Article Summaries

by Alexander Lindee

by: S. Karene Witcher

from: Wall Street Journal - 6/26/84

Argentine officials met in New York with the country’s foreign creditor banks to try to make some attempt to have Argentina repay the remaining $350 million that they owe by Saturday the 30. Even though there still is a possibility that the payment will be made by Saturday, many U.S. banks are ready to classify some of their Argentine loans as “non-accrual.” The reason for this is recently U.S. bank regulators tightened accounting rules for U.S. banks - saying that U.S. banks must list their loans as non-accrual as soon as interest payments are more than 90 days overdue. Banks normally reported overdue interest loans at the end of the quarter not before, so if an interest payment was previously 100 days overdue throughout the quarter, banks would not list the loans as non-accrual if interest payments became only 89 days overdue on the last day of the quarter. But under the new rules, loans remain classified as non-accrual until all interest payments are made current

Right at the end of last quarter Argentina was bailed out on a last minute bail out package from four Latin American countries discussed in the previous article allowing them to make the payment by the end of the first quarter. With the tightened rules banks are under a little less pressure than they were at the end of the first quarter, but they are still urging Argentina to meet its obligations for the second quarter.

During this debt crisis, the 90-day debt payment rule has been used, as leverage by banks, threatening countries with non-accrual loans will not get lent any more money.

Argentina however turned this on the banks, playing on bankers’ fear of lower earnings and high non-accrual loans. They did this to try to get better terms from the banks.

Then you have your other economic observers that are thinking that Argentina can not endure a period of isolationism, realizing that most producers in Argentina depend of imports.

Last week the Peronist- dominated General Confederation of Workers, the group that control’s the countries unions, demanded higher wages or a general strike will occur.

“Peronist leaders deep down believe Argentina must reach an agreement with banks by way of a prior accord with the IMF,” says Dante Loss, a Peronist Party organizer. “But for electoral reasons, any of them want the government to adopt a position that will take it to economic disaster. This is their position: urge him on and then say how irresponsible he was to get us in this mess.”