• by IPS Correspondents (buenos aires)
• Wednesday, December 28, 1994
• Inter Press Service

BUENOS AIRES, Dic 28 (IPS) - The Argentine government took steps to calm investors' nervousness and fears of devaluation in the face of a steady decline in the stock market early this week.

Argentine President Carlos Menem assured that "there is no chance of a devaluation...the economy is solid and well reinforced," adding that the market's fall was due to normal financial changes, not a "Mexican-style" stock market collapse.

Economic Minister Diego Cavallo traveled to the United States to pursuade investors not to withdraw after an Argentine bank suffered a crisis and the withdrawal of capital from the stock exchange fed rumours of a general banking collapse.

In a radio interview, Cavallo called for calm, saying "there is no cause for concern."

The exchange has declined continually since the crisis began, falling four percent on Tuesday alone, nine percent over the past two days, and a total of 27 percent since October. Foreign debt "Brady bonds" have also fallen four percent.

The Central Bank responded with an increased sale of dollars, and interest rates rose sharply, from an average annual 16 percent to as much as 40 percent in smaller banks.

In an attempt to recover control, Menem signed two decrees Tuesday, one calling for a one billion dollar reduction in the 1995 budget and the other for a four-month suspension of state compensation payments to pension funds - a savings of some 100,000 dollars a month.

Menem said the measures were a reflection of the "urgency to defend the country and its people," adding that he was not pleased to have to suspend the compensation for unpaid pensions.

Meanwhile, Cavallo called on creditors to be "patient" with Argentine banks, saying that "those who have bought shares and bonds can wait a while and recover their investments when prices go back up."

He advised the population to remain calm and "buy shares while they are cheap," but not to use borrowed money to do so.

© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service

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