ARGENTINA: Economy Minister Expects IMF Agreement Soon

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, May 3 2002 (IPS) - Argentina’s Economy Minister Roberto Lavagna is confident about reaching a much sought-after agreement this month with the International Monetary Fund (IMF), in spite of congressional resistance to passing the laws required for the accord and the announcement of a labour strike.

The IMF has made the disbursement of credit aid to Argentina contingent on the repeal of a law against so-called economic subversion and a reform of bankruptcy legislation, as well as a commitment from the provinces to make dramatic cuts in expenditures.

But most of Argentina’s lawmakers refuse to vote in favour of a new bankruptcy law that would leave the country’s crisis-stricken small and medium-sized companies defenceless against creditors.

They are also against annulling the 1974 law that penalises certain economic crimes because it would halt the lawsuits under way against bank and business executives who are being investigated for fraud.

In this context, the dissident faction of the General Confederation of Labour (CGT), the country’s largest trade union, announced a general strike for May 14 to protest the IMF’s political and economic stipulations, which the unionists say violate Argentine sovereignty.

A work stoppage organised by this section of the CGT, led by trucker Hugo Moyano, tends to have a major impact on the country because the confederation unites numerous unions, particularly in the transport sector.

Meanwhile, the Congress of Argentine Workers (CTA), the country’s other main union, has yet to make an official announcement about the protest, though is expected to follow suit because some of its leaders spoke Wednesday about an imminent general strike.

Moyano announced the strike and a march to the Plaza de Mayo, across from the presidential palace, during the special national congress of the CGT dissident wing, held Friday in Buenos Aires.

Minister Lavagna, meanwhile, pointed out that “there is no date set for (signing) an agreement, but there is a commitment from Anne Krueger (IMF first deputy managing director) to carry out the negotiations at the maximum speed possible.”

“We are talking about May or June, preferably May,” Lavagna told the foreign press Friday, seven days after his predecessor Jorge Remes Lenicov resigned in the middle of a profound crisis in the Argentine financial system.

The new minister’s statements run counter to those of IMF spokesman Tomas Dawson, who suggested this week that the timeframe for new disbursements of money for Argentina would involve a longer wait than the Eduardo Duhalde government had hoped.

Lavagna stressed that to keep Argentina inserted in the international community requires negotiating with the IMF.

“That is how the international financial system works. One should not refuse to negotiate with (the IMF), but that does not mean one has to accept everything it proposes,” he said.

The minister added that Argentina does not want more visits from high-level IMF negotiators with a political profile, like Anoop Singh, the IMF’s chief of Special Operations, who spent several weeks here in recent months.

The Duhalde government will not consult with the IMF on each of the decisions taken with respect to exchange rates or possible ways to resolve the banking crisis, he added.

The agreement that the Duhalde administration has desperately sought to reach with the IMF already cost former minister Remes Lenicov his post.

His authority was weakened as a result of the strong criticisms from lawmakers – from across the political spectrum – who charged that he was subordinating Argentina’s own economic strategy to the IMF requirements.

Today, the provincial governors belonging to the Justicialista (Peronist) Party, like Duhalde, most with their own presidential aspirations, are demanding that the national government confirm its promise “not to isolate the country,” which is what most assume would occur if the IMF talks were called off.

Lavagna acknowledged that Argentina is in a very critical situation and pointed out that 800 million dollars of World Bank debt come due at mid-month. To cancel that debt, a “bridge loan” from other governments and multilateral organisations is being negotiated.

But those potential loans would also be subject to compliance with the IMF’s requirements.

Many legislators have indicated that they would be willing to approve some sort of reform of the bankruptcy law, but refuse outright to overturn the law on economic subversion.

Lavagna recognises that in the case of the latter “the issue is a little more complicated.”

The minister believes that the approval of the legislation by one of the two chambers of Congress could at least achieve a temporary loan by mid-May, just when the CGT is to carry out its first general strike against the Duhalde government.

The sharp decline in gross domestic product and rapidly rising unemployment have Lavagna worried. But he said there is no chance of carrying forward a medium-term economic plan without re- establishing confidence in the Argentine financial system and changing the laws that fuel doubts among foreign investors.

“The credibility crisis is severe,” he said, stressing that the top priority should be to rebuild confidence. He mentioned that an “initial phase” of economic reactivation could occur through boosting exports and reducing imports.

In Lavagna’s opinion, Argentina’s economic collapse is the result of failing to resolve problems that arose in the mid-1990s, when – he said – the one-to-one parity regime that pegged the Argentine peso to the dollar should have been modified.

Since 1995, the months in which the gross domestic product (GDP) declined have outnumbered the months in which the GDP has increased, he said. The recession is well into its fourth year, and the economy is expected to shrink by 10 to 15 percent by the end of 2002.

Lavagna removed some of the blame from the political leadership, stating, “the problem is of economic origins, though I can admit that the government was responsible for failing to see that the scheme failed some time ago.”