Argentina Has Little Hope for Rescue

BUENOS AIRES, Argentina – As Argentina crisis worsens, there's no sign the cavalry is about to ride in to save the country from default.

A crushing $132 billion debt burden and the imposition of unpopular austerity measures fed riots that forced the resignation of President Fernando De la Rua Thursday, less than 24 hours after economy minister Domingo Cavallo stepped down.

Across the globe, government and financial leaders expressed their concern, but offered little concrete support.

"Nobody's going to rescue Argentina until the Argentines rescue themselves. That's the bottom line," said Fernando Losada, ABN Amro's top Latin American analyst in New York, and a native of Buenos Aires.

"Until Washington, and private investors at home and abroad receive clear signals that the political ship is back in shape, there'll be no more aid," he said. "The time for words is over. People want facts."

Four years of bitter recession has brought Argentina — once one of the world's richest economies — to its knees and to the brink of default.

As Argentina's foreign exchange reserves have been bled virtually dry by the four-year crisis, the country would be in no condition to defend its currency against speculation, should it be forced to float, analysts say.

With growth, production and business confidence plummeting, the only indicators on the rise in recent years have been bankruptcies and unemployment, which has soared to near-record levels of over 18 percent.

The final straw for most Argentines was a partial freeze on their bank accounts imposed Dec. 1 by Cavallo to prop up the ailing financial system.

Simmering popular discontent erupted in a day of frenzied violence Wednesday and continued Thursday nationwide. With his government collapsing, De la Rua submitted his resignation.

World government and financial leaders offered cautious support for Argentina.

President Bush and Treasury Secretary Paul O'Neill both said the International Monetary Fund or the World Bank would be prime candidates for helping Argentina out of the chaos.

But asked if the United States could help Argentina on a bilateral basis, O'Neill said bluntly: "I think not."

But the IMF has cut off funding to Argentina this month after it failed to meet pre-agreed budget limits.

Its chief economist, Kenneth Rogoff, last week said Argentina's economic policy mix of massive debt and a fixed exchange rate was "not sustainable."

Thomas Dawson, the IMF's director of external relations, said Thursday Argentina must develop a sustainable economic plan before lending can resume.

But with politically uncertainty following De la Rua's exit, such a plan seemed a distant hope.