Argentine Leader Makes Pledge on Debt

Hoping to soothe jittery investors, President Fernando De la Rua insisted Tuesday that Argentina would keep up its debt payments to investors and maintain the peso's one-to-one peg with the U.S. dollar.

"There will be no devaluation, no default," he told reporters at Government House shortly after the Buenos Aires stock market opened. 

Argentine stocks and bonds continued to weaken in early trading as investors worried about the country's ability to avoid a debt default after the government delayed the unveiling of a new economic recovery program. 

The Merval Index of leading shares fell 3.2 percent to 212.49 points early Tuesday, a day after the closing down 8.7 percent Monday. 

Signaling souring investor sentiment, Argentina's country risk rating — a barometer of investor confidence in Argentine bonds — continue to climb over the 2,000 mark, meaning South America's second-largest economy ranks as one of the riskiest investments in the world. 

Market watchers said investors were growing impatient with repeated delays in the rollout of the government's economic package, first expected two weeks ago. The measures have been held up by De la Rua's failed attempts to reach a key accord with provincial governors over how to distribute millions of dollars in tax revenue. 

De la Rua said his government was working to ensure that the new measures prove effective in lifting the country out of protracted recession. 

"I want the programs that we implement to have the signs of participation (by all sides) and that they're understood by everyone," he said. 

The economic package is aimed at ending a 40-month recession and avoiding a default on $132 billion in debt. It is expected to include a tax cut to boost consumer spending, reductions in government spending, aid to struggling companies and a debt swap. 

Over the weekend, Economy Minister Domingo Cavallo said the government will seek to restructure its hefty debt load by offering greater payment guarantees to creditors in exchange for lower interest rates. 

Cavallo offered few details on how the voluntary restructuring might work, but said he was seeking the support of the Group of Seven industrialized nations and the International Monetary Fund. 

Argentine bonds make up nearly a quarter of all emerging market debt worldwide, and it was unclear how many foreign lenders would be willing to swap new bonds for lower interest rates. 

"I think people sense that you're going to be left with something you'd rather not have," said Christian Stracke, an emerging markets analyst at Commerzbank Securities in New York.