Currency fears hit Argentine shares

The economy ministry is still mulling argentino plans

Investor uncertainty forced Argentine shares sharply lower on the Buenos Aires stock exchange which opened on Friday after a week-long suspension.

The MerVal index of leading shares closed 7.82% at 297.39 as traders grew increasingly concerned about the untested argentino currency designed to resolve the country's economic crisis.

Argentina's economic crisis has become impossible to manage for the country's government, forcing its interim president Adolfo Rodriguez Saa to ask other governments for assistance.

Mr Rodriguez Saa on Friday spoke with the first deputy managing director of the International Monetary Fund on the telephone, asking for "patience" and "understanding", he said.

Also on Friday, the US President George W Bush said the US would offer technical assistance via the IMF to Argentina.

Argentino worries

Earlier, labour minister Oraldo Britos said that state employees are to be paid overwhelmingly in argentinos.

Mr Briton told La Nacion newspaper that up to 70% of salaries and pensions would be paid in argentinos, with the balance given in dollar-linked Argentine pesos.

Such heavy reliance on the argentino to pay salaries would come as a blow to the majority of Argentines, who worry that the new currency will carry far less purchasing power than the dollar or the peso.

The argentino, backed by all the government's physical assets, is intended to inject liquidity into an economy starved of cash by draconian restrictions on the withdrawal of dollars or dollar-linked pesos.

Devaluation fears

The restrictions on withdrawing hard currency deposits are designed to make it easier for the government to service its $132bn debt, on which it has now declared it will not be paying instalments early next year, causing a record debt default.

All private bank deposits would also be switched into the argentino.

The argentino will not be directly convertible.

It will be allowed to float freely against the dollar, raising fears that the new currency will be heavily devalued.

Under a bill still being debated in the Argentine congress, the government would also use the argentino to pay domestic debts and buy supplies.

The government is aiming to introduced the new currency by mid-January.

Economists have argued that the new currency will make it more difficult for Argentines to settle their dollar denominated debts, and is likely to fuel inflationary pressures.

Also on Friday, the FIEL institute said in a monthly survey that the country's industrial output in November was 10.4% down on the year.