Argentina Seeks Billions
In Aid To Survive

By Stephen Brown and
Anna Willard

BUENOS AIRES/WASHINGTON (Reuters) - On its second day of talks with multilateral lenders in Washington, Argentina on Wednesday tentatively estimated it needs $22 billion to $23 billion in aid to get back on its feet but the IMF said it was "premature" to talk numbers.
"Normally these crises require about 12 percent of economic output, which in our case is 22 to 23 billion dollars, and in some cases they have required more," said Argentine Deputy Economy Minister Jorge Todesca in Buenos Aires. "That doesn't mean we're negotiating these numbers with the agencies," he told a local radio station.
But while Todesca said that no "specific number" was yet on the table in negotiations with the International Monetary Fund that he predicted could drag on for four to six weeks, his tentative estimate jived with those of other Argentine officials.
In Washington, IMF External Relations Director Tom Dawson said it was "premature to be talking about numbers. There are no packages on the table."
He called the contacts so far "quite positive," but said real negotiations do not typically begin until an IMF mission visits a country. In Argentina's case, no date has been fixed for such a visit, Dawson said.
Argentine Economy Minister Jorge Remes Lenicov's meetings with the IMF, U.S. Treasury, World Bank and InterAmerican Development Bank are off to a good start, officials say.
That news combined with the successful flotation of the peso earlier this week provided Argentines a breather from relentlessly bleak news of recession and misery.
Since December when deadly riots forced out two presidents in succession, shaking one of Latin America's firmest democracies to its core, Argentina has defaulted on part of its $141 billion public debt and devalued its peso currency after being fixed at par to the dollar for over a decade.
Officials say President Eduardo Duhalde is leery of sending a "shopping list" of funding needs, especially since his country swallowed up billions of dollars in assistance last year and still could not avert the massive debt default in December.
Argentines' savings are still restricted by limits on cash withdrawals, imposed to stop a record run on banks last year. Since the public sector and local businesses have no access to credit, many shops and factories have been forced to close, driving up unemployment.
While the peso finds its feet and President Duhalde's government tries to patch things up with wary multilateral lenders, everyday life is on hold for millions of people.
With unemployment now estimated at 22 percent conversation here centers on jobs lost and dollar savings forcibly converted to pesos and locked up in the banks. For many, personal plans like weddings and birthdays have been canceled or scaled down.
"I had saved up $7,000 to move out on my husband and get a divorce," laments Rosa, an unhappy Buenos Aires hairdresser.
As he bought dollars at a foreign exchange house, Antonio, a 75-year-old Argentine pensioner who lives in Spain, said that he had only come to see his daughter for Christmas, but his cash was trapped in the bank and he could not buy a ticket home.
"I was supposed to have left a 1-1/2 months ago," he said.
Others scramble to get around the economic shackles.
Speculators, who locals call "arbolitos," or little trees, stand on street corners offering black-market dollars to those who cannot face the long lines at exchange bureaus.
But the lack of cash to buy dollars meant the feared dive in the peso's value with Monday's full flotation did not materialize. The country had a dual system for just over a month with a fixed peso for exports and a floating peso for the public.
Confounding forecasts, the peso has strengthened from its lows right after devaluation to sell on Wednesday at 2.0 to the dollar on the retail market and 1.95 for large-scale deals. Some had predicted it would fall as low as 5 to the dollar.
But traders agree the relative stability is due to the cash crunch rather than any newfound faith in the peso from people who have always stashed away their savings in U.S. dollars.
While prices on imported goods rise, fueling fears of a return to the hyperinflation of the 1980s, barter markets offering goods and services from food to plumbing have spread.
Bankers say Argentina has a month to secure foreign aid before it falls into the grip of hyperinflation.
January's 2.3 percent rise in consumer prices in a country accustomed to zero inflation for years and mindful of the daily and even hourly price rises seen back in the 1980s, showed how panic-inducing a real bout of hyperinflation would be.
Meanwhile, the orthodox economy is at a standstill. The run on the banks until cash limits were imposed in early December emptied the system of a quarter of its deposits.
The problems have also spilled over into neighboring Uruguay, where knock-on liquidity woes at Banco Galicia Uruguay, a bank owned by Argentina's largest private-sector bank, prompted intervention by the Central Bank.
Ratings agency Fitch reported that losses to the Argentine banking system in 2001 may exceed 18 percent of gross domestic product, or 50 billion pesos.
In a television interview late Tuesday, Duhalde put a brave face on the daily protests against the cash crunch and growing unemployment, saying: "It's ridiculous to believe a president will step down because of protests. I'm even less likely to step down if the crisis gets worse."
Attributing his determination to his Basque roots, the stocky former vice president from the Peronist Party promised that within "two months these things that bother people like roadblocks will disappear and things will calm down."
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