MercoPress. South Atlantic News Agency

Argentina's tax receipts confirms recovery

Argentine authorities were on Monday expected to confirm the country's surging economic recovery by announcing that April tax receipts grew by 30 per cent compared with a year ago.

The strong performance - led by value added tax and a sharp increase in imports - adds to an array of recent economic data underlining Argentina's return to health after its economy collapsed in December 2001.

Last week, the government reported a 17 per cent year-on-year increase in exports and an 81 per cent increase in imports. Tax receipts this month are expected to be a record 11bn pesos ($3.9bn, £2.2bn, ?3.2bn).

The figures were welcomed by the country's private creditors, who are this week expected to meet investment banks handling the restructuring of about $100bn (?85bn, £56bn) in defaulted Argentine debt.

They say the performance proves that President Néstor Kirchner can afford to increase the target of the primary fiscal surplus - the surplus before interest payments - of 3 per cent of gross domestic product this year.

The surplus determines in large part the funds the government has to pay its creditors.

"This recovery is an opportunity for Argentina to make an offer that will be widely accepted, and reintegrate quickly into the world's capital markets," said George Estes, sovereign credit analyst at Grantham, May o, Van Otterloo, a Boston-based fund management company.

So far, there is little evidence that the government shares that view.

In spite of a number of recent meetings in Buenos Aires with creditor groups, it confirmed it would announce in June the final details of the offer it made to bondholders last September in Dubai.

That offer, which entails a 75 per cent reduction on the nominal value of the bonds, was rejected almost as soon as it was unveiled.

But it is clear that the vastly improved tax receipts and primary fiscal surplus - which during the first quarter was almost four times the target set in Argentina's agreement with the International Monetary Fund - is making the government's tough offer increasingly hard to maintain.

Mr Kirchner's administration has reacted by trying to hide the size of the surplus - for example by paying future obligations early as it did in December last year.

It has also begun a long-awaited reduction of several taxes brought in during the economic emergency two years ago, which account for about 20 per cent of the total but which have also created serious fiscal dist ortions.

On Friday, Roberto Lavagna, the economy minister, announced that a 1.2 per cent tax on financial transactions would fall to 1 per cent starting this week.