Argentina To Get $39.7B Bailout Plan

Monday, December 18th 2000, 12:00 am

By: News On 6

BUENOS AIRES, Argentina (AP) â€” Argentina's government disclosed Monday it will receive a larger than expected $39.7 billion bailout package from the International Monetary Fund and other lenders under a plan to revive South America's slumping economy.

According to a government document made available ahead of his speech, the largest contributor is the IMF, which is increasing Argentina's existing program from $7.2 billion to $13.7 billion for 2001 and 2002. Other contributors are the World Bank, the Inter-American Development Bank, the Spanish government and other lending institutions.

Argentina must finance close to $22 billion next year and has foreign debt of more than $120 billion, which equals close to 50 percent of the country's gross domestic product.

The long-awaited announcement was expected to bolster investor confidence after two years of sluggish economic growth and recent concerns about the ruling Alliance coalition government's ability to implement unpopular belt-tightening reforms.

Argentina's economy is still struggling to emerge from a slump that had sent the unemployment rate briefly above 15 percent this year. Last year the economy shrank by 3.1 percent and this year's growth estimates have been scaled back from 3 percent to just 0.2 percent.

The loan is expected to help push down interest rates, which have risen to 16 percent in recent weeks as worries over the debt burden have deepened.

However, both international lending institutions and local economists have made it clear that the loan will need to be accompanied by measures designed to boost productivity and exports and cut costs.

``The loan is necessary to stop the hysteria of the financial markets,'' said Jose Ignacio de Mendigueren, the secretary of the Argentine Industrial Union. ``However the important thing that is like an anesthetic: a calm not a cure.''

The IMF and other lenders had made the loan conditional on the enactment of a packet of austerity measures. In response, President Fernando de la Rua has enacted labor reform, a 5-year spending freeze with the provinces, an ``austerity'' budget which has cut salaries for state workers and introduced changes to the pension and the social security system.

Such measures were strongly opposed by Argentine unions, which have organized several general strikes against De la Rua's year-old government in recent months.