Argentina Receives $12.5 Billion IMF Loan

Back in 2001 economic problems in Argentina forced President Fernando de la Rua to flee his presidential palace in helicopter after resigning halfway through his term. Shortly afterward, Argentina set the dubious mark of the largest default on foreign debt ever — $140 billion.

But in September the International Monetary Fund agreed to loan Argentina an additional $12.5 billion over the next three years to bail it out of its economic crisis. Talks were scheduled with Argentina for October to discuss rescheduling $90 billion of its foreign debt.

Argentina asked private creditors to write off as much as 75 percent of its debt (in the form of government bonds).

In order to obtain the loan, Argentina agreed to control government spending and achieve maintain a budget surplus equal to 3 percent of gross domestic product for 2004. The government also agreed to submit a tax reform plan to the Argentine legislature by 2005.

Sources:

Argentina gets huge IMF loan. The BBC, September 21, 2003.

IMF approves US$12.5 billion loan package for Argentina. Associated Press, September 21, 2003.

Was Iran Behind Bombing of Argentinian Jewish Community Center?

The BBC has an interesting story about a diplomatic row between Argentina and Iran over the worst terrorist attack ever in Argentina. In 1994 somebody detonated a car bomb that destroyd a Jewish community center in Buenos Aires, killing 85 people.

Argentina has long suspected that Iran was behind the bombing, but it recently put its cards on the table by issuing arrest warrants for four Iranian officials including,

  • Ali Fallahian, the former Iranian intelligence minister
  • Mohsen Rabbani, the former cultural attache at the Iranian Embassy in Buenos Aires
  • Ali Balesh Abadi, a diplomat
  • Ali Akbar Parvaresh, a former education minister

Iran denies the accusation, but it doesn’t help its case by appealing to the saem lame excuse that Middle Eastern governments always used when accused of wrongdoing — it’s just a bunch of “baseless allegations” invented by the Israelis.

Besides there’s the little problem of phone calls intercepted from the Iranian embassy in 1998 which established beyond much doubt that Iran had been involved in the bombing. Argentina expelled several Iranian diplomats at that time, but its investigation into which specific individuals were responsible for the attack stalled.

What’s changed in the meantime? In September 2001 en individuals went on trial in Argentina for havin gassissted in the bombing. These were mostly Argentinian police who were accused of taking bribes to protect a stolen car ring that the terrorists used to purchase the car ultimately used in the bomb plot. Of course there’s alwasy been suspicion that the police may have been more directly involved, especially given the rather large amounts of money that exchanged hands (one of those accused receieved a $2.5 million bribe). Perhaps that trial and its aftermath led to new leads.

Either way this episode illustrates that while George W. Bush’s “Axis of Evil” characterization may be a bit overblown and simplistic, Iran has been an active sponsor of terrorism in foreign countries and after Iraq is likely the biggest threat in that region (which is why supporting internal efforts to liberalize should be a major policy goal of the United States).

More on the Counterproductive Nature of Sugar Tariffs

Back in February I mentioned that high tariffs on sugar had caused Kraft to announce that it would close the LifeSavers plant nearby and move it to Canada. The Christian Science Monitor has an article that points out this is an industry wide phenomenon in the hard candy industry.

According to the Monitor, high sugar prices are driving many hard candy manufacturers out of the United States. Brach’s Confections, which employs 1,100 people in the Chicago area, has announced that it will close down that factory by 2004. It will contract that work to Mexico or Argentina.

A George candy maker, Bobs Candies Inc., has moved its 40 percent of its candy cane operations to Mexico to avoid the high tariffs on sugar. Hershey Foods Corp. is closing its Colorado factory that produces the excellent Jolly Rancher hard candies, but will not say yet where production will be relocated.

Greg McCormack, president of Bobs Candies, tells the Monitor,

I don’t know whether there will be a domestic hard-candy industry in 10 years’ time. . . . You’re going to see tens of thousands of jobs leave this country — jobs that paid $10 to 20 an hour.

Unions and others say that it is the labor costs — not the high price of sugar — that is driving candy manufacturers across the border, but the reality is there are enormous savings to be had by avoiding the tariff. McCormack, for example, expects that his company will save $2 million annually just from cheaper sugar costs.

Source:

Bitter reality: Candy less likely to be ‘Made in US’. Laurent Belsie, The Christian Science Monitor, April 8, 2002.