliers, such as
pharmacies that give subsidized medicine to
pensioners, in
order to steer money toward making debt payments, economists who
specialize in Argentina say.
``He is holding
onto one technical definition of default -- like Clinton's definition of
sex -- while doing all sorts of distortive things to
keep the payments
going,'' McKenna added.
Clinton was mocked in the Lewinsky scandal of the late 1990s for
offering an uncommonly narrow definition of sex that he hoped would
allow him to deny having had an affair with the young White
House intern.
``We would much rather have them default and then have a discussion
about how to solve the problem,'' McKenna said.
But indications are the government will make Wednesday's payment.
``They would be doing themselves a favor by not paying and getting it
over with,'' said another holder of Argentine debt, who requested
anonymity. ``It has to come, so the earlier they take the bull by the
horns and manage the aftershock, the better.''
Meanwhile, with police guarding some supermarkets from hungry looters,
Argentine provinces appealed on Tuesday for emergency food aid from the
government.
``They have no economy left all because they are delaying the
inevitable,'' the bondholder said.
Several provincial governments, worried by a flare-up of social
protests, asked President Fernando de la Rua for help after some
supermarkets were raided in recent days.
Argentine bond prices are so low that a default is seen having little
impact.
``If a default is not priced in, it is close to being priced in,'' the
investor said. ``There will be a dip in Argentine asset prices when the
default comes, but the contagion effect will be minimal.''
THE SHORT, UNHAPPY LIFE OF THE GLOBAL '08
Issued about six months ago, Argentina's global bond due 2008 began
trading at 78-1/2 cents on the dollar. Since then the bond has been
trounced by fear of default.
It traded at about 32 cents on the dollar on Tuesday.
``If he (Cavallo) would have put up the white flag a month ago at least
Argentina would still have a healthy banking system. Now we having
people rushing to take their money out of the banks,'' yet
another U.S. holder of Argentine debt said. ``The more they drag this
out the worse it is for everyone.''
In the recently conducted domestic portion of Argentina's debt exchange,
local creditors were invited to swap their bonds for loans which are
guaranteed by Argentina's stream of tax-revenue.
The international portion of the swap is expected to start in the second
half of January.
Although it is widely understood that the government needs to lighten
its debt payments in order to resume sustainable economic growth, fund
managers must answer to their superiors and their investors
who will want to know why they are voluntarily accepting bonds that pay
less than the current instruments.
``How can we responsibly tender into an exchange unless the country says
it is ceasing payment?'' the bondholder asked.
---------------
Tuesday December 18, 11:54 am Eastern Time
Argentina's policy mix unsustainable--IMF
(UPDATE: recasts with news briefing, incorporates ARGENTINA-IMF-POLICY)
By Jonathan Nicholson
WASHINGTON, Dec 18 (Reuters) - The mix of policies that Argentina
currently is following cannot be sustained and the International
Monetary Fund is doing what it
can to help, IMF chief economist Kenneth Rogoff said on Tuesday.
``It's clear that
the mix of fiscal policy, debt and the exchange rate regime is not
sustainable,'' Rogoff said in response to questions
after publication
of the IMF's World Economic Outlook.
``The authorities
recognize that. This is the subject of ongoing negotiations,'' Rogoff
noted. ``Everyone recognizes that to a large
extent the problem
lies in Argentina, the solution is in Argentina but the International
Monetary Fund stands ready to help.''
Argentina is
trying to avoid default on $132 billion of debt. Earlier this month, the
IMF said it could not finish its review of
Argentina's
economic program, putting $1.3 billion in IMF aid effectively on hold
and ratcheting up default fears.
Rogoff sidestepped
questions about whether the IMF approved of Argentina's new 2002 budget,
just sent to Congress.
The IMF's latest
WEO report said that while economic growth in Argentina is expected to
fall again next year, the country's potential
to bring other
emerging market economies crashing may be on the wane.
``Since 1998,
there has not been a credit event in a major emerging market. It remains
an open question as to how much contagion
there would be if
such an event were to actually take place,'' the IMF report said.
The IMF usually
publishes a global economic forecast twice a year, but issued a third
version this year in an effort to reflect the
negative economic
impact of hijack attacks on New York City and Washington on Sept. 11.
In the WEO report,
the IMF said it expects Argentina's economy to contract by 2.7 percent
in 2001 and by 1.1 percent in 2002. That's
much gloomier than
the IMF's previous assessment in September, in which it had expected the
economy to contract by a smaller 1.4
percent in 2001 and to rebound in 2002, growing at a 2.6 annual rate.
``Looking ahead, while the situation remains subject to great
uncertainty, output is likely to fall in 2002, with deflation continuing
(although at a slower rate than in 2001),'' the IMF said.
Separately, Argentine Finance Secretary Guillermo Mondino gave an even
bleaker forecast for this year, saying the economy would contract by at
least 3 percent in 2001.
But even if Argentina continues to struggle, the IMF sounded a mildly
hopeful note that its troubles will not spread to other emerging
markets. That would be in marked contrast to 1997 and 1998, when
troubles in some Asian markets and Russia led investors to temporarily
flee markets in emerging countries worldwide.
``In the case of Argentina, investor concerns have been building for
some time, thereby allowing dedicated investors to take underweight
positions in Argentina and Brazil and (they) have, since late last
year, overweighted Mexico and Russia,'' the report said.
The IMF also said there was more ``investor discrimination'' than in
previous financial crisis episodes, the result of dedicated and local
investors that have lessened the tendency for investors to treat all
emerging markets the same.
Those changes, among others, in emerging markets and those who trade in
them have lessened the chances for contagion, though not eliminated
them, the IMF said.
``Past episodes of contagion were associated with discrete events and,
therefore, the potential for contagion, were a credit event to occur in
one of the major emerging markets, remains,'' the IMF said.