Argentine opposition postpones spending talks

BUENOS AIRES, Argentina (Reuters) -- Argentine government efforts to unlock billions of dollars in international credit were dealt a blow Friday after opposition leaders postponed talks aimed at clinching an austere public spending pact.

President Fernando de la Rua has asked the country's 23 provincial governors to freeze primary spending alongside the federal government the next five years in hopes of rebuilding investor confidence in Argentina's stagnant economy.

De la Rua also unveiled a raft of investor-friendly reforms to the nation's pensions, retirement and tax systems, and said the International Monetary Fund and other multilateral lenders were preparing an aid package aimed at quashing fears Argentina will be unable to pay next year's debt obligations.

On Friday, a week after De la Rua's announcements, eight provinces governed by the ruling Alliance coalition signed the pact. But the country's 14 opposition Peronist Party governors, who control Argentina's most important provinces, postponed negotiations with the government until Monday, after a Peronist governors' meeting in the Patagonian town of Calafate.

The delay hit Argentine bonds and stocks, especially after the IMF said it would not dispatch a mission to finalize the new aid package under De la Rua hammered out a final deal.

The IMF-led package, which will also include credits from the Inter-American Development Bank and other lenders, is rumored to be worth up to $20 billion.

"There are moments in which we must stop making demands and show our national unity in order to face the problems we have," De la Rua told reporters from Panama City, where he is attending the 10th Ibero-American summit, according to state news agency Telam.

Under the current terms, provinces would receive an extra $225 million next year to be used for social services in exchange for freezing their spending. But Peronist leaders have called for more leeway in social spending.

In a statement released Friday, they asked they be able to tap funds from state privatizations to use on social spending and that taxes be cut in order to kick-start the economy, which has been in recession or stagnation more than two years.

Carlos Ruckauf, the influential Peronist governor of Buenos Aires province, walked out of talks Thursday night, saying "the situation is paralyzed."

In another sign of heightening tensions, all 99 Peronist Congressmen in the lower house Chamber of Deputies have filed petitions to have the 2001 budget bill sent back to the committee level in order to make the alterations necessary for next year's fiscal assumption to be incorporated in the bill.

The budget and reforms must also pass through the Peronist-dominated Senate and their passage is seen as a key test of De la Rua's ability to govern after a political crisis last month unveiled cracks in the Alliance.

Foreign currency reserves in Argentina's Central Bank have fallen $1 billion or 3.9 percent to $24.7 billion on Tuesday from $25.7 billion on Oct. 25.

"That 4 percent fall is a consequence of amortization and debt payments," said economist and former Central Bank president Rodolfo Rossi. "We have about $21 billion in amortization and debt payments in 2001 so that's why public servants are immensely preoccupied. I think Argentina will see moments where it comes very close to defaulting."

Copyright 2000 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

See related sites about Americas

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.