| Spanish assistance in Argentina’s debt crisis |
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| World Affairs Talk | |
| Wednesday, 16 May 2007 | |
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The agreement was first reached verbally in November 2006 when Kirchner met with his Spanish counterpart, Jose Louis Rodriguez Zapatero, during the Ibero-American Summit held in the Uruguayan capital of Montevideo. The agreement anticipates a 10 percent payment in 2007, another 15 percent in 2008, 20 percent in 2009 and other payments by 2012. Spain had responded to Argentina's call for funds back in March 2001 in an unsuccessful bid to avoid the economic crisis, which triggered a run on banks by panicked depositors, street riots, and a more than 70-percent devaluation of Argentina's peso, which had been attached at parity with the US dollar for nearly 11 years. Spain is one of Argentina's biggest investment partners. Major Spanish investments in Argentina involve the Spanish-Argentine oil and gas giant Repsol YPF, as well as Spanish banks, telecommunications company Telefonica and several gas and electric utilities. It is five years since Argentina devalued its currency and defaulted on its debt, bringing to a shattering end a decade during which the country had often been viewed as a poster child of International Monetary Fund-backed market reform. By early 2002, with the economy sinking and the country wracked by political crisis, it was widely assumed that it would take many years for an isolated and impoverished Argentina to recover. But already, Argentina is prospering again. Néstor Kirchner, its popular centre-left leader, has presided over four successive years of expansion above 8 per cent and is expected to win a second term at elections due this year. Kirchner, who took office in 2003, has kept the peso fix at three per dollar, a competitive exchange rate that has fueled a flow in exports and triggered booms in country’s tourism, construction and several other industries. Argentina has also restructured some $100 billion in public debt owed to private creditors. Inflation is considered one of the biggest risks in Argentina’s economy, which has expanded rapidly since the debt default and devaluation five years ago. Inflation had roughly doubled annually since 2003, reaching 12.3 per cent in 2005, but the introduction of a heterodox policy of price controls helped push inflation down to 9.8 per cent in 2006. It appears that credit is also returning to Argentina. The Inter-American Development Bank in Washington announced on late January 2006, a $1.5 billion credit line to improve housing for the poor in Argentine cities that were battered by the financial meltdown. The money is to be loaned out over 24 years. Share & Bookmark             |
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