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To: marek_wojna who wrote (71727)	6/14/2001 3:46:05 PM
From: long-gone	Respond to of 116753

Thursday June 14, 11:43 am Eastern Time Argentine country risk up on pension fund fears By Gilbert Le Gras BUENOS AIRES, Argentina, June 14 (Reuters) - Argentine country risk rose sharply on Thursday as bond traders took profits and funds feared talk that the government may trim staff private pension payments, analysts said. ADVERTISEMENT Argentina's country risk rating, or the measure of the premium it must offer above safehaven U.S. Treasuries to attract investors to its debt instruments, was up 31 points, or 3.43 percent, to 935 basis points at 12:17 p.m. local (1517 Gmt). ``There's talk private pension funds' payroll deductions may be reduced. That would be disastrous, from the point of view of demand for bonds, if they cut the deductions in half,'' said Luis Corsiglia of Corsiglia brokerage. About half of the $22 billion in funds managed by Argentine private pension funds are held in the nation's sovereign debt. Economy Minister Domingo Cavallo told Clarin newspaper the government is studying cutting the private pension fund deductions from employee payrolls. ``Cavallo wants to put more money in people's pockets,'' said UBS Warburg economist Matias Silvani. ``But it's not clear how they'll do it or if it will be done in the short term.'' Latin America's third-largest economy has been in recession for nearly three years and has posted chronic budget deficits that constrain its ability to repay its public debt, causing speculation recently that a debt default was imminent. As a result, Argentina swapped nearly $30 billion in short-term for later-dated debt in an exchange that has deferred around $16 billion of debt servicing payments which had been due by the end of 2005. ``The strong fall in country risk (earlier this month) was mainly the effect of the mega bond swap, and now people are taking profits,'' EcoLatina economist Marco Lavagna said. ``It's a bit early to say country risk will settle at 900 (basis) points or will continue declining to 800 (basis) points, because we're coming out of a very complicated situation, and so before there's a small improvement people are taking profits.'' Argentina's new benchmark Global 2008 dollar-denominated bond fell 0.125 points to bid at 81.250 points. Markets were also concerned about whether the house arrest of former President Carlos Menem -- under investigation in connection with sales of arms to Croatia and Ecuador in the 1990s -- might rally his opposition Peronists against government initiatives. ``The political situation with the Menem case is having some market impact, but the implication for domestic politics is actually not that much because the three most important Peronist governors did not sign this letter accusing the government of acting against Menem,'' UBS Warburg's Silvani said. The trade impact on Argentina from the fall in Brazil's real currency (BRBY - news) -- which closed at a record low of 2.42 reais per dollar on Wednesday, down 24 percent since the start of the year -- was another concern, Silvani said. Traders were also waiting for more details on a planned swap of euro-denominated debt. Part of Argentina's financing plan for 2001 which was drafted among other guarantees to secure last December's International Monetary Fund-led $40 billion aid package was a swap of $1 billion worth of euro-denominated debt. Finance Undersecretary Julio Dreizzen did not say on Wednesday how much euro-denominated debt, which accounts for about 20 percent of its $128 billion gross public debt, would be swapped. (Additional reporting by Cesar Illiano.) biz.yahoo.com