MercoPress. South Atlantic News Agency

Breaking News from Argentina

Headlines:
Duhalde on the campaign trail; Mr. Lavagna's promises and warnings; Another IMF mission in Buenos Aires; Official unemployment 22%

Duhalde on the campaign trail

Argentine president Eduardo Duhalde during a brief visit to the province of Córdoba attacked those "politicians who were demanding elections and now bitterly complain the decision".

In direct reference to Deputy Elisa Carrió who leads a splinter group that is ahead in the polls for the anticipated March presidential election, Mr. Duhalde said "she's doing the right thing. If she won't be a candidate it's because she knows she doesn't have a chance".

Actually Ms. Carrió is demanding a renewal of all elected posts and not only the Executive. "We need a complete renewal of politics and faces", underlined the candidate that leads in presidential vote preference.

However Mr.Duhalde had other things in mind when he met in Monte Maíz, a small town of Córdoba, with the province's governor, José Manuel De la Sota. According to the Argentine press, Mr. De la Sota together with Santa Fe governor Carlos Reutemann are two presidential hopefuls with most chances and the current president would like to see them run against his arch enemy and former president Carlos Menem who has already indicated he will win a third mandate in the Casa Rosada.

The anticipated March election bill makes it compulsory to hold primaries in all parties and Mr. Duhalde wants his strong Buenos Aires province standing, that enabled him to be nominated by Congress to office last January, to be included in the Peronist ticket.

This means defeating Mr. Menem in the coming November primaries and the two outstanding rivals for the task are Mr. Reutemann and Mr. De la Sota.

During the short public ceremony Mr. Duhalde recalled that during his short term he has had "to manage the worst crisis in Argentine history" and praised both governors for their political support to his administration.

Mr. Duhalde also attacked another hopeful, Alfredo Rodríguez Sáa, who "was president for five days last December and nobody knows why he resigned".

Cordoba governor De la Sota indicated he would not run in the Peronist primaries if Mr. Reutemann decides to be a candidate, the candidate that apparently has president Duhalde's full support.

"We have to give Reutemann time to decide, and actually people are not waiting for a name or a candidate, rather a new, definitive, effective, convincing program that helps us get Argentina out of the crisis", replied Mr. De la Sota when asked about his plans.

However if Mr. Reutemann declines to become a candidate, "I will seriously consider running" in the November Peronist primaries concluded Mr. De la Sota.

Mr. Lavagna's promises and warnings

Argentine Economy Minister Roberto Lavagna interviewed by the Buenos Aires press said the government's economic policy leading to the March 2003 general election will have two main objectives, keeping prices and the exchange rate of the United Stated dollar under control.

"Our purpose is to hand over to the next government a working economy with clear signals of recovery", stressed Mr. Lavagana.

To ensure this target Mr. Lavagna said the government will have to: rebuild the financial system, reach an agreement with the International Monetary Fund, begin talks with international creditors; negotiations with privatized companies particularly regarding public rates and help Argentine private companies reschedule their debt horizon following the strong devaluation of last January and the "pesification" of the Argentine economy.

To support his optimism Mr. Lavagna revealed that for the first time in four years there are some "positive recovery symptoms in some sectors of the economy and inflation is beginning to fall".

"We believe that if we keep to our present guidelines we will avoid hyperinflation and the US dollar will recede. Actually the US dollar has "over shot", and we expect it to continue its gradual decline as the economy starts to pick up", added Mr. Lavagna.

Regarding the deposits and accounts in banks trapped since last December when the government decided a freeze, and have been a constant motive of protest all over Argentina, Mr. Lavagna said there was no chance of a compulsory exchange of assets for government bonds "since this would have a terrible fiscal impact for the Treasury and would also harm depositors".

Argentine bank clients are demanding the return of their funds in US dollar, the currency in which their deposits were originally done and accepted by the financial system, since at that time one Argentine peso was equivalent to one US dollar. The US dollar now quotes at 3,60 pesos.

Mr. Lavagna also added spice to his interview criticizing the idea of "dollarization" of the Argentine economy, that is making the US dollar the legal tender currency in Argentina.

"It's a very simplistic solution. It's a myth gullible to public opinion but it does not solve basic economic problems?just look at Ecuador, they adopted the US dollar and their country risk has also shot to the stars?", indicated Mr. Lavagna.

However Argentina's Economy Minister cautioned politicians about the coming electoral campaign.

"This administration is very conscious of its political framework and we expect the political campaign to respect those limits. The economy is still very fragile and this can not become a street brawl. If the campaigns turn to be particularly aggressive it won't held the economy".

Finally Mr. Lavagna said that the technical IMF mission that begins to work this week in Buenos Aires will concentrate in the fiscal framework of the budget and its long term sustainability; the financial system; help develop a monetary anchor for the floating exchange rate and strengthen the Central Bank's autonomy.

Another IMF mission in Buenos Aires

A joint IMF/World Bank mission begins this week to work in Argentina to analyze the restructuring of the financial system and demand the Argentine government adjusts public utilities rates.

In preliminary reports the IMF has argued that the Argentine financial system is in urgent need of reforms including bank fusions, closing others, defining the role of government run banks and immunity for members of the board of the Central Bank.

Recently named Argentine Central Bank president Aldo Pignatelli publicly anticipated that it's very difficult to estimate the number of banks that will be left and what is to happen with them and their staff.

"Of the hundred financial institutions we now have, forty can be said are operational; those with greatest chances are regional banks, particularly the former banks that were run by provincial governments", said Mr. Pignatelli.

World Bank experts are expected to scrutinize inflation targets, and the profit and viability situation of privatized former public utilities many working at a loss, and which have had rates frozen by the Argentine government since last January.

It is believed the World Bank will insist in adjusting rates since many of the privatized companies have pending credits with the multilateral organization.

The issue promises to be contentious since an Argentine Senate committee of experts states that most of the companies, during the fixed parity rate of one peso.one US dollar that lasted from 1991 to 2002, were able to recover several times their initial investments plus charging rates well above developed countries averages.

However Economy Minister Roberto Lavagna apparently is willing to accept a 4 to 8% increase in public utility rates.

The Argentine government that last January defaulted on 141 billion US dollars of private debt and since has been cut of international credit, is desperately trying to avoid a similar situation with the multilateral organizations.

IMF missions to Argentina so far have been "technical", and not at negotiating level, which means further delay for beleaguered president Duhalde's agenda.

Official unemployment 22%

Argentine Labor Minister Graciela Camaño officially admitted that unemployment in Argentina reached 22% last May, a significant jump from the latest report in October 2001, 18,3%.

Ms. Camaño complained that the index, totally unacceptable, is also far from the 25% that "is regularly reported in the press".

"May's report means that 220,000 jobs were lost since last October, although that is not a complete picture: jobs have disappeared but others in the export industry for example have been created", said Ms. Camaño.

Argentina officially publishes two employment reports annually, in May and October. Ms. Camaño also indicated that the more "flexible labor practices" policy "has proven to be a complete failure. It simply didn't create the jobs it promised".

Talking about incomes and salary increases Ms. Camaño said the 100 pesos (28 US dollars) across the board increase is compulsory for all labor agreements in the private sector.

The increase was decided by government at mid June to help recover salaries punished by an official 30,5% inflation rate during he first half of 2002.

Consumer price index for June was 3,6%, below May's 4%, but adding to the six months 30,5%. Furthermore basic food inflation actually jumped 5,2% in June totaling 50% in the same period. More worrisome, whole prices recorded 8,2% in June, a six months 95,6%, meaning many companies are absorbing the impact of inflation or sacrificing profits until the situation becomes more stable.

The Argentine peso was pegged to the US dollar one to one last December, but has consistently depreciated since, and in the first week of July, the greenback was selling in Buenos Aires at 3,60/3,70 pesos.