[R-G] No Debt Service Problems Likely in Argentina, Paper Finds

[Yoshie Furuhashi]

Press Release

No Debt Service Problems Likely in Argentina, Paper Finds

Analysis Shows That Crisis Scenarios Are Unfounded

For Immediate Release: October 3, 2008
Contact: Dan Beeton, 202-239-1460

Washington, D.C. -- A new paper from the Center for Economic and
Policy Research examines Argentina's current debt, fiscal, and overall
economic situation and finds that, contrary to a number of recent
press reports and analyses, there is little or no reason to believe
that Argentina is facing serious economic problems that could lead to
a default on its sovereign debt.

"These unwarranted crisis scenarios are nothing new," according to
Mark Weisbrot, Co-Director of the Center for Economic and Policy
Research and author of the paper, "Argentina: The Crisis That Isn't."
[LINK: <http://www.cepr.net/index.php/publications/reports/argentina:-the-crisis-that-isn-t/>]
"Most economists, the IMF, and the business press were wrong about the
Argentine economy throughout most of last six years of Argentina's
economic expansion. The latest 'Chicken Little' scenarios about
Argentina fit a familiar pattern that makes the Argentine economy out
to be in much worse shape than it actually is."

The Argentine economy today has grown more than 60 percent since its
recovery began six years ago, has trade and current account surpluses,
and has declining levels of debt relative to GDP and other indicators.

The paper notes that even under relatively pessimistic assumptions,
Argentina would have only $2.1 billion in debt service that it would
have to finance from savings or reserves, or through borrowing.

"Contrary to scare stories, Argentina's situation today has almost
nothing in common with the situation of 2001," Weisbrot said,
referring to Argentina's economic crisis of end 2001-2002.

The paper also suggests that as Argentina's debt burden declines after
2009, it will become clearer to "holdout" bondholders (who rejected
the settlement that Argentina negotiated with about 75 percent of its
creditors in 2005) that their continued efforts to block Argentina's
access to credit are not likely to have much impact on Argentina's
economy, and they have had no apparent impact so far.  It is therefore
likely that this problem will also be resolved, and Argentina will
regain normal access to international credit markets. But in any case,
the current discussion of default possibilities does not appear to be
justified by the economic reality, current or projected.

The Center for Economic and Policy Research is an independent,
nonpartisan think tank that was established to promote democratic
debate on the most important economic and social issues that affect
people's lives. CEPR's Advisory Board of Economists includes Nobel
Laureate economists Robert Solow and Joseph Stiglitz; Richard Freeman,
Professor of Economics at Harvard University; and Eileen Appelbaum,
Professor and Director of the Center for Women and Work at Rutgers
University.

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Suite 400, Washington, DC 20009
Phone: (202) 293-5380, Fax: (202) 588-1356, Home: www.cepr.net