MercoPress. South Atlantic News Agency

Good omen for Argentina

Argentine Finance Minister Domingo Cavallo will be meeting US Treasury Secretary Paul O'Neil next Friday in Washington. The meeting after months of waiting, is considered a very good omen for Argentina's desperate attempts to restructure its public debt and avoid a default, that could send shock waves to the rest of the continent.

Mr. O'Neil is expected to tell Mr. Cavallo that the US Treasury will support Argentina's plan to restructure the 132 billion US dollars public debt, although it's not clear if direct assistance will be forthcoming.

Argentina has the full support of the International Monetary Fund, World Bank and the G 7 group of industrialized countries for its zero deficit program and debt restructuring. However the political situation, plus almost four years of recession, has shut off international credit to Argentina, bank deposits are fleeing from Buenos Aires banks, and the country risk assessment has reached a world record of over 2,500 points.

Last Sunday Argentine President Fernando de la Rúa met with US president George Bush in New York and received a strong support for the restructuring program.

President Bush urged Mr. De la Rúa to work closely with international agencies regarding the country's financial problems.

The De la Rúa administration has been stalled for months by the refusal of the country's 23 provinces to accept a cut in their guaranteed monthly tax transfers, a key IMF demand.

Finally some agreements have been reached with nine provincial governors from the government's own party, as well as four, possibly five, from the opposition Peronist party. In return for signing, Mr. Cavallo has been negotiating with local banks to offer provinces the possibility of swapping floating rate debts, whose interest rates have in some cases reached as high as 40 per cent, for new 7 per cent loans.

As part of the first leg of its debt restructuring Argentina is offering all bondholders new bonds paying a maximum 7 percent a year in return for their higher yielding bonds. The government claims that the new loans backed by tax receipts will give them more security and will be repaid.

Guarantees are not convincing but local banks, pension funds and insurance companie