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ARGENTINA.

ARGENTINA

 % Change (In millions US $)

 Interest Trade
Date CPI M1 Rate(%) Imports Exports Balance

 1990 1,343.9 904.0 17.2 4,079.0 12,354.0 8,275.0
 1991 85.0 125.0 7.0 8,000.0 11,999.0 3,999.0
 1992 17.5 48.4 11.6 14,868.0 12,239.0 -2,629.0
 1993 7.4 35.7 10.9 16,784.0 13,118.0 -3,666.0
 1994 3.9 12.0 8.6 21,591.0 15,839.0 -5,752.0
 1995 1.6 6.5 9.3 20,122.0 20,963.0 842.0
 1996 0.2 19.9 7.6 23,762.0 23,811.0 49.0
 1997 0.5 15.5 8.2 30,355.0 25,513.0 -4,842.0
 1998 0.9 -7.0 8.0 31,405.0 26,434.0 -4,791.0
 1999 -1.2 -5.0 8.2 25,508.0 23,333.0 -2,175.0
Jan 0.5 0.7 9.2 1,906.0 1,547.0 -359.0
Feb -0.2 -5.1 8.3 1,855.0 1,533.0 -322.0
Mar -0.8 -0.8 6.8 2,078.0 1,999.0 -79.0
Apr -0.1 -0.6 6.1 1,873.0 2,038.0 165.0
May -0.5 0.4 6.3 1,931.0 2,227.0 296.0
Jun 0.0 0.3 7.5 2,213.0 2,130.0 -83.0
Jul 0.2 4.0 7.7 2,278.0 1,946.0 -332.0
Aug -0.4 -2.6 7.6 2,331.0 2,101.0 -230.0
Sep -0.2 -2.7 8.0 2,234.0 1,897.0 -337.0
Oct 0.0 -1.8 9.4 2,213.0 1,908.0 -305.0
Nov -0.3 0.0 9.4 2,290.0 1,966.0 -324.0
Dec -0.1 4.3 10.3 2,305.0 2,055.0 -250.0
 2000 -0.7 1.5 8.4 25,149.0 26,298.0 1,149.0
Jan -0.7 1.5 8.4 25,149.0 26,298.0 1,149.0
Feb 0.8 3.3 7.9 1,812.0 1,761.0 -51.0
Mar 0.0 -3.4 8.3 1,909.0 1,781.0 -128.0
Apr -0.5 -1.7 7.3 2,126.0 2,178.0 52.0
May -0.1 0.5 7.2 1,902.0 2,340.0 438.0
Jun -0.4 1.6 8.1 2,167.0 2,536.0 369.0
Jul -0.2 0.7 7.6 2,175.0 2,394.0 219.0
Aug 0.4 1.4 7.4 2,204.0 2,375.0 171.0
Sep -0.2 -1.8 7.3 2,311.0 2,220.0 -91.0
Oct -0.2 -1.0 8.0 2,084.0 2,144.0 60.0
Nov -0.2 0.7 8.5 2,220.0 2,061.0 159.0
Dec -0.5 -2.6 10.9 2,181.0 2,162.0 19.0
 2001 1.0 1.5 12.0 24,000.0 26,000.0 2,000.0
Jan 0.1 -0.4 8.5 1,936.0 2,045.0 109.0
Feb -0.2 -2.3 6.4 1,743.0 1,862.0 119.0
Mar 1.0 -3.2 10.7 2,030.0 2,029.0 -1.0
Apr 0.7 -0.6 14.1 1,908.0 2,381.0 473.0
May 0.1 0.9 13.5 2,075.0 2,802.0 727.0
Jun -0.7 5.4 11.0

Column
Number 1 2 3 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 -9,361.0 25,122.0 1.0
Feb 25,358.0 1.0
Mar 25,665.0 1.0
Apr -3,217.0 25,349.0 1.0
May 25,289.0 1.0
Jun 25,225.0 1.0
Jul -1,469.0 25,455.0 1.0
Aug 26,609.0 1.0
Sep 25,531.0 1.0
Oct -2,423.0 24,870.0 1.0
Nov 24,985.0 1.0
Dec 23,443.0 1.0
 2001 -9,000.0 25,000.0 1.0
Jan 25,437.0 1.0
Feb 25,377.0 1.0
Mar -2,939.0 21,924.0 1.0
Apr 20,547.0 1.0
May 20,271.0 1.0
Jun 21,082.0 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 0.3% in the 12 months ended June 30 as declines in clothing, education and food prices offset rises in electricity, gas and transportation. Argentina has been suffering from more than two years of deflation as firms cut prices to attract business in a recession now in its third year. Depressed wages, political uncertainty, and rising poverty and unemployment continue to hurt consumer confidence, keeping a lid on inflation.

* Interest rates will probably remain high as the government struggles to demonstrate political stability, revive economic growth and shore up public finances. Rates shot up in March and April as recession and political problems heightened concern that Argentina could default on its $130 billion debt or abandon its currency-board system, a cornerstone of the economy. The overnight interbank peso rate hit 110% in March before returning to 5%-10% in June. The prime lending rate in pesos fell to 16% from 23% during the same period.

* The trade surplus reached $1.427 billion in the first five months of 2001. However, export growth has slowed because of a strong dollar and weakening economies in foreign markets, especially top trading partner Brazil. Imports are expected to remain stagnant as the frail economy dampens demand for goods from abroad. The current account deficit will likely remain unchanged this year from 2000 at about $9 billion, or 3.4% of CDP, as the government and corporations send dollars abroad to make debt payments.

* Reserves have been at about $20 billion since dropping about 27% in March after the central bank cut banks' maximum liquidity requirements and took other measures to beef up lending capacity. Argentina staved off the threat of default in June after it completed a $29.5 billion debt swap that month. The deal stretched out financing costs and bought time for the government to rekindle economic growth and get its widening fiscal deficit under control. Argentina is increasingly turning to the local market for financing as international investors become increasing default-shy. The nation continues to receive disbursements from the $40 billion IMF relief package.

* Congress passed a law in June that alters the currency-board system, known as convertibility. The peso, fixed one-to-one with the US dollar since 1991, will be set at the midpoint of the dollar and the euro on the day that those currencies trade at par. The government also implemented a floating exchange rate for foreign trade in June. It is based on the eventual new currency system and uses the existing tariffs and subsidies structure. It aims to improve the competitive edge of local firms against exporters from countries with weaker currencies.

ECONOMY MONITOR

* Growth Outlook: First-quarter CDP shrank 2.1%, the third consecutive contraction. Authorities expect a second-half recovery to spur year-end growth of 2.5%. Many private economists expect weaker expansion or even a contraction of up to 0.5%, with 2.5% growth in 2002. Economy minister Domingo Cavallo is trying to make businesses more competitive by instituting tax-system reforms and breaks for struggling industries. He also cut income taxes for the middle class and provided refunds to spur consumption, which accounts for 80% of CDP.

* Political Factors: President Fernando de la Rua is in a tough spot. Since taking office in December 1999, he has launched campaigns to reduce the fiscal deficit and pull the economy out of recession. But numerous problems - from corruption scandals to the resignations of several ministers - have undermined his efforts. Worse, he is now struggling to make payments on his personal debt, providing more fodder for cartoonists and commentators already taking aim at his weak leadership and sputtering Alliance government. The problems have sparked concern that the Alliance could loose to the opposition Peronists in key mid-term congressional elections. Former President Carlos Menem was placed under house arrest in June on charges of heading an illicit organization that smuggled weapons to Croatia and Ecuador during his government last decade.

* Fiscal Situation: The fiscal deficit hit $4.9 billion through May, close to the first-half IMF target of $4.94 billion. But despite economy minister Cavallo's well-received tax reform plan and a new financial-transactions tax, the government was hobbled by a brutal bond sale in early July, in which it had to pay 14%, or more than 50% more than the previous sales' rates. Large spending cuts are now to be implemented in another last ditch attempt to balance the budget and pacify investors. Achieving balance by 2005 is more realistic.

* Major Sectors: Industrial production fell 2.8% in the first five months as recession diminished demand. Declines in production of autos, glass and fibers led the drop. Authorities are pushing ahead with a four-year vaccination program to eradicate foot-and-mouth disease from cattle after several first-half outbreaks. With rising soybean prices and good growing conditions, farmers sowed 18% more soybeans in the 2000-01 crop year and expect the harvest to climb 28%. Farmers plan to boost wheat planting acreage by 10% in the 2001-02 crop year.

* Employment: Unemployment increased to about 16% in May from 14.7% in October 2000 as the recession continues to drag on the economy. The government is negotiating a $200 million loan from the World Bank for an employment program.

* Stock Market: The Merval index fell 3.5% in the first half to the lows of October 2000 and March 2001, when the nation was also embroiled in deep economic, financial and political crises. Investors fear the ongoing political instability will push Argentina to default.

COMPANY MONITOR

* Banco de Galicia, Argentina's largest private bank, will buy ABN-AMRO's Argentine consumer-banking business for $46 million. The Dutch bank is focusing on markets where it has a dominant position.

* Repsol YPF plans to spend $71 million to explore and drill nine wells at an exploration tract in Neuquen.

* Sky Online, a data services group owned by Belgium's Tractebel, a unit of France's Suez Lyonnaise des Eaux, paid $20 million for local ISP Netizen in May. With the fresh cash, Netizen bought the El Sitio's Argentina ISP business and is seeking other access assets in Latin America to build itself into a regional player.

* Italy's Gefina and Argentine banking venture Los W bought 30% of Caja de Ahorro y Seguros for $50 million in June from the Argentine government. The government sold the bank as part of a broader move to raise fresh funds by clearing out its minority holdings in several firms like banks, utilities and railroads.

* Eduardo Eumekian, a wealthy Argentine businessman and president of airport operator Aeropuertos Argentina 2000, is bidding for LAPA, the country's second-largest airline. He leads a group of local investors and US insurance giant AIG. Eumekian earlier bought a minority stake in local airline Southern Winds.

* Anglo-Dutch Unilever, a maker of food and home- and personal-care products, plans to invest $170 million this year to modernize and enhance production at its four plants in Argentina.

* French supermarket operator Carrefour bought the remaining 49% it didn't already own of top competitor Norte for an estimated $735 million. It bought them from the Exxel Group, Argentina's leading private equity fund. Carrefour now controls a third of the supermarket business in Argentina

* Third-largest supermarket operator Coto is investing $350 million through 2004 to build 36 outlets, taking its total to 124.

* McDonald's plans to invest $10 million this year to open an undisclosed number of restaurants in Buenos Aires.
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Article Details
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Title Annotation:economic indicators
Publication:America's Insider
Article Type:Illustration
Geographic Code:3ARGE
Date:Aug 3, 2001
Words:2304
Previous Article:Americas Insider Summary Forecast for 2001.
Next Article:BOLIVIA.
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