Leon M. Bodevin

April 22, 2002

Professor Cleaver

 

“Argentina, IMF Agree on Plan for Austerity,” A. Pine and L. Schuster, Wall Street Journal, September 26, 1984

Main Point:

Argentina has reached an agreement with the IMF for an austerity plan that will provide Argentina with a $1.42 billion loan from the IMF. This plan will also provide for the resumption of lending by commercial banks to Argentina

Summary:

Argentine President Paul Alfonsin has apparently dropped his opposition to what he called IMF’s recessive recipes.” The IMF plan will likely require Argentina to devalue its currency, slow down worker wage increases, and slash the nation’s budget deficit.

            With the IMF loan, Argentina will pay the $900 million that banks have asked to be paid this Sunday in order to have the payment show up on their third quarter earnings sheets.  Argentina is looking for some $20 billion, some of which will be used to pay for the $5 billion it must pay to banks in the coming year.

            President Alfonsin will face fierce opposition to this IMF plan because he had previously promised workers that their wages would rise at least 6% to 8% faster than the country’s 650% inflation rate.

            Argentina’s plan means that the four biggest debtor problems (Mexico, Brazil, and Venezuela have all implemented austerity programs of their own) are solved—at least for the time being.