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Monday, 3 December, 2001, 11:25 GMT
Fear of ruin haunts Argentines
The government has faced a wave of protests
By the BBC's Tom Gibb in Buenos Aires

The latest board game to hit the shops in Argentina goes by the name of "Eternal Debt".

It invites players to pit their wits against the International Monetary Fund - something in which Argentina's present rulers appear to be failing.

People are not spending because what they earn hardly covers what they need to eat

Raul Ruibal
The game is produced in a small factory in a Buenos Aires suburb.

Employing about 70 workers, the company makes a wide variety of board games.

Its owner, Raul Ruibal, would like to expand and export. But in the present climate, he says, borrowing money would be suicide.

"The market in Argentina is very weak. People are not spending because what they earn hardly covers what they need to eat," says Mr Ruibal.

"We were thinking of building a new single factory with a government credit. But the situation here is so difficult that we are frightened of getting a loan we cannot pay.

"Our objective at the moment is to stay afloat. Today, maintaining one's workers and paying their salaries is considered a success."

As in the game, debt is at the heart of Argentina's problems.

The government owes $132bn, and is still overspending. Argentina is almost bankrupt.

Devaluation fears

Other countries in similar situations have devalued their currency, but for many Argentines, that would be disastrous.

Buenos Aires stock market trader
Investor gloom: There are fears Argentina will not be able to pay its debts
Martin Rapeport has a mortgage on his apartment, where he lives with his wife and 15-month-old baby, which like almost all mortgages in Argentina is set in dollars.

But his salary as an auditor at the firm Price Waterhouse is in pesos.

At present, the mortgage swallows up 40% of his salary. If the peso gets devalued, it would become impossible to pay.

"I would have to sell the apartment the very next day," he says. He would almost certainly lose money because everyone else would be trying to sell at the same time.

Martin's boss at Price Waterhouse, Ricardo Silvagni, says such fears are widespead.

"People who are on payrolls these days worry about two things. One is devaluation - if they have debts in US dollars - and the other is losing their jobs," he says.

"If they lose their jobs, with the high unemployment we have in Argentina, they know that they will be unemployed for a long period of time and they will not able to pay for their loans either."

Cutting down

At the cattle market on the outskirts of Buenos Aires, farmers are also worried about a devaluation.

They thought they could borrow and borrow because we have never honoured our commitments before, and they thought they were not going to honour them now

Malcolm Rodman
About 70% of Argentina's farmers have debts in dollars.

It was meat that made Argentina rich. But an epidemic of foot and mouth disease and the economic crisis have put many farmers into serious trouble.

Malcolm Rodman, a farmer and exporter, blames this on government overspending.

"I personally sold my flat in a rather posh side of the city, I cut down on my telephone bills, I gave back my credit cards.

"I am spending half of what I used to spend two or three years ago. But the government has to do exactly the same thing.

"The problem is the politicians have overspent. They have grossly overspent. I mean they thought they could borrow and borrow, because we have never honoured our commitments before, and they thought they were not going to honour them now. That's not the way the world works," he says.

No way out

The government is now trying to cut its costs.

Argentines praying
People have been praying for work in Buenos Aires

It has been swapping its debt for bonds on which it will pay lower interest.

There have been repeated cuts in pensions and state salaries. But these in turn have provoked a wave of protests.

Eighty-one-year-old Alberto Bono blames corrupt politicians for the country's mess.

He says his $145 pension is not enough to live on.

He is frequently ill and, now that they are privatising the pensioners' health system, he says he cannot get treatment easily.

After four years of recession, Argentina's financial system looks close to collapse.

If that happens, the government says it will convert its currency to the dollar, rather than devalue.

But that in turn may make recovery harder.

Argentina appears to be caught in a downward spiral, with no easy way out.

The BBC's Tom Gibb reports from Buenos Aires
"In practice the restriction on cash withdrawals will make little difference to most Argentines"
See also:

03 Dec 01 | Americas
Argentina curbs cash withdrawals
25 Nov 01 | Business
IMF spotlight on Argentina
21 Aug 01 | Americas
Argentine salaries paid in bonds
20 Jul 01 | Business
General strike paralyses Argentina
22 Aug 01 | Business
IMF agrees extra cash for Argentina
26 Nov 01 | Business
Slowdown spells debt fears
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