New Argentinian leader suspends debt payments

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The Independent US

Argentina's new interim president, Adolfo Rodriguez Saa, began his three-month tenure in office yesterday with a fiery speech announcing the suspension of payments on the nation's hefty foreign debt.

Mr Rodriguez Saa, 54, will serve as President until 5 April, and then make way for the winner of elections to be held on 3 March. That president will finish the term of Fernando de la Rua, who resigned last week after two days of riots sparked by economic austerity measures. Mr De la Rua's term was scheduled to end on 10 December 2003.

"Let us take the bull by the horns .... I announce that Argentina will suspend payment on the foreign debt," Mr Rodriguez Saa said to loud applause from Congress, which began chanting "Argentina! Argentina!" The country is struggling under the weight of a huge $132bn (£92bn) public debt, of which $79.3bn is owed to foreign creditors.

Congress approved the designation of Mr Rodriguez Saa as interim president by 169 votes to 138. He is a member of the Justicialista party, also called the Peronists, which vocally opposed many of Mr De la Rua's measures during his brief two-year term.

"I plan to work for 90 days, all day and all night, for Argentina," Mr Rodriguez Saa said. As he left Congress, he told reporters he believed "international organisations will respond well" to his decision to suspend debt payments.

Argentina's increasingly desperate efforts to avoid defaulting on its debtsprompted Mr De la Rua to cut salaries, increase taxes, and pass a "zero deficit" law to curb government spending. But the draconian measures only alienated the middle classes and angered the poor, who make up about a third of Argentina's population of 36 million.

The $132bn foreign debt makes up 44.9 per cent of the gross domestic product. Earlier this month the International Monetary Fund refused to release $1.26bn in fresh funds, arguing that Argentina had failed to meet fiscal targets.

Jose Ignacio Mendiguren, president of the Argentine Industrial Union, said: "What has happened in Argentina was the total loss of common sense."

In a populist acceptance speech, Mr Rodriguez Saa stressed he would focus on "social policy" and create a million jobs in an effort to decrease the 18.3 per cent unemployment rate.

Mr Rodriguez Saa also said he would create a "new currency" to co-exist with the peso, which has a one-to-one parity with the US dollar.

Over the past year, many of the provincial governments of Argentina have begun issuing debt bonds in an effort to pay public salaries. The bonds are accepted at most stores since they can be used later to pay taxes. Analysts expect the incoming president to unify gradually all the local bonds into a single bond that can be used throughout Argentina.

As Argentina's grinding recession enters its fourth year, economic analysts are suggesting a devaluation of the currency to make the country's products more competitive and ease pressure on the budget. But opponents argue a devaluation could harm a great number of people since almost all private debts, from mortgages to bank loans, are in dollars.

Another option is to eliminate the peso for the dollar, a step taken recently by Ecuador.

But Mr Rodriguez Saa said: "During the current crisis the options of dollarisation or devaluation are unworkable. A devaluation means a reduction in the salaries of workers."

Many of Mr Rodriguez Saa's promises are sure to spark scepticism. The last Justicialista president, Carlos Menem, left office in 1999 amid widespread charges of corruption. The public debt during his decade in power increased by 87 per cent to $118bn.