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Duhalde Erases Doubt Over Argentine Peso Devaluation - 2002-01-04

Argentine President Eduardo Duhalde says there will be a currency devaluation, as the country struggles to overcome its ongoing economic crisis.

But Mr. Duhalde, who addressed business and labor leaders Friday, did not give details about how the devaluation will be carried out, or any other aspect of his economic emergency plan which must still be considered by Congress.

Mr. Duhalde's speech Friday was aimed at reassuring the nation about how his government will deal with Argentina's crisis. However, the Argentine leader said would not talk about his emergency economic plan because he did not want to be seen influencing or pressuring the Congress which will be considering the package over the weekend.

Mr. Duhalde did confirm that a devaluation is imminent, calling it "a given."

According to reports citing government sources the plan calls for scrapping the law that has pegged the Argentine peso at a one-to-one rate to the U.S. dollar since 1991. These same sources say the peso could be devalued by up to 40 percent, though a preferential dollar rate may be set for importing essential items.

A devaluation is expected to cause great hardship in this country of 36 million people, which has been hard hit by years of recession. While Argentines are paid in pesos, up to 80 percent of their debts are in dollars.

In anticipation of the devaluation, stores are already raising prices.

At an electronics store, vendor Damian Aranburu says his suppliers have already told him that computer laptops and other imported goods are no longer available unless he pays a higher price. This in turn, he said, has forced him to raise prices.

We will be hurt the most by a devaluation, he said, because almost everything we sell is imported. At the same time, he acknowledged that raising prices now has slowed business even more.

Even prices of bread, and other foods are being raised, while at some pharmacies certain medicines can only be bought with dollars.

In his speech Friday, Mr. Duhalde pledged his government will seek to protect Argentina's productive sector from small stores and business to large companies saying they have been hard hit by the open market policies of the past.

Mr. Duhalde also said his government will not tolerate anarchy a reference to the widespread unrest that led to the resignations of two presidents late last month. The Argentine leader said using force is not the answer, instead promising to build consensus among all sectors of society.

Mr. Duhalde, a former Senator of Argentina's populist Peronist party, was chosen by Congress Tuesday to become the country's fifth President in less than two weeks a number that includes two, temporary caretaker Presidents that filled in when the office was vacant.

Bloody riots and protests drove President Fernando de la Rua out of office on December 20. Ten days later, the interim President chosen by Congress, Adolfo Rodriguez Saa also resigned in the face of demonstrations in which middle class people took to the streets to bang pots and pans.

Political analyst Atilio Boron says Mr. Duhalde could share the same fate if his policies do not satisfy the demands of a broad section of Argentine society that has been impoverished.

"If the government is prudent enough as to see that the situation is radically different from the past because you have an incredible level of popular mobilization and people feel they have become very, very strong because they knew that they swept away two governments, de la Rua and also Rodriguez Saa, it may happen again...and I don't think that Duhalde has more than three weeks to do something very dramatic and very important. If in three weeks he does not produce a significant breakthrough to convince the people that things are going to change for the better, the pots [and pans] will again be heard in the streets, and this time it will be much more violent," he said.

Mr. Duhalde's economic emergency plan is expected to be debated and passed by the Congress over the weekend. Along with the devaluation proposal, the plan is reported to include measures to alleviate some of the hardship caused by the loss in the currency's value such as converting dollar debt into pesos.

The package also is said to call for measures to create the basis for a sustainable economic recovery.