ARGENTINA NOW FACING A CRISIS

Greymouth Evening Star, 20 August 1949, Page 5

ARGENTINA NOW FACING A CRISIS

BUENOS AIRES, August 19 (Rec. 1 p.m.).—Argentinians, who three years ago were told that their Central Bank was “stuffed with gold,” may have to devalue the peso if they are to compete again in the world markets. This, forecast by some observers followed the disclosure last night that the nation's gold and foreign reserves were down to below 2,000,000,000 pesos* (about £100,000,000), compared with more than £121,000,000 in December of last year.

In 1946 Argentina’s reserves were at an all-time peak and must have seemed to some limitless.

Mr Miguel Miranda, the virtual dictator of Argentine economy during, the first two and a half years of the Peron Government, boasted that the country possessed so much gojd that it had to stack it in the corridors of the Central Bank. On A Spending Spree The Anglo-Argentine meat pact, which went into force on July 1, is expected to put new life into the nation’s economy, but the pact is not expected to be enough in itself. The independent press and statements frequently issued by business and farmer organisations all put the major emphasis on drastic cuts in Government expenditure as the first step on the long road of disinflation —then lower production costs through stabilisation of wages and the elimination of labour unrest. For three years the nation has been on a spending spree, involving industrialising the predominantly agricultural country, increasing wages, shortening working hours, raising pensions and food subsidies. Argentina aimed to pass on the resultant inflation to her foreign customers by charging in the sellers market what some openly complained were extortionate prices for produce. . _ . , . Provincial, municipal and federal authorities started spending money in a fashion which brought repeated charges of extravagance and created a wide range of new taxes to finance the spending spree. It was obviously based on the supposition that the world sellers’ market would be maintained, thus enabling Argentina to balance through the large volume of exports at high prices her enormous investment in her newly-proclaimed “economic independence.” From Canter To Gallop When the sellers’ market dried up, Argentina exports headed into an alarming decline. Before the brake could be applied, the gold and currency reserves evaporated quickly. The Central Bank defaulted on its commitments, running into several hundred million sterling. Inflation, breaking from a canter to a gallop, led to widespread labour unrest, smothered by still further wage increases. The stock, market crashed and Mr Miranda resigned. West Berlin’s Future

BERLIN, August 19 (Rec. 1 p.m.). —Reports that West Berlin is Jo become a State in the West German Republic were premature, Mr John McC.loy, United States High Commissioner for Germany, said today, says the Associated Press. “I know of no steps in that direction,” he added. He did not oppose such a plan, but it had not been discussed recently.