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To: Dealer who wrote (45842)	1/5/2002 4:15:22 AM
From: Dealer	Read Replies (1) \| Respond to of 65232

01/05 00:48--Argentina to Fix Peso at Lower Rate; Seek $20 Billion in Loans By John Lyons Buenos Aires, Jan. 5 (Bloomberg) -- Argentina plans to fix its currency at a lower level, balance the budget and seek $20 billion in new aid from international lenders in a bid to end the country's financial crisis, a government official said. President Eduardo Duhalde, who took office Wednesday, expects the plan -- which includes abandoning a decade-old exchange rate that pegged the peso one-to-one with the U.S. dollar and trying to limit the devaluation -- will help revive economic growth and restore investor confidence, Cabinet Chief Jorge Capitanich said. Riots toppled the previous government last month and Argentina has stopped payments on $141 billion of debt. ``A program like this is coherent, and with international support it becomes consistent,'' Capitanich said in an interview. Investors are skeptical Duhalde will be able to maintain a fixed exchange rate or persuade the International Monetary Fund and other lenders to provide fresh funds. In Mexico in 1995 and Russia in 1998, efforts to fix the national currency at a lower rate by widening the band in which they traded failed. Both currencies fell immediately to the lower end of the trading band and the central banks were unable to sustain their value, forcing the countries to float their currencies. `Difficult Time' Argentina ``would have a difficult time limiting the devaluation,'' said Robert Kowit, a fund manager at Federated Global Investment Management in New York, which oversees $1.8 billion in international fixed income assets. ``And I haven't seen anything to suggest that foreign lenders would be willing.'' The peso probably will weaken 40 percent as soon as the government scraps the decade-old fixed exchange rate, money- changers in Buenos Aires said. Argentina will eventually let its currency float, Capitanich said. ``Later, when the program is coherent, consistent and lasting, it will float free,'' he said. Argentina's new government is seeking to reverse three years of economic contraction that pushed up the unemployment rate to above 18 percent and left more than a third of the population of 37 million earning wages below the poverty line of 120 pesos ($120) a month. Food riots against spending cuts and bank restrictions killed 27 people and led former President Fernando de la Rua to resign Dec. 20. Three other presidents were appointed in the interim before Duhalde took office. Stability The government's main aims are to create political stability, restore order in the country and introduce social and economic programs that will last, Capitanich said. ``We want, on the basis of this, the world to help us,'' Capitanich said. ``We want this economic program to be successful, and we want strong international cooperation.'' Capitanich gave no time frame for seeking foreign aid or floating the peso against the dollar. The country, the biggest emerging market borrower in the 1990s, raising about $89 billion on overseas markets since starting the dollar peg in 1991, was cut off from IMF funding in December after de la Rua's government limited bank withdrawals to try to protect the banking system and avoid a devaluation. Argentina is now in default on $95 billion of bonds and has stopped paying its debts. The country has no investment bank as an adviser, Capitanich said. De la Rua's government had hired Merrill Lynch & Co. to advise it on restructuring its debts. The government has asked legislators this weekend to approve a new law scrapping the nation's decade-old currency system and allowing the central bank to print money and buy and sell pesos to keep the currency stable. It also wants approval to reduce spending and streamline ministries. The government has called a banking holiday for Monday and Tuesday, Argentine television reported. The government also aims to force banks to convert dollar- denominated loans, mortgages and credit card debt into pesos before the devaluation. Analysts said the decision may leave many banks unable to pay their dollar debts. Duhalde's plan reminds Ricardo Greig, 74, of the four currencies he has witnessed Argentina go through in the last quarter century. ``Devaluation never ends, all it does is give the government an excuse to print money,'' said Greig, who shut down his school uniform factory last month amid uncertainty about the fate of the nation's currency. ``It's not a good way to start a so-called rescue plan. It scares me, and I have seen a lot.''