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Friday, 13 December, 2002, 16:30 GMT
Argentina in $1bn loan default
Starving Argentine child
Starvation has been reported in some provinces
Argentina will continue to default on $1bn of debt owed to the World Bank, a move which will effectively isolate the country from all major international lenders.

"We are not going to pay," cabinet chief Alfredo Atanasof told reporters.

"We assume the responsibility as a country... but what we are saying is the bureaucracy at the Fund has promoted the policies that put us in this situation."

Alfredo Atanasof
Argentine cabinet chief
The default comes almost a year to the day after deadly rioting over the economic policies of President Fernando de la Rua caused him to resign.

Bankrupt Argentina, which is in its fourth year of recession, is now considered to be in the same league as Iraq and Zimbabwe in terms of defaulting on multilateral loans.

It was once known as the bread basket of Latin America, but unemployment is now over 20% and there have been tens of deaths from starvation.

Street protests are planned for 19 and 20 December to mark the anniversary of riots in which 27 people died last year.

Debt fault

The government said it would suspend payment of $726m (441m) after talks with the International Monetary Fund for aid failed.

It will also default on a $250m bond due on Monday that was guarantee by the World Bank. About $2.4m in interest is also due.

"We're not saying the blame for what's wrong should be pinned on the fund (IMF)," Mr Atanasof said.

"We assume the responsibility as a country... but what we are saying is the bureaucracy at the Fund has promoted the policies that put us in this situation."

Argentina first defaulted with the World Bank on 15 October by making only a $79m payment on $805m that was due, which has now risen due to interest and other payments to $830.7m.

The World Bank, which will now halt disbursement from $2bn of existing loans, had provided the last major credit line open to Argentina.

The IMF halted loans to the country last December, resulting in the biggest default on foreign debt in history when Argentina in turn halted repayments on about $95bn of $141bn debt owed to private-sector creditors.

The sticking points with the IMF include requests that Argentina increases the price of privatised public services and increases taxes.

Lender's ratings

The country has relied on World Bank money to help fund social programmes and finance businesses.

Over the next 14 months, Argentina faced debt payments to international creditors totalling more than $16bn with reserves of only $10bn.

The second high-profile default should not harm the World Bank's creditworthiness.

Bond-rating agencies rate the lender's bonds at the "blue chip" AAA level.

But one of the biggest US pension funds, TIAA-CREF has already sold all of its World Bank bonds for what it described as economic reasons.


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12 Dec 02 | Business
10 Dec 02 | Business
04 Dec 02 | Americas
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