- The Washington Times - Monday, October 29, 2001

For the past 40 months, Argentina, one of Latin America's largest economies, has been tottering between recovery and disaster. Now, an economic meltdown seems imminent and, if the past is an indicator, a debt-default in Argentina will likely be felt all over the continent and beyond.

One of Argentina's main problems, lately, is the lack of political consensus on how to best manage the country's fiscal shortfalls. While Argentine President Fernando de la Rua has been instituting a creative mix of fiscal austerity with tax cuts, to prompt consumer spending, and subsidies to the poor, the opposition Justicialist Party, which won control of both houses of congress earlier this month, is aggressively challenging the government's plan to reduce the deficit to zero. These political skirmishes have panicked already skittish investors and sent interest rates so high that the government doesn't appear to have the necessary funds to pay its outstanding debt. A loan extended earlier this year by the International Monetary Fund (IMF) year has failed to restore investor confidence. Unfortunately, the de la Rua administration which has been buffeted by a senate bribery scandal and dizzying cabinet shuffles appears to lack the stature to bring together warring factions, even those within his own political coalition.

Argentina must now try to renegotiate its debt with its largest international lenders, with talks brokered, possibly, by the U.S. Treasury Department. After all, it is clearly in America's interest to avoid another large-scale IMF rescue.

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