MercoPress. South Atlantic News Agency

Argentina starts to see positive signs

A year ago Monday, Argentina committed the biggest sovereign debt default in history. Last week it claimed the country's four-year recession was over.

The government also said over the weekend that a new transition programme with the International Monetary Fund could be agreed by the end of this year. IMF negotiations have been stalled throughout 2002.

In December 2001, Argentina sent shockwaves through the world's financial system by defaulting on $95bn of its $115bn of commercial debt. The default came days after widespread riots that cost 30 lives and forced the resignation of President Fernando de la Rúa. One of the first decisions of Adolfo Rodrguez Sáa, Mr de la Rúa's successor, the default caused more turmoil, and led to Mr Sáa's downfall after just one week in office.

Hundreds of thousands of people marched peacefully through Buenos Aires on Friday to remember those killed during the unrest. "The last year was very tough for me financially," said Carlos Medina, a Buenos Aires greengrocer. "My business went down by more than 30 per cent after the government introduced bank restrictions."

Mr Medina was referring to the corralito and the corralón, introduced by Mr de la Rúa and Domingo Cavallo, his economy minister, to stop a run on bank deposits. The corralito limited withdrawals to 2,000 pesos a month from current accounts valued at 21bn pesos ($6bn), while the corralón froze $40bn in dollar-denominated bank

accounts. The government finally removed the corralito this month, although the corralón remains.

Argentina is due to hold presidential elections on April 27 2003, with run-offs on May 18 and the new president inaugurated on May 25. The Peronist party l ast week agreed to hold primary elections on February 23.

Even before then, the Argentine government continues to face huge problems: It must reach an agreement with the IMF, arrive at a debt rescheduling programme with other multilateral agencies, and enter into talks with international banks about resuming commercial debt repayments. The country's Supreme Court is also threatening to force the government to re-dollarise bank accounts, which could lead to hyperinflation.

But there are some positive signs. Argentina has not yet started to reschedule its debt but last week Roberto Lavagna, the economy minister, said the recession was over after three consecutive months of positive economic growth. Economic production rose by 2 per cent in November compared with the same month last year, according to Argentina's National Institute of Statistics - the first time in 27 months that there has been a monthly rise.

However, the NIS figures also showed that economic production fell by 12.2 per cent on an annualised basis. In addition, unemployment still stands at more than 20 per cent and 50 per cent of the population live below the official poverty line.

The IMF confirmed on Friday that its board had considered Argentina's request for a transition programme. The government is pushing the IMF to roll over $13bn of multilateral debt until the end of 2003 and has said it will not repay any multilateral debt until it has reached an agreement. The agency will send a new mission to the country during the first two weeks of January.