Summary of S.
Karene Witcher’s “Argentina Faces New Showdown over Its Debts” by Ryan
Steed
Argentina’s loans
Witcher states that
Argentina will
have a $43 billion debt at the end of the month. At this point, loans are the only thing
that will save
Argentina and
they are begging to be cut a special deal.
In an attempt to seek an International Monetary Fund austerity program,
Argentina has
sent a letter before the IMF outlining conditions to which they will agree. Witcher, for the most part, believes
Argentina will
not receive this $1.5 billion bail-out.
Why has an agreement not been met yet? Witcher points to other historical
examples of
Argentina’s
inability to reach deadlines. They
had been expected to already be in agreement with the IMF earlier, but plans had
been disrupted. The month before,
the US Treasury convinced four other Latin American countries to lend $300
million each in return for a promise that
Argentina would
soon join the IMF. Still, their
deadline to join has been extended numerous times.
Banker’s worries
US banks cannot afford such disturbances being created by
Argentina in the
financial market. Many are hoping
some sort of resolution will be made to settle the economy down. “The financial markets…already are
jittery about U.S. bank loans to Latin America. A crisis
over Argentina
would only shake the markets further.”
After finding out that
Argentina may be
able to pay off its interest through a $125 million loan, US banks were dismayed
to discover these loans may have IMF ties – join in order to receive the
loan. This move would have negative
consequences as the “bankers said that if they do tie the bank financing to an
IMF pact,
Argentina
wouldn't be able to pay its back interest.” Money would, of course, be diverted to
the IMF and away from collectors.
Is Argentina helping?
Witcher argues that an IMF-Argentina agreement is looking more and
more difficult. Raul Alfonsin’s
Radical Party recently forged an agreement with the opposing Peronist Party
basically “making it more difficult for
Argentina to
agree to IMF conditions without the Peronists’ approval.” Another disappointing sign is the
problems surrounding
Argentina’s
“letter of intent” to the IMF just recently. The letter essentially “[outlines] the
conditions under which
[Argentina] will
agree to an IMF austerity program in order to get $1.5 billion in emergency
loans.” Although the letter was
officially passed by the Argentinean cabinet, it is unlikely, according to Witcher, the IMF will accept those
conditions.