From: Carlos Gonzalia (gonzalia@cs.chalmers.se)
Date: Mon Jul 30 2001 - 11:05:58 MDT
>From: Brian D Williams <talon57@well.com>
>
>In what is the ultimate bad news in the global age, Moodys has
>downgraded a number of investments in Argentina to Caa1.
>
>This happened on Friday I believe....
Yes, I read about it by then. It comes as no surprise, really. Last night
Parliament finally approved the zero-deficit law, by which all state
wages and expenses will be paid only as much as tax collected during the
ongoing month allows for, and after paying all that month's national
debt interests. This might avoid national debt default in theory, but
the taxing is already perceived as punitive by all big business, so
tax collection is already dropping. As this schema is already falling
short, state workers and state retired people are already seeing a 13%
reduction in their checks this month. It is not clear yet which state
budgets will be the most affected, there is already talk of closing
down some state regulation agencies. But these concerns are secondary
to Moodys and such firms, what they think is most important for
downgrading Argentine debt titles to the point of almost worthlessness
is their conviction that the government will not be able to carry this
last ditch program, as social unrest, strikes and protests will
make things very nasty.
It's becoming difficult to ascertain all the parties playing the
current tug-of-war games. Argentine papers have published convincing
reports that political elements within US Treasury want to make an
example of Argentina, and will cut all support once debt default and
financial collapse happen. If this is true, I can't imagine a better
way to fire up anti-US and anti-globalization feelings in a population
that already doesn't believe in anything much. All local political and
economical actors are completely discredited in Argentina, and there
is already hidden (and not so hidden) murmurs about "the need for
an iron hand", that is a return to authoritarian government.
So much for people using their heads to deal with the crisis, sigh.
-Carlos
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