MercoPress. South Atlantic News Agency

The Brazilian experience

Argentina's Production Minister José Ignacio de Mendiguren said he was optimistic about the country's industrial and farm recovery, as happened with Brazil when it devalued its currency in January '99. Mr. de Mendiguren is expected to meet this week with the new Brazilian Ambassador in Argentina, and one of Brazil's top experts in Mercosur, Mr. José Botafogo Goncalvez. "It's only natural that after strong convulsions countries recover; Brazil devalued following a period of constant fall in economic activity and investments, and quickly recovered competitiveness and businesses became profitable", said the Argentine official recalling Brazil's experience. "Now we're in the stage of making the exchange rate modification competitive and profitable for Argentine production", indicated Mr. de Mendiguren. Ambassador Botafogo and Mr. de Mendiguren are expected to discuss the automobile industry integration agreements that have been a constant source of dispute among both countries. This coming week Argentine Finance Minister Remes Lenicov will be meeting again with Arminio Fraga, Brazil's Central Bank president, the man who steered the Brazilian devaluation in January '99. "Brazil opted for a floating currency system in '99 but with a strong fiscal commitment and a rigid monetary policy", stressed Mr. Fraga during the previous meeting. Argentina on January 6th. devalued the peso 30% and is targeting for a floating currency system sometime in mid 2002, after a decade of fixed exchange rate, par to the US dollar, that helped eradicate dramatic hyperinflation experiences of the Argentine past. However, since devaluing the currency from 1 peso to 1,40 to the US dollar, the street value of the green back in Buenos Aires closed last week at two pesos.