Argentina's corporate bail-out

Protestors are enraged by the seventh austerity package in less than three years

Some of the largest international companies in Argentina have agreed to pre-pay about $1bn of a "patriotic" tax to help pay off the country's foreign debts.

Telefonica, banks BSCH and BBVA, the utility Endesa and oil company Repsol are amongst the Spanish companies that will pay their Argentine taxes for the next three years.

Our concern for Argentina is somewhat less than it was two days ago, but I would not say that we are optimistic.

Ramon Blanco
Repsol

The voluntary tax on companies comes as workers supported a general strike on Thursday against the government's latest cuts to wages and pensions.

Repsol has announced it would pay $150m in advance taxes but the contributions from the other companies have not been declared.

"This is an expression of support for Economy Minister (Domingo) Cavallo's measures," Repsol vice president Ramon Blanco was quoted in the Argentine press.

The measure highlights the extreme cash-crunch the country is experiencing as the recession causes tax revenues to dry up ahead of a $8.4bn debt repayment due later this year.

Corporate interest

"Let us hope that the executive branch will obtain political support and that other corporations will follow our example. Our concern for Argentina is somewhat less than it was two days ago, but I would not say that we are optimistic," Mr Blanco said.

The firms have all invested heavily invested in Argentina and the exposure has hit their share prices as investors fret over a possible default or devaluation in the South American country.

A general strike brought Argentina to a standstill

The companies will not be paid interest for the advances to the government and it is not yet clear if they will be given any favours in kind.

The protests are against President Fernando De la Rua's wage and pension cuts, which are part of the seventh austerity plan since he took office in 1999.

The government wants to use the money to fund provincial governments which on Tuesday agreed to big funding cuts to help balance the budget, a key step in the country's economic recovery.