Orlando Ferreres, Director of CEMA
Eduardo Blasco, President of Maxinver
Manuel Alvarado Ledesma, Director of CEA
Felipe de la Balze, CARI-Flacso

Orlando Ferreres, Director of CEMA:
"After always postponing reality now it’s time to face it’

‘We are attacking the basic problem of Argentina which is excessive government spending in relation to tax collection. This has been happening since 1996 and after five or six years with this staggering excess covering the gap with bonds issuance, we knew a time would come when bond buyers would not want them anymore. Bond buyers disappear and interest rates go up to such an extent that not a single buyer appears. Therefore we must face the reality that has been postponed for some time. Now it is time to confront it. What makes me glad is that while it is hard to solve the problem at least right now we are dealing with it because mi despair rose when the serious problem was present but nobody seemed to be aware of it. The 2 million public workers have been living on a bubble, a different reality from that of the other 35 million citizens. Nobody want to pay the political cost of that but the possibility for a default to strike is more undesirable. I believe Cavallo’s measures are well-intended though they are too soft to solve it all and so the problem will be overcome in the end. Except that ideology comes in the way’.

 Eduardo Blasco, President of Maxinver:
"According to the United States, Argentina is not Russia"

‘If people do not believe the Executive power is capable of implementing measures it is almost an anecdote what measures will be implemented. The expectations to change this underlying situation would be a total change in the sort of decisions made by the President that should rule based on the concrete emergency needs. If a change of this sort occurred and was totally believable, then foreign nations might be willing to offer us aid for what is still not foreseen in the plan –renewing capital maturity dates from now until yearend being Letes the major problem with over 5 billion dollars for the rest of 2001. Foreign aid will not be granted unless we consider the Executive can take to extremes all legal powers. If we don’t act like this then foreign aid will continue being refused and the measures that will have to be taken later will be much more drastic’.

‘All emerging economies have experienced country-risk hikes. But they are relatively limited hikes unlike contagion. As to whether the herd effect may be considerable we estimate Brazil is experiencing some quote problems but is not on the brink of collapse. An interesting point is that the major powers are not comparing the crisis to the Russian debacle that at that time plunged the US stock exchange into a sharp slump: US markets go up and even the stocks of banks such as Citi or JPMorgan with stakes in Latin America have also increased. It seems a potential default in Argentina unlike what happened in Russia does not convey the feeling that the overall world economy could be affected.

‘I don’t think Chile will be strongly shaken in the long-term. However, without a strong foreign support, Brazil is affected by some external factors; Argentina may fuel some domestic problems that would not be serious if it wasn’t for the Argentine crisis’.

 Manuel Alvarado Ledesma, Director of CEA:
"Government spending makes us less credible"

‘Today we clearly see the decision of taking the bull by the horns and addressing government spending, which is not only a real problem but also a credibility issue before investors. Government spending not only affects the real economy but also makes us less credible and here lies the major problem. The ‘bottleneck’ is today government support . If it wasn’t for the deep uncertainty around the government’s resolute support to these measures they would be much more effective’.

‘The challenge lies on the government’s gathering the necessary support to move forward. That is crucial. If the political community deals with the real problem and our decision to support the public order, saving and austerity plan then the country-risk rate would quickly decrease’.

Felipe de la Balze, CARI-Flacso
"A question of size"

‘It all depends on the size. When the United States sneeze, the whole world gets a cold. If Uruguay has a flue, Argentina, Paraguay and Brazil experience lower side effects. The economic impact of a crisis also depend on the relative size of the economies and the sort of relationship. If you trade a great deal with a certain country or operate financially with a nation and one of the two countries is hit by a crisis or financial woes, the impact is considerable. Now, as the Brazilian risk is viewed in financial markets as similar to the Argentine risk. Of course, Argentina’s recent problems have worsened Brazil’s already existing problems and placed Brazil on the spotlight of international financial uncertainty. But Brazil suffers less from an Argentine crisis than what Argentina suffers when Brazil is in crisis ’.

*(Extracted from a series of interviews about the Argentine crisis in Radio Nuevamayoria.com, Jul 3, 2001)