Economy In Argentina

Essay by PaperNerd ContributorUniversity, Master's December 2001

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November 5, 2001 This article has to do with the continuing struggle of Argentina's economy. Argentina is going to launch a reconstruction plan today. This plan consist of offering bond holders lower interest payments and extended full repayment by three years. This type of plan has caused many investors to be skeptical, for it will to very difficult to achieve. Economy minister Domingo Cavallo told investors that this plan is the only way to avoid a full-blown default. This plan is going to put an even bigger burden on the struggling global economy. Some details of the plan consist of $60 billion of government and $95 billion in total bonds issued. This bonds issued are designed to insight local business to take part in the initial bonds issued hoping foreign investors will follow. This plan will also try to help Argentina to save up to $4 billion a year by lowering the amount of interest paid on notes to 7% from 11%.

The government hopes the lowering interest along with other saving measurements, like reducing federal tax transfers to provinces will stimulate the economy. President Fernando De La Rue is standing behind Mr. Cavallo's decisions by warning governors of 23 provinces, that they must accept spending cuts. These governors have avoided any reduction in the $1.36 billion in monthly transfers, needed to prove to investors that the government will stop spending more money then it earns. President De La Rue wants to make a deal with the governors before he comes to the United States. He believes that making a deal with the governors is one way of convincing Washington and other foreign lenders that Argentina is getting its financial house in order. Local share prices climbed 3.7% on hopes that a deal might be near. Local officials believe...