Argentina’s financial problems seem hopeless

Press, 21 August 1984, Page 13

Argentina’s financial problems seem hopeless

NZPA-Reuter Buenos Aires Argentina is under increased pressure to reach an agreement with the International Monetary Fund after creditor banks .refused to renew a $125 million dollar loan, banking sources said. . But few bankers saw a clear outcome to the country’s complicated debt problems. One banker said it was a hopeless situation, adding that President Raul Alfonsin had put himself into a corner with his repeated insistence that wages would rise 6 to 8 per cent in real terms this year. President Alfonsin would have to renege on that pledge to reach an agreement with the 1.M.F., but that would undermine his ability to implement the economic austerity programme sought by the fund, the banker said. The powerful General Labour Confederation has already called a major demonstration in front of Government House unless this month’s wage increase is raised from the 18 per

cent offered by the Government to 23 per cent. Argentina on August 16 paid a $125 million debt which fell due after Argentina’s bank steering com: mittee refused to extend the loan for an additional 45 : days, Economy Ministry sources said. The extension was to have been granted if Argentina had reached the longsought agreement with the I.M.F. On several previous occasions creditor banks either extended loans or granted new loans to help President Alfonsins’s young Democratic Government to avoid defaulting on debt payments. But the patience of bankers is running out and Argentina will soon face big repayment deadlines. It

must pay $750 million of a $l.l billion medium-term loan on September 15 and $9OO million in interest falling due on September 30. Until it has an agreement with the 1.M.F., Buenos Aires will not have access to the financing needed to make the payments. The Economy Minister, Bernardo Grinspun, said on returning from a week of meetings in Washington and New York with officials oi the I.M.F. and creditor banks that the Government would now draw up a concrete proposal to bring down the inflation rate. The cost of living increased 18.3 per cent in July alone, taking the inflation rate over the last 12 months to a record 615.5 per cent. Local economists and bankers doubt if Mr Grin-

spun will receive the political backing needed to put together a true anti-infla-tionary programme. Banking sources said Argentina had made progress in several key policy areas but big differences over wages and the budget deficit remained. Mr Grinspun said Argentina had a “basic agreement with the I.M.F. that will allow us in a few weeks more to make decisive advances.” But the bankers said they were adopting a wait-and-see attitude. They said they were more willing to accept a failure by Argentina to meet its September payment deadlines than to reverse their new policy of refusing fresh funds until Argentina had an I.M.F. agreement.