Argentina to Keep Floating Currency, No Price Controls: Lavagna

May 5, 2002 - 0:0
BUENOS AIRES Argentina will keep a floating currency, Economy Minister Roberto Lavagna said Friday, adding that the government has no plans to break off relations with the IMF or bring in controls to keep a check on inflation. "A system of exchange control would be artificial and would isolate us from the world," lavagna told reporters a week after he was appointed to the economy portfolio by President Eduardo Duhalde. And Lavagna said that the depreciation of the peso, with its dollar exchange rate Friday at 3.15 pesos, "is not realistic, because it would give us a per capita GDP of 2,000 dollars which is not the case for Argentina." He pointed back to the $9,000 GDP under convertibility -- ended abruptly on January 3 after a decade in which had pegged the dollar and peso at a one to one rate, AFP reported. The economy minister said the GDP should be around 5,000 to $5,500 per capita. Lavagna also said that Argentina would, in the next 30 days, request a "bridging credit" from countries and multilateral organizations, including the International Monetary Fund, so as to make a deadline on an $800 million interest payment to the World Bank. Argentina would be looking to negotiate the interim credit from the IMF "in May or June," he said, noting that he had spoken to IMF number two Anne Krueger to try to move things forward. Meanwhile, ex-finance minister, Oscar Lamberto, put forward two theories on the IMF's position, based on what he suggested was the fund's apparent change in position on Argentina in recent months. According to Lamberto, Krueger wants Argentina to "explode and to go through a period of hyperinflation" so as to bring down the value of Argentine business assets so they could be bought up by U.S. investors. "Each time we manage to implement the conditions they insist on, they come in with fresh demands. They keep moving the goalposts," said Lamberto, who was the chief negotiator on the Argentine side during the IMF mission here two weeks ago. He charged that IMF Managing Director Horst Koehler, of German nationality, wants the government, on the other hand, to "get rid of 500,000 argentine public employees" whatever the consequences. Koehler, however, does not favor a scenario of hyperinflation, the ex-minister told the weekly "veintitres," which published a section it titled "The U.S. Plan to Get Its Hands on Argentina." According to Lamberto, the United States "is still mad that they lost many of the privatization bids that took place in the 1990s" -- most of which were won by European companies. Lavagna also said Friday that a 14-point agreement signed by provincial governors and the government, which includes a commitment to reducing the fiscal deficit, was now starting to come into effect. In the face of the growing crisis that has added 1.5 million to the official count of impoverished Argentines since October, the International Monetary Fund has refused to bail Argentina out until bankruptcy and "economic subversion" laws are modified. Those changes to bankruptcy law, which currently gives debtors 180 days' grace period, are due to be debated in Congress next week. But he said the economic subversion law was proving to be "a little more complicated." Under the economic subversion law, executives can be jailed for up to six years for bad business decisions, something that makes foreign investors leery, the IMF said. Former economy minister Domingo Cavallo, who brought in a series of economic hardship packages so as to bring Argentina in line with IMF requirements, is currently under house arrest on economic subversion charges, and has complained that Argentina has "judicialized politics" by targeting him with the law.