Asking for understanding and belief, since miracles do not exist, Argentine Economy Minister Jorge Remes Lenicov confirmed on Sunday evening a 40% devaluation of the peso and simultaneously outlined the rules for the new economic system which includes negotiations with the country's creditors, sometime in February, after we've put the house in order .
Mr. Remes Lenicov made the announcement an hour after Congress passed a bill granting President Eduardo Duhalde emergency powers to reform the "collapsed" and "broke" Argentine economy, that ended 2001 with a budget deficit of 11 billion US dollars and a tax revenue drop of 30% last December. The incoming Minister said the new economic approach will resort to traditional instruments of fiscal, monetary and exchange rate policy, geared to four, five main targets which he outlined as: complete transparency regarding the real situation of the country's finances; "untying" the productive process; reliability and certitude ?"no surprises"--; structural reforms and a balanced budget described as "presentable" to international creditors. Mr. Remes Lenicov confirmed most measures anticipated in the local press including the end of the fixed rate of 1 peso 1 US dollar, with a medium term goal of a floating exchange rate; converting debts of up to 100.000 US dollars into pesos at the old rate, to protect consumers from the full impact of devaluation; price caps for fuel, medicines and other public utilities; a 180 day freeze in pesos on all private contracts such as rents, mortgages even those in US dollars; a special export tax on oil, and a gradual easing of withdrawal conditions for the estimated 61 billion US dollars frozen bank deposits and savings. The budget will include funds for a minimum compensation to one million unemployed heads of family and a special emergency food program. Mr. Remes Lenicov said four years of consecutive recession had left 20/22% of the active Argentine population with employment problems. When asked about the reaction of foreign investors, particularly Spain with 40 billion US dollars mainly in privatised public utilities, oil and banking, which according to the announced measures will carry much of the burden and are bound to loose several billion US dollars, Mr. Remes Lenicov said he will begin talks in the coming days."I refused to answer all phone calls from lobbies, companies and particular interests until, as I said, the house is in order. Anyhow Spain, Brazil, have suffered similar devaluation process so I'm sure foreign investors will understand", underlined the Arge