ECONOMY-ARGENTINA: Gov’t Pleased with Bank Experts’ Report

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jul 30 2002 (IPS) - The Argentine government considers a new report by a group of financial experts an endorsement of its economic policy and is confident that this will help achieve a much hoped-for loan agreement with the institution that appointed the four-person panel, the International Monetary Fund (IMF).

The IMF managing director himself, Horst Kohler, fed the optimism of the Eduardo Duhalde administration by saying, nearly simultaneously with the release of the report, that his organisation “is ready” to negotiate support for an economic programme based on the recommendations of the team.

Led by the president of Switzerland’s Bank for International Settlements, Andrew Crockett, former central bank presidents, Hans Tietmeyer, of Germany, John Crow, Canada, and Luis Rojo, Spain, spent a week evaluating the Argentine economy at the behest of the IMF.

Economy minister Roberto Lavagna said Monday that the panel coincided with the government’s view that neither “dollarising” the economy nor measures that would imply accelerating inflation would contribute to solving the severe problems afflicting this South American country.

“There is a clear compatibility between the economic policies in place and the recommendations and comments of the panel,” Lavagna told the press conference convened for the release of the experts’ report.

The four international bankers stated that it is “essential” to control the flow of cash out of the country’s banking system if the courts continue to allow savers to immediately withdraw their fixed-rate deposits that have been frozen since early December, restrictions known as the “corralito”, or little fence.

The IMF-sent mission stressed that an immediate and lasting solution was needed to limit such court rulings, the only mechanism for eluding the measure enacted by the government of Fernando de la Rúa just days before he resigned Dec 20, halfway through his presidential term.

Lavagna said the group “made no recommendation that conflicts with the official policies” and that “its report can be considered a stamp of approval for the Duhalde government’s economic programme.” Duhalde took office Jan 1, appointed by Congress to finish out De la Rúa’s term.

That plan has two pillars, said the minister, “the normalisation and recovery of the Argentine economy.”

The idea to send a team of experts to Argentina arose during Lavagna’s latest desperate trip to Washington, where negotiators failed to reach an accord with the IMF to drag the country out of its financial collapse, the four-year recession and resulting unemployment of nearly a quarter of the economically active population.

The international banking experts met with government officials, lawmakers, business leaders and bank executives during their weeklong visit.

In their conclusion, the panel of “notables” advised taking greater care of the nation’s reserves, which fell from 15 billion dollars to 9.8 billion in six months, and halting the distribution of bonds or vouchers — which are being used as local currencies — in several provinces.

Although they recognised the severity of the crisis, the experts expressed confidence that the country’s natural and human resources would help to overcome its problems. They advised against measures that would restrict the options of the next government, which will be chosen in the March 2003 presidential elections.

One of the first things Duhalde did after taking office seven months ago was to end the currency “convertibility” regime, which had pegged the Argentine peso at one-to-one parity with the dollar for more than a decade.

The move came just days after his predecessor, Adolfo Rodríguez Saá, who held the presidency for just seven days, declared the country in default with regard to private creditors.

Since then, neither Lavagna nor his predecessor at the Economy Ministry, Jorge Remes Lenicov, were able to come up with an effective solution that would permit an end to the corralito, which has frozen the accounts of some 11 million people.

The confidence crisis afflicting the banks has continued to deepen and is preventing the renewal of a series of credits aimed at reactivating Argentina’s productive sectors, which are suffering despite having benefited from the devaluation of the peso.

The government believes that lifting the restrictions on bank withdrawals would lead to a collapse of the banking system and would trigger hyperinflation.

Because of this, Lavagna opted to offer a set of alternatives that would allow savers to swap their deposits for Argentine Treasury certificates that would come due in the middle to long term. He also proposed a return of deposits under a quota system that would stretch from 2003 and 2010.

Foreign finance experts have voiced their support for a voluntary savings-for-certificate exchange, and have urged the government to somehow put a permanent stop to the draining of bank reserves that is occurring through court rulings in favour of savers.

To that end, Duhalde last weekend decreed a 120-day suspension on such legal manoeuvres, a controversial decision that was declared unconstitutional by the National People’s Defender (Ombudsman). An appeals court will have to issue a ruling on the president’s decree.

Meanwhile, delegates from the Inter-American Human Rights Commission arrived in Buenos Aires this week to attend to the legal petition of 900 Argentine savers whose money is frozen in their bank accounts.