- The Washington Times - Thursday, February 7, 2002

BUENOS AIRES (AP) The government postponed yesterday's scheduled debut of a free-floating peso until next week, buying more time as it tried to reform an economy nearly four years into a nose dive.
Economy Minister Jorge Remes Lenicov said Argentina will fully float its peso Monday, a move sure to be watched closely as the government eliminates the country's dual exchange rate.
Mr. Remes Lenicov would not predict where the peso might settle, but said he expected it to fare well. "It's going to be a good opening," he said.
However, he said the move to an entirely peso economy is expected to shrink gross domestic product at least 4 percentage points this year. As a result, the government estimates the roughly $260 billion economy will shrink 4.9 percent by the end of the year.
President Eduardo Duhalde moved to scrap the peso's longtime one-to-one peg with the U.S. dollar four days after he took office last month. He set an official rate of 1.4 pesos per dollar for limited export and import transactions but allowed the peso to devalue nearly 50 percent on the open market, where it now traded for around 2-to-1.
Under Mr. Duhalde's economic plan, all bank deposits denominated in dollars will be converted to pesos at the government-set rate of 1.40 per dollar. Bank loans denominated in U.S. dollars will be converted into pesos at a rate of 1-to-1.
Speaking to Congress yesterday, a U.S. Treasury official praised Mr. Duhalde for his efforts but said Argentina quickly must implement more changes, including sweeping tax reforms and a new revenue-sharing agreement with the nation's 23 provinces.
John Taylor, Treasury undersecretary for international affairs, also said Argentina's central bank needs to follow monetary policies that keep inflation in check.
With a credible economic program, Mr. Taylor said, the administration would support resumption of loans to Argentina from the International Monetary Fund. The government reportedly is seeking more than $15 billion from international lending agencies.
Argentina's stock market opened higher yesterday as investors sought blue-chip shares to protect themselves from an expected drop in the peso's value when it free-floats. The Merval Index of leading shares opened 1.4 percent higher at 451.35 points.
Mr. Remes Lenicov, meanwhile, said he remained watchful for inflation but that the administration would not impose any price controls after government data showed January consumer prices rose 2.3 percent from December.
He also acknowledged that exporters and importers had run into severe problems with the dual exchange rate, but said "we hope over time that things will resolve themselves."
Argentina's economic crisis came to a head in December when the IMF shut off emergency bailout funds, prompting the country to default on its staggering $141 billion debt.
The crisis triggered the downfall of the last elected president, Fernando de la Rua, amid deadly street rioting on Dec. 20. A series of presidents followed until Mr. Duhalde took power on Jan. 2.


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