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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (6034)	4/28/2002 10:49:21 PM
From: John Pitera	Respond to of 33421

Argentine Financial Markets to Reopen In First Step Toward Economic Stability By MICHELLE WALLIN DOW JONES NEWSWIRES BUENOS AIRES -- Argentina's newly appointed economy minister, Roberto Lavagna, making his first decision on how to approach the country's ravaged economy, will allow financial markets to reopen Monday after an emergency five-day shutdown. Cabinet Chief Jorge Capitanich also indicated that the government of President Eduardo Duhalde was backing away from the notion of bringing back a fixed exchange rate for the peso or placing other restraints on the currency, at least for now. After a decade of being pegged to the dollar at a 1-to-1 ratio, the peso was allowed to float freely in early February at the urging of the International Monetary Fund, a critical Argentine lender. The peso has since plunged in value to around 3.10 to the dollar, wiping out much of Argentines' savings and purchasing power and sparking inflation. "The stability of the exchange rate depends on confidence," Mr. Capitanich said in a news conference. "We want a foreign-exchange policy that tends toward stability." To achieve such a policy, Mr. Lavagna suggested he intends to concentrate on ways to restore Argentines' access to their savings without risking a run on the banks by spooked depositors. Government officials indicated that fixed-term deposits in state banks may be exchanged for some sort of state-backed IOU. Private banks, owned mostly by European and U.S. multinational companies, may set up a trust and offer their own paper to depositors, according to decidedly preliminary plans. Checking and savings accounts would remain subject to monthly withdrawal limits for the time being, officials said. This is perilous territory. Mr. Lavagna's predecessor, Jorge Remes Lenicov, resigned Tuesday after Congress rebelled against his plan to convert the fixed-term deposits into government bonds. And many in Buenos Aires financial circles questioned whether Mr. Lavagna, a mild-mannered specialist in international trade, would be up to the herculean task of righting the economy. Argentina, in its fourth year of recession, is plagued by unemployment above 20% and a $141 billion public-sector debt, much of it in default, that has scared away foreign investors and caused multinational lenders, like the IMF, to suspend aid. Mr. Lavagna returned to Buenos Aires last week from Brussels, where he was Argentina's ambassador to the European Union. A member of Mr. Duhalde's Peronist party, he has held posts under governments of all political stripes, always in issues related to domestic industry and international trade. His views on trade in the past have tended toward protectionism, and he has almost no first-hand experience in the banking sector, foreign exchange or the budget.<?b> "His appointment really doesn't take us in one direction or another," said Federico Thomsen of ING Bank in Buenos Aires. In addition to the resumption of foreign-currency trading, the Central Bank said that as of Monday all banks would be permitted to operate without restrictions. Banks and financial markets were shut down last Monday after thousands of Argentines won court injunctions allowing them to remove their savings from banks, contravening rigid five-month-old restrictions on withdrawals. Last week, Congress passed legislation taking some of the legal might out of the injunctions, and banks reopened on a limited basis Friday. Mr. Lavagna, speaking in an interview published Sunday in the leading daily newspaper Clarin, said fully operating markets were essential to recovering confidence and, eventually, reviving economic growth. "First we must inject some oxygen into the situation by allowing markets to function," he told Clarin. "It's incredible the number of [bank and market] holidays we've had recently. This hurts economic activity and tax collection and generates fully justified social tensions." The 60-year-old Mr. Lavagna was sworn in as economy minister Saturday and spent the first hours in his post meeting with governors, lawmakers, the president and the rest of the cabinet. In other banking-sector news, the Central Bank approved a reorganization plan for Banco General de Negocios SA, a small investment bank at the center of a judicial investigation into capital flight from the nation. The bank is owned by Credit Suisse Group, Dresdner Bank AG and J.P. Morgan Chase & Co. and two Argentine brothers, one of whom has been arrested in connection with the probe. The plan strips BGN of the bulk of its assets and some liabilities, including its shareholding in a regional commercial bank called Nuevo Banco de Santa Fe. The plan is intended to protect depositors and the Santa Fe bank from problems at BGN, closed since mid-April. Write to Michelle Wallin at michelle.wallin@dowjones.com