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ARGENTINA.

ARGENTINA
 % Change
 Interest
Date CPI M1 Rate (%)

 1990 1,343.9 904.0 17.2
 1991 85.0 125.0 7.0
 1992 17.5 48.4 11.6
 1993 7.4 35.7 10.9
 1994 3.9 12.0 8.6
 1995 1.6 6.5 9.3
 1996 0.2 19.9 7.6
 1997 0.5 15.5 8.2
 1998 0.9 -7.0 8.0

 1999 -1.2 -5.0 8.2
Jan 0.5 0.7 9.2
Feb -0.2 -5.1 8.3
Mar -0.8 -0.8 6.8
Apr -0.1 -0.6 6.1
May -0.5 0.4 6.3
Jun 0.0 0.3 7.5
Jul 0.2 4.0 7.7
Aug -0.4 -2.6 7.6
Sep -0.2 -2.7 8.0
Oct 0.0 -1.8 9.4
Nov -0.3 0.0 9.4
Dec -0.1 4.3 10.3

 2000 -0.7 1.5 8.4
Jan 0.8 3.3 7.9
Feb 0.0 -3.4 8.3
Mar -0.5 -1.7 7.3
Apr -0.1 0.5 7.2
May -0.4 1.6 8.1
Jun -0.2 0.7 7.6
Jul 0.4 1.4 7.5
Aug -0.2 -1.8 7.3
Sep -0.2 -1.0 8.1
Oct -0.2 0.7 8.6
Nov -0.5 -2.6 11.0
Dec -0.1 4.0 12.4

 2001 1.0 1.5 10.0
Jan 1.0 2.5 10.0
Feb 0.1 -0.4 8.5
Mar -0.2 -2.3 6.4

Column
Number [1] [2] [3]

 (In millions US $)
 Trade
Date Imports Exports Balance

 1990 4,079.0 12,354.0 8,275.0
 1991 8,000.0 11,999.0 3,999.0
 1992 14,868.0 12,239.0 -2,629.0
 1993 16,784.0 13,118.0 -3,666.0
 1994 21,591.0 15,839.0 -5,752.0
 1995 20,122.0 20,963.0 842.0
 1996 23,762.0 23,811.0 49.0
 1997 30,355.0 25,513.0 -4,842.0
 1998 31,405.0 26,434.0 -4,791.0

 1999 25,508.0 23,333.0 -2,175.0
Jan 1,906.0 1,547.0 -359.0
Feb 1 855.0 1,533.0 -322.0
Mar 2 078.0 1,999.0 -79.0
Apr 1 873.0 2,038.0 165.0
May 1 931.0 2,227.0 296.0
Jun 2 213.0 2,130.0 -83.0
Jul 2 278.0 1,946.0 -332.0
Aug 2 331.0 2,101.0 -230.0
Sep 2 234.0 1,897.0 -337.0
Oct 2 213.0 1,908.0 -305.0
Nov 2 290.0 1,966.0 -324.0
Dec 2 305.0 2,055.0 -250.0

 2000 25,149.0 26,298.0 1,149.0
Jan 1,812.0 1,761.0 -51.0
Feb 1,909.0 1,781.0 -128.0
Mar 2,126.0 2,178.0 52.0
Apr 1,902.0 2,340.0 438.0
May 2,167.0 2,536.0 369.0
Jun 2,175.0 2,394.0 219.0
Jul 2,204.0 2,375.0 171.0
Aug 2,311.0 2,220.0 -91.0
Sep 2,084.0 2,144.0 60.0
Oct 2,220.0 2,061.0 -159.0
Nov 2,181.0 2,162.0 -19.0
Dec 2,058.0 2,346.0 288.0

 2001 27,000.0 28,500.0 1,500.0
Jan 27,000.0 28,500.0 1,500.0
Feb 1,942.0 2,008.0 66.0
Mar 1,742.0 1,886.0 124.0

Column
Number [4] [5] [6]

 (In millions US $)
 Current Exchange
Date Acct Bal Reserves Rate

 1990 5,278.0 3,242.0 5,590.0
 1991 463.0 5,946.0 9,922.0
 1992 -5,715.0 10 656.0 1.0
 1993 -8,158.0 13 636.0 1.0
 1994 -11,158.0 12 870.0 1.0
 1995 -5,191.0 15 963.0 1.0
 1996 -6,843.0 19 745.0 1.0
 1997 -12,328.0 22 482.0 1.0
 1998 -14,603.0 24 906.0 1.0

 1999 -12,255.0 25,848.0 1.0
Jan - 24,006.0 1.0
Feb - 24,283.0 1.0
Mar -3,535.0 23,666.0 1.0
Apr - 23,836.0 1.0
May - 23,568.0 1.0
Jun -2,016.0 23,683.0 1.0
Jul - 23,243.0 1.0
Aug - 25,002.0 1.0
Sep -3,387.0 23,021.0 1.0
Oct - 23,193.0 1.0
Nov - 24,070.0 1.0
Dec -3,317.0 24,909.0 1.0

 2000 -9,361.0 25 122.0 1.0
Jan 25 358.0 1.0
Feb 25 665.0 1.0
Mar -3,217.0 25 349.0 1.0
Apr 25 289.0 1.0
May 25 225.0 1.0
Jun -1,469.0 25 455.0 1.0
Jul 26 609.0 1.0
Aug 25 531.0 1.0
Sep -2,423.0 24 870.0 1.0
Oct 24 985.0 1.0
Nov 23 443.0 1.0
Dec 2,253.0 25,122.0 1.0

 2001 -10,000.0 25,000.0 1.0
Jan -12,000.0 20,000.0 1.0
Feb 25,437.0 1.0
Mar 25,377.0 1.0

Column
Number [7] [8] [9]

FOOTNOTES BY COLUMN: Annual figures for 2001 are projections.
[1-2]: Annual figures represent January-December increase. [3]: Up
to December 1992: Effective rate for 7-day time deposits. From
January, 1993: Effective rate for 30-60 day deposits in pesos.
[4-9]: Annual figures represent values at year-end. 9: From 1989,
figure represents liquid reserves excluding gold. Figures shown
prior to that date are gross reserves.

SOURCES BY COLUMN: 1: Instituto Nacional de Estadistica y Censo.
2-3: Banco Central. 4-7: Instituto Nacional de Estadistica y
Censo. 8-9: Banco Central.


FINANCIAL OUTLOOK

* Inflation fell 1% in the 12 months through March 30, as depressed wages and double-digit unemployment, results of a nearly three-year recession, prompted manufacturers and retailers to cut prices to attract business. Persistent deflation - now in its third year - has been cited as aggravating the country's economic slump.

* Interest rates will be high and volatile as long as the financial crisis continues. The overnight interbank peso rate dropped to 30% on March 30 after rising as high as 110% on March 23, when investors feared a political crisis would push Argentina to default and devaluation. Then it rose again in mid-April as events took another turn for the worse. The overnight rate normally hovers between 5% and 8%. By end April, the market was taking courage from the news that a large bond swap was in the works. Even so, the average 30-day prime lending rate in pesos fell to 24% from 33% during the same period.

* The trade surplus hit nearly $1.15 billion in 2000, as exports rose 12.5% and imports dropped 1.4%. Strong prices for oil and other raw materials, a growing economy in Brazil and a strengthening euro will help sustain exports to these leading trade markets in 2001. Imports will get a boost from the country's decision in March to eliminate import tariffs on all capital goods.

* Reserves plummeted 12% to $22.2 billion on March 28 from $25.4 billion a month earlier, as the country's economic, financial and political crisis prompted investors to seek safer havens. The government has renounced plans to raise $21.8 billion in 2001, $14.6 billion of which would go to paying down debt. Until rates on international markets come down, Argentina will borrow on local markets. Authorities reached a $3.5 billion financing agreement with banks in Argentina in April. The government will use the funds to pay debt coming due this year. As well, officials won authorization from the central bank to allow banks to use $ 2 billion of the financing agreement - instead of cash - to fulfill their minimum liquidity requirements. In March, the monetary authority lowered banks' maximum liquidity requirement from 20% to 18%. These measures are expected to free up money for lending and drive down interest rates, helping spur consumption and investment: two key ingredients to economic growth. Also, Argentina is receiving regular disbursements of the $40 billion it secured in December from the IMF and other creditors.

* The convertibility system will change from its current one-to-one peg with the dollar to a 50-50 split of the euro and the dollar, according to plans put forth by economy minister momingo Cavallo. Cavallo, who implemented the present system in 1991, envisions the new peg taking effect as soon as the euro hits parity with the dollar. Cavallo says such a measure could be instituted without devaluing the peso, because the two currencies would fluctuate inversely.

ECONOMY MONITOR

* Growth Outlook: GDP shrank 0.5% in 2000, the second consecutive contraction, as declining consumption and investment offset a rise in exports. The result was far from the 4% growth forecast authorities had initially predicted. Fourth-quarter GDP contracted 2% after shrinking a revised 0.5% in the third quarter. The government continues to forecast 2.5% growth for 2001, but private economists are less optimistic at 1%-1.5%.

* Political Factors: Still stinging from the fallout of vice president Carlos Alverez's resignation in October, Argentina plunged into another crisis in March. First, economy minister Jose Luis Machinea quit on March 5. Two weeks later his replacement, Ricardo Lopez Murphy, resigned after seven top officials left the government to protest his austerity program, which proposed deep education cuts. Stocks and bonds crashed as investors feared the political turmoil would prolong the recession, or even push Argentina to default or devaluation. That forced President Fernando de la Rua to turn to momingo Cavallo, the economist who rose to international fame a decade ago by stamping out hyperinflation. Cavallo is seeking to slash corporate production costs by 20% by eliminating punitive taxes, simplifying the tax system and streamlining the public sector - all to boost investment. In late March congress granted the executive branch special legislative powers for one year, which will allow Cavallo to change tax rates and merge or dissolve state agencies, to quickly press ahead with his new programs.

* Fiscal Situation: The fiscal deficit hit $3.1 billion in the first quarter, $1 billion more than the IMF target. The wider deficit came as political uncertainty and a weak economy limited tax revenues and boosted social aid payments. Authorities expect to meet the $6.5 billion revenue target for 2001 as Cavallo's economic plan raises revenue with a new tax on checking accounts and an overhaul of the tax system. The new tax, effective April 3, is expected to generate $3-$6 billion in revenue. Otherwise, authorities have said this year's fiscal deficit would hit $8.8 billion. Cavallo has said he wants to cut the deficit by $3 billion this year.

* Major Sectors: Industrial production fell 1.9% through February, with the auto sector, edible oils, fibers, glass and cement down the most. Agriculture, autos and construction have been hit hardest as the recession has diminished demand. The beef industry is reeling from multiple outbreaks of foot-and-mouth disease, resulting in the loss of at least $200 million in export sales. Authorities have launched a four-year vaccination program and are looking to work with neighboring countries to eliminate it from the region. With soybean prices rising and growing conditions good, farmers are sowing 18% more soybeans and cutting corn and sunflower seed plantings.

* Employment: Authorities launched a training and unemployment insurance program in March to help cut the 14.7% unemployment rate. They also hope economic recovery will spur investment and create jobs.

* Stock Market: The Merval index ended the first quarter up 6.5% after a roller-coaster quarter. The index had surged 27% in January as investors bet the $40 billion IMF-led package would help shore up finances and spur economic growth. Then stocks plunged as financial and political problems sparked concern that Argentina could default or devalue its currency. As the government pushes ahead with pro-growth measures, stocks are recovering. But companies wanting to go public will likely lay low until there are more signs of growth.

COMPANY MONITOR

* In end-May, Argentina will unveil fiscal incentives to attract investment and spur development of the country's $4.2 billion information technology sector, including tariff and tax cuts, and free-trade zones.

* Argentina plans to sell licenses in August for up to 70 new television channels, seeking to build its TV broadcasting industry to rival that of Mexico, home to the leading producers of Spanish-language programming.

* Dell Computer is opening a sales and marketing office in Buenos Aires in the second quarter to sell personal computers manufactured at its factory in neighboring Brazil.

* German media giant Bertelsmann bought in February the 40% of Editorial Sudamericana, Argentina's second-biggest book publisher, that it didn't already own. Now it plans to expand further in Latin America.

* Sky Latin America, a satellite TV provider part owned by media giant News Corporation, is investing $200 million to build operations in Argentina, where it first launched in November 2000.

* OptiGlobe Communications of the US is building a $100 million Internet data center on the outskirts of Buenos Aires. US-based Lockheed Martin Global and other firms are investing $350 million to build or expand data centers in Argentina. Terremark Worldwide of the US plans to break into the business in Argentina.

* CTI Movil, a cellular provider controlled by US-based Verizon, is investing $800 million through 2003 to extend its network and expand services. MetroRed of Argentina is investing $240 million through 2005 to develop and expand. Brazil's Embratel is investing $10 million this year to begin offering data transmission services in Argentina. Telecom Argentina is investing $800 million to expand and improve services.
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Title Annotation:economic aspects
Publication:America's Insider
Geographic Code:3ARGE
Date:Apr 30, 2001
Words:2380
Previous Article:Americas Insider Summary Forecast for 2001.
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