MercoPress. South Atlantic News Agency

Still much convincing ahead.

Lack of credibility persists in the essence of the latest financial announcements of the Argentine government in its desperate attempt to avoid defaulting on the 130 billion US dollars foreign debt and getting the country out of its four years recession.

With no international credit available, mounting debts, falling revenue, IMF's refusal to advance funds and an adverse political scenario, President De la Rúa and Finance Minister Domingo Cavallo appealed to the nation and the international business community promising first of all to honour debts and keeping the one peso-one US dollar convertibility system.

The program basically has three areas, a voluntary debt swap to reschedule payments, lower interest rates for local industry and an incentive program for consumers. However reactions were mixed: Argentina's country risk shot to 2,500 points, Buenos Aires stock exchange dropped over 2%; the G 7 Group and the IMF gave their support, but local businessmen are not entirely convinced, and provincial Governors, the big winners in the recent legislative election, are demanding their federal revenue sharing and reject any further cuts.

The most crucial of all areas is the voluntary debt swap, which still has to be fully explained and is a medium term process involving overseas Argentine bond holders, international financial institutions, IMF and the US Treasury, according to Mr. Cavallo. But this needs much convincing because the idea is rescheduling at 7% interest rate with a specific tax revenue guarantee.

A significant interest rate reduction for local industry is closely linked to the success of the debt rescheduling. The incentive program for consumers includes initially a one year suspension of social security contributions plus several points less of added value tax when payments are made with debit cards. This represents approximately a 7% increase for all salaries and pensions.

However the program still has a political hurdle ahead since Congressional reaction remains uncertain and provincial governors are conditioning their support to a greater share of federal funds. Besides, October tax revenue dropped 11% confirming Argentina remains deep in recession.

The only good news this last Friday was Mr. De la Rúa' health. After experiencing a minor heart condition a few months ago, doctors reported the President had completely recovered.