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Saturday, 21 July, 2001, 06:02 GMT 07:02 UK
Argentines living in the shadow of debt
Argentinians seeking to emigrate
Many people are trying to emigrate to Spain
By Tom Gibb in Buenos Aires

Argentina is a nation of immigrants, most from Italy and Spain, who crossed the Atlantic seeking a better life in South America's most prosperous country - but today the reverse is happening.

A short radio report that the Spanish province of Galicia was offering work to those wishing to emigrate led to lines of hopeful applicants extending for several blocks outside the Galician tourist offices in central Buenos Aires.

Devaluation is the shadow and fear that hangs over us permanently - I think that 80% of the country has debts in dollars

Beatriz Biscay
Sandra Zoiro has not been paid for four months. She has two children - and no money to pay the rent or school fees.

"It is very hard to leave," she said. "This country is the cradle where we were born, which we love, but there is no future for us here."

Many have lost jobs in the last few months as factories and businesses close down, creating perhaps the worst social crisis in Argentina's history - with rising unemployment and violent crime.

Sylvia Dominguez says her husband was fired from his job in a private postal company after being assaulted at gunpoint and having the mail stolen.

The company, she said, suspects everyone who gets robbed of colluding with the thieves.

"The company fired 40 other people along with him - because they decided all those who had been assaulted should be fired. This country makes me sick," she said.

Economy Minister Domingo Cavallo
Cavallo pegged the Argentine peso to the US dollar

Like many Argentines she is wondering how her once prosperous country got into the present mess.

In fact, Argentina is now paying the price for decades of corruption and rising debts.

In the 1980s, governments financed their overspending by printing money and devaluing every few months.

So 10 years ago Economy Minister Domingo Cavallo pushed through a law to peg the Argentine peso to the US dollar.

That stabilised the currency - but it did not stop the borrowing.

Many Argentines blame the crisis in part on massive government corruption under the presidency of Carlos Menem - who is now under house arrest accused of illegal arms sales to Croatia and Ecuador.

Today the public debt of $128bn - about $80bn in foreign loans - has sent interest rates soaring.

Argentinian trader
The shadow of devaluation hangs over Argentina

At the same time the strength of the dollar has made Argentine exports very expensive in the country's main markets in Brazil and Europe.

The combination has forced many companies to go bust.

Mr Cavallo has now come up with a new law of economics which is being sold to the Argentines as a revolutionary idea - zero deficit.

If he fails to get this accepted, then the scenario is bleak.

Argentina would almost certainly default on its debt and could well be forced to devalue.

As it is, some argue that it will be extremely difficult for Argentine exports to compete unless there is some kind of devaluation.

Pressure to devalue

President Fernando de la Rua has sworn that he will never devalue because he says that would hurt the poor far more than the present 13% cuts in public sector salaries and pensions.

But many international investors fear he may be forced to.

For many Argentines, who have taken out loans fixed in dollars, that does not bear thinking about.

Beatriz Biscay runs a real estate office close to the centre of Buenos Aires.

She says that already, too many people are trying to sell houses to move somewhere smaller and get rid of dollar loans.

"Devaluation", she says "is the shadow and fear that hangs over us permanently. I think that 80% of the country have debts in dollars. People will lose their house, their families, their partners. It would be a terrible disaster."

See also:

20 Jul 01 | Business
Argentina softens economic reforms
19 Jul 01 | Business
Argentina's corporate bail-out
17 Jul 01 | Business
Argentine austerity plan backed
12 Jul 01 | Business
Argentina debt sparks foreign fears
20 Jun 01 | Business
Argentine currency fears grow
13 Jul 01 | Business
Argentina minister appeals for calm
20 Jul 01 | Business
General strike paralyses Argentina
06 Jul 01 | Country profiles
Country profile: Argentina
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