Argentina poised for new economic plan

Eduardo Duhalde: Promised a shift in economic policy

As Argentina's president Eduardo Duhalde prepares to swear in a new Cabinet, speculation is mounting that he is preparing to devalue the peso.

Mr Duhalde, the country's fifth leader in two weeks, faces the daunting task of pulling Argentina's debt-laden economy out of a four year recession that culminated in widespread riots and the death of 27 people.

Economist Jorge Remes Lenicov - formerly Mr Duhalde's provincial economy minister - is widely expected later on Thursday to be named as economy minister.

My commitment is to do away with an exhausted economic model

Eduardo Duhalde

Mr Duhalde is on Friday set to announce an economic plan which, advisers have indicated, will herald the devaluation of Argentina's peso.

A central bank rule forcing banks to accept the peso at a rate of one-to-one to the dollar will end at 2300 GMT on Thursday.

"My commitment, starting from today, is to do away with an exhausted economic model... and to lay the foundations of a new model that can help our market recover and ensure a better distribution of wealth," Mr Duhalde said.

Falling peso?

An adviser to Mr Duhalde has indicated this was likely to mean a depreciation of more than 30% for the Argentine peso.

The interpretation underpinned a near 10% rise in Argentina's ValMerl index of leading shares, as fears of a devaluation led people to invest their cash in stocks.

The Duhalde adviser said the peso might be moved to 1.3 or 1.4 pesos to the dollar.

The devalued peso would then be pegged to a new basket of currencies, including the Brazilian real, the Japanese yen and the euro.

Mr Duhalde also promised to protect the billions of dollars locked in bank accounts since strict limits were put on cash withdrawals.

Debt rises

Argentina's public debt rose to $141bn (£97bn) during the January to September months of 2001, official figures have revealed.

The 9.3% rise compared to a year earlier was revealed as the new President Eduardo Duhalde said Argentina cannot afford to pay its debts - though technically it still has until the end of the month before it defaults.

Argentina has already said it cannot repay the $132bn (£90bn) it owes, and in an acceptance speech criticising free-market policies, Mr Duhalde said the country would need international co-operation to resolve its problems.

Leap in the dark

Martin Redrado, chief economist at the Buenos Aires think-tank Fundacion Capital, said Mr Duhalde's economic plan was "a leap into the unknown," but was likely to entail a more protectionist approach than his predecessors.

The president has already commented that the free-market policies have left Argentina "without a peso".

Argentina in crisis

Early December, IMF refuses to disburse $1.3bn aid

20 December: President de la Rua resigns after riots

23 December: Adolfo Rodriguez Saa sworn in

30 December: Mr Rodriguez Saa resigns

1 January: Eduardo Duhalde elected president

Mr Duhalde is the second president elected by Congress since Fernando de la Rua resigned on 20 December amid street protests over the state of the economy.

Two other leaders have been temporary stand-ins in the past fortnight.

Argentina's severe economic crisis saw Adolfo Rodriguez Saa quit after only one week in office.