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Argentina approves economic measures aimed at ending crisis
[BUENOS AIRES] Argentina's center-left government approved on Monday a package of emergency measures aimed at lifting the South American country out of its worst economic crisis in years.
Argentina is in a recession caused by a currency collapse that struck 18 months ago.
Poverty levels in the country of 44 million still top 40 per cent - in a country that was among the world's wealthiest in the early 20th century.
The emergency economic package was announced by new President Alberto Fernandez, who took office two weeks ago with a vow to put Argentina back on its feet.
The emergency measures were announced just after 5.00pm in the government's Official Bulletin - several hours after it was expected due to some last-minute changes.
Fernandez's plan involves tax hikes - on foreign currency purchases, agricultural exports and car sales.
The government says the tax hikes will only affect the upper and middle classes.
The bill passed the lower house of Congress on Friday and the Senate on Saturday.
Mr Fernandez has described this crisis as almost as bad as that of 2001 - when Argentina defaulted on a US$100 billion debt.
Its current foreign debt stands at around 90 per cent of GDP.
"It is not the same as 2001. But it is similar. At that time poverty was at 57 per cent, today we have 41 per cent poor people; then we had a debt default, today we are in virtual default," Mr Fernandez said in an interview with TV programme La Cornice on Sunday.
The new law will allow the executive extra powers over finance, tax, administration, pensions, tariffs, energy, health and social issues.
The government's aim is to "attend to the needs of the most vulnerable sectors and to ... spark growth," Social Security Administration chief Alejandro Vanoli said.
The government has vowed to "tackle hunger" and has announced a 10,000 (S$217) peso bonus for pensioners and a six-month freeze on public utility prices.
"It's a difficult situation, it's a country that has had to restructure its debt, with a deep fiscal and financial deficit, in a situation of recession and inflation," said Mr Vanoli.
"The state is putting all its efforts into those suffering the most from the social situation."
Market-friendly liberal ex-president Mauricio Macri had planned in September to negotiate a restructuring of debt repayments with the International Monetary Fund, with which he'd agreed a US$57 billion bailout loan last year.
Argentina has already received US$44 billion of that loan but Mr Fernandez says he'll refuse the remaining disbursements.
Argentina's economy is expected to shrink by 3.1 per cent in 2019, inflation is hovering around 55 per cent and unemployment is rising to 10.5 per cent.
"That's what we inherited. We can't face up to it and pay the obligations that we've been landed with," Mr Fernandez said on Sunday, as he made comparisons with the 2001 crisis.
"We had massive unemployment, we also have that now. What we didn't have (then) is inflation (but) now we have it."
Economist Claudio Loser of the Washington-based Centennial Group says Mr Fernandez wants to "make it clear to creditors that they're going to have to negotiate a restructuring with Argentina."
"He's referring to a virtual default to dramatise the situation and show that Macri left him a huge problem."
On Friday, Argentina unilaterally postponed a US$9 billion maturities payment until August, a move that saw rating agencies Fitch and S&P downgrade its credit rating.
On Monday, though, Fitch restored Argentina's rating to "CC" from "restricted default" but warned of "a high probability of another default of some kind."
"We're in a huge freefall ... in two years, Argentina has massively increased its debt," said Mr Fernandez.
Argentina owes US$330 billion, around 90 per cent of its gross domestic product.
That figure was around 20 per cent in 2016, soon after Mr Macri came to power.
One of Argentina's main problems is its people prefer to hold dollars rather than pesos, meaning they try to sell their local currency and often keep their dollars in foreign bank accounts.
"Argentina has no more dollars. Macri lost US$100 billion. Argentina needs dollars to come back in," said Mr Fernandez, who has maintained the monthly US$200 limit of buying foreign currency imposed by Mr Macri last August.
"Dollars are scarce, as there aren't any, they have to be expensive" to buy, he said.