MercoPress. South Atlantic News Agency

Argentina admits global crisis, unveils stimulus plan

Argentina announced on Tuesday a package of measures to soften the impact of the global crisis by boosting investments and protecting jobs. The plan includes tax breaks to encourage companies to retain workers and incentives for savers and companies to bring back funds deposited overseas.

The announcement is a radical change for President Cristina Fernandez de Kirchner administration which all along insisted that Argentina was insulated from the global crisis. She argued the strong government influence in the Argentine economy was safeguarding Argentines from the nasty effects of the beginning of the collapse of the capitalist system. However this week Economy minister Carlos Fernandez warned of a possible slowdown of the Argentine economy that has been riding on a five year economic boom. And the international financial meltdown has come at a bad time for Argentina, which faces mounting debt costs next year. Mrs. Kirchner also announced a 21 billion US dollars public works plan aimed at more than doubling the number of jobs in construction, which she said will be financed through budget outlays and the money obtained from the nationalization of private pension funds. "(This crisis) is going to require an unprecedented degree of articulation, coordination and efficiency between the public, private and trade union sectors" she underlined adding that "the fundamental goal that we should all have is sustaining economic activity and the level of employment, today more than ever". Mrs. Kirchner said the government would also establish a Production Ministry to promote Argentine exports, but she made no mention of changes to the current foreign exchange policy which exporters claim has hurt competitiveness. She anticipated the plan would be sent to Congress this week and although no specific date was given for the massive public works program, it will be launched December 15.- Business leaders insist that Argentina's exports have lost their competitive edge in recent months due to the relative strength of the peso compared with the currencies of neighbouring countries, --particularly Brazil the country's main trade partner--, which have weakened more against the US dollar. Under the capital repatriation plan announced by Mrs. Kirchner, the government would give tax breaks to Argentines who bring home funds stashed abroad and invest in infrastructure, real estate, agriculture and industry, or government bonds. The plan would also give tax breaks to firms that create new jobs, and pardon unpaid taxes for the smallest employers if they give formal employment status to off-the-books workers. But investors have dumped Argentine bonds in recent months due to concern the country will not be able to meet rising debt payments as prices for its commodity exports fall and state revenue slips. Argentina must repay 20 billion US dollars in interest and principal on its debt in 2009, and only 8 billion have been accounted for in the government's financing program. Besides Argentina has a long tradition of not precisely honouring contracts or having regard for private property. Only last week the Kirchner couple administration nationalized private pension funds (24 billion US dollars) and is in the process of a similar action with Spanish owned and flag carrier Aerolineas Argentinas. The argument is that liabilities far surpass assets.