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Monday, 22 April, 2002, 22:27 GMT 23:27 UK
Argentina treads the tightrope
President Eduardo Duhalde
Eduardo Duhalde: Difficult balancing act
As an indefinite bank holiday began on Monday, angry Argentines searched for the few banks still with money to hand out.

Their president, meanwhile, vowed to push ahead with economic reforms - but on his own terms.

After four years of recession, Argentina is burdened by a $141bn debt mountain, a banking and financial system in disarray, and a poverty-stricken people hit by soaring unemployment.

Writing in the Washington Post on Monday, President Eduardo Duhalde said that "just as we need to re-establish the confidence of the Argentines in their own nation, we need to re-establish the confidence of the rest of the world in our [economic restructuring] program".

Argentina's main aim is to comply with the International Monetary Fund's (IMF) pre-conditions for granting financial aid.

"We are beginning to restructure the banking sector. And we are taking many specific actions to strengthen the rule of law," Mr Duhalde wrote, referring to the country's banking crisis and the IMF's call for improved bankruptcy laws.

The government is also pressing for Argentina's provinces to impose further spending cuts, as called for by the IMF.

That still leaves Argentines facing the compulsory conversion of their savings into bonds, in an attempt to stop the banks from collapsing - and the economy from imploding altogether.

The BBC correspondent in Argentina, Lourdes Heredia, told the BBC's World Business Report that in the provence of Rioja, the bonds are called evitas - like Evita Peron.


Mr Duhalde's letter was published just hours after Economy Minister Jorge Remes Lenicov returned empty-handed from this weekend's IMF and World Bank meeting.

Mr Remes Lenicov failed in his bid to persuade the IMF to resume lending cut off in December when Argentina defaulted on its debt repayments.

"It does not make sense to throw money behind Argentina if the government doesn't fulfil the preconditions set by the IMF," a German delegate to the conference said.

While stressing that "we need the support of the IMF, World Bank and Inter-American Development Bank", Mr Duhalde also insisted that "our crisis is home-grown, made in Argentina, by Argentines".

"Our solutions will also be home-grown - made in Argentina, by Argentines," he said.

Riot fears

For Mr Duhalde, pushing through the reforms is an acutely tricky balancing act.

The atmosphere in Argentina is explosive following the latest clash between the international community's insistence on tough austerity measures, and the Argentine people's resistance against further belt-tightening.

The IMF's demand for spending cuts by the provinces was met with street demonstrations that raised fears of a repeat of the deadly riots seen earlier this year.


The main problem appears to be that many of the policies pushed for by the international lenders are politically unviable.

"The IMF is not able to make Argentina listen," Italy's central bank governor Antonio Fazio said.

"Argentina makes promises, but it is not able to keep its promises."

Pointing to the futility of trying to push ahead with excessively ambitious economic solutions, Mr Duhalde noted that "what seems lost on many international commentators who demand more austerity, more quickly implemented, is that Argentina is a democracy".

He added: "Arguably, the biggest challenge Argentina faces is not economic but political.

"What economic decisions are politically viable in a country with almost 30% unemployment?"

Many decry the savings-to-bonds switch as a way out for the banks and foreign investors at the expense of the ordinary citizen.

Tough action

Mr Duhalde called for the IMF and the international community to take a fresh look at the efforts already made by Argentina.

"My government is committed to designing and executing a restructuring plan that, as first steps, will stabilize the economy and re-establish credibility with the international financial community.

"Once we finish the first phase of our programme, we will work with Argentina's creditors to restructure our country's international debts.

"I ask the international agencies to assess our programme, look at our actions, evaluate our commitments and measure our performance."

BBC correspondent Lourdes Heredia
"The bonds are called evitas - like Evita Peron."
Carlos Asilis, Markets Strategist
"The crisis has the potential of becoming the worse crisis Argentina has seen since the 1930s."
The BBC's Tom Gibb
"The President is warning the whole financial system is at risk"
See also:

22 Apr 02 | Business
Argentina 'risks financial collapse'
22 Apr 02 | Americas
IMF says Argentina could get aid
20 Apr 02 | Business
Argentina closes all banks
18 Apr 02 | Business
Argentina pleads for financial aid
05 Apr 02 | Business
IMF 'to ignore' Argentina cash plea
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