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Strategies & Market Trends : Argentine stocks -- Ignore unavailable to you. Want to Upgrade?

To: Tom who wrote (72)	9/16/1998 5:29:00 AM
From: EPS	Read Replies (1) \| Respond to of 331

NY Times. Argentina Negotiating Loan Package to Protect Against Slowdown September 16, 1998 By CLIFFORD KRAUSS UENOS AIRES, Argentina -- In an attempt to ease any future economic tremors from neighboring Brazil, Argentina is negotiating loan packages totaling more than $8 billion with various international lenders to insure government financing in case of a severe economic slowdown next year. Publicly, government officials are still painting a rosy picture of the economy, making every effort to differentiate Argentina from other emerging market countries. The proposed 1999 budget sent to Congress this week projects a 2 percent increase in spending based on increased tax receipts generated by a 4.8 percent annual growth rate, more than double what most Wall Street economists expect. But privately, economy ministry officials are expressing concern that Argentina is vulnerable to any crisis in Brazil over the next several months, since 30 percent of Argentina's exports are purchased by Brazilians. While they express hope that Brazil can avoid a devaluation, government economists say they expect the Brazilian economy to slow further in the coming months, with officials in Brasilia, the capital, keeping interest rates high, raising taxes and lowering expenditures. "We are not expecting a devaluation in Brazil," said Deputy Economy Minister Pablo Guidotti. But he added: "We continue analyzing, and if necessary, we can revise our projections." Hoping to anticipate any severe recession in Brazil, Guidotti and other officials are putting the final touches on loan packages with the World Bank, the Inter-American Development Bank, the International Monetary Fund and Eximbank of Japan that could total as much as $8.5 billion. These lines of credit are expected to be signed in the next two weeks, government officials said, noting that they would complement commercial borrowing and were intended to reassure foreign investors. Local economists noted that the government has not drawn from a $2.8 billion IMF credit line, nor issued bonds at high interest rates to cover expenses. Neither action is necessary, they said, because the government's current deficit is a modest 1 percent of the gross domestic product. David Malpass, chief international economist for Bear Stearns, noted that Argentina already had contingency lines of credit with several international investment banks in case of a future emergency. But he said officials were seeking the added loan packages because "they didn't want to be perceived as inactive while Brazil was being attacked." Referring to the policy of pegging the Argentine peso to the dollar at a 1-to-1 rate, Malpass added: "Argentina has been holding a pretty strong hand provided by convertibility." Martin Redrado, a former senior aide to President Carlos Saul Menem, said the government was negotiating the loan packages "to insure that whatever happens to Brazil, Argentina will have the muscle and the money to weather the crisis." Recent statements by President Clinton and Treasury Secretary Robert Rubin stressing the importance of Brazil and promising to stand by the economies of the region have bolstered confidence in Argentina, at least for the moment. Share prices on the Buenos Aires stock exchange, which had dropped by 50 percent this year as of last week, rallied 8.90 percent on Tuesday. The benchmark Merval index has gone up better than 20 percent over the last three trading sessions. In Brazil, the Bovespa stock index soared 18.68 percent Tuesday, reflecting easing concerns on Wall Street that Brazil would soon devalue. "This is a Rubin rally because he expressed U.S. interest in Brazil's financial stability," Malpass of Bear Stearns said. "The immediate threat of a Brazilian devaluation has been lifted." Copyright 1998 The New York Times Company