Candace Vargas

Eco 357L

by Alan Murray in Wall Street Journal-June 15, 1984

With a deadline to make a 500 million dollar interest payment looming, U.S. treasury and Federal Reserve Board members decide whether or not to give Argentina an extension to make the payment.

Speculation on whether Argentina will be able to make good on its promise to make its interest payments on June 30 is causing the U.S., specifically Treasury Secretary, Donald Regan, to consider extending the loan. The debtor nations of Mexico, Brazil, Colombia, and Venezuela are being forced to consider coming together in Colombia to discuss the situation. The countries loaned Argentina money in order to help them make interest payments. The U.S. agreed to repay to countries on Argentina's behalf, if Argentina agreed to seek help from the IMF in order to straighten out their finances.

Federal Reserve Board Chairman Paul Volker is downplaying the significance of Argentina making the payment on time. He feels the larger issue is that Argentina will be able to come up with a new program in order to avoid further monetary issues. He also expressed that it would be in their best interest to follow through with the agreement and not back down like many have suggested that they will do.

The committee of banks deciding whether to extend the loan meets later in the week. Options include "an Argentine proposal that would include new bank loans to pay the overdue interest. But there is some pressure from U.S. bank regulators that any new bank package be tied to an IMF agreement." The results of which would be closely tied to the outcome of the agreement.