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Wednesday, 4 September, 2002, 22:53 GMT 23:53 UK
Fresh row over Argentina
Anti-IMF protestors in Buenos Aires
There is mass resentment of the IMF in Argentina
The war of words over Argentina's plans to resuscitate its economy has intensified after the government in Buenos Aires took exception to overt criticism from Washington DC.

US Treasury Secretary Paul O'Neill told American television earlier on Wednesday that negotiating with Argentina had been a "struggle", and had taken much longer than it needed to.

The country's IMF submission "doesn't really reach the full measure of creating the basis for stability", he said.

But President Eduardo Duhalde hit straight back, telling his fellow Argentines: "Don't pay much attention to the comments of Paul O'Neill."

Back again

The row came as a fresh team from the International Monetary Fund (IMF) arrived in the country to take soundings on new economic policies, the latest iteration in eight months of tortuous and - thus far - unproductive talks.

The IMF has said there were "major issues" that needed to be resolved before Argentina, which is in its fourth year of recession, could hope for more loans.

The Argentine government's economic plans, outlined in a letter of intent to the IMF in August, have been under attack by Argentina's congress, the Central Bank and the Supreme Court.

Argentines, millions of whom have been plunged into poverty, have demanded the resignation of the heads of all the institutions.

"Officials at the IMF and some representatives of countries with influence at the fund feel that every time they come close to a deal it is Argentina that changes the conditions, generating deep confusion," Economy Minister Roberto Lavagna told local radio.

Argentina defaulted on its $140bn public debt late last year in a financial crisis that has drawn in Brazil, Uruguay and threatens to spill over into the whole region.

Institutional trouble

Argentina's currency devaluation in January, when it dropped a one-to-one peg with the US dollar, sent the peso crashing more than 70%.

The government ordered banks to turn deposits held in dollars into pesos at a rate well below market value.

Congress, in turn, passed laws to make banks pay for the social costs of the devaluation and the Supreme Court has over-ruled government spending cuts, which have worsened relations with the IMF.

The court is also due to rule on whether banks should transform peso deposits back to dollars.

Presidential concern

The IMF is unlikely to abandon Argentina, given fears of contagion in the region, and has recently lent billions to neighbouring Brazil and Uruguay.

No new lending agreement is expected until the successor to caretaker President Eduardo Duhalde is elected in March.

Mr Duhalde said on the weekend that a long-term IMF deal would likely have to wait until the next president took office in May 2003.

The IMF is expected to allow Argentina to postpone the latest monthly debt payment of $2.7bn due in September.

But the US Treasury Secretary questioned whether the Argentine government's reform package goes far enough, saying "I think doesn't really reach the full measure of creating a basis (for economic growth)."

The US had worked "diligently" to close the gap between the Argentine government and the IMF, Mr O'Neill said in an interview with a US cable TV station.

Since December, Argentina has had five presidents, violent riots and the virtual collapse of the financial system.

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Argentina in turmoil


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