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Government Explains Economic Plan; Banks to Stay Closed Wednesday

August 3, 1988

BUENOS AIRES, Argentina (AP) _ Government officials explained on Tuesday the economic changes being put in place to reduce the budget deficit and curb triple-digit inflation, and asked Argentines to give the changes time to work.

Presidential spokesman Jose Lopez also announced that banks and exchange houses, which were ordered closed for two days last Sunday, will stay shut on Wednesday. He gave no details.

Lopez said a 30 percent increase in utility rates, announced Monday night, will be the only increase for the next two months. Cutbacks in public employment will be done voluntarily through incentives to retire.

Agriculture Minister Ernesto Figueras meanwhile met with angry farmers and ranchers, who may have to turn in their dollars from export sales at a new, lower commercial exchange rate. This will give the government access to hard currency at a lower cost.

Figueras later told reporters, ″You will see ... Once the confusion passes, the agriculture sector will be OK.″

Further elements of the government’s plan, which may include devaluation, were expected to be disclosed shortly.

″In 30 or 40 days, we can’t overcome inflation, but after this period we will arrive at the figures given by the president of the republic, absolutely,″ Vice President Victor Martinez said.

President Raul Alfonsin says the monthly inflation rate in this nation of 31 million people can be reduced to below 10 percent by year’s end. In June, the cost of living rose by 18 percent. July’s figure, still unreleased, is expected to be higher.

Health Minister Ricardo Barrios Arrechea said the economic changes are ″an effort to arrive by the end of the year at an acceptable inflation rate.″

Alfonsin has been plagued by economic problems since he took office in December 1983. Argentina’s foreign debt has risen to $53 billion. Repayment of the interest alone consumes a major portion of the national budget.

Inflation rose by 121.2 percent in the first six months of 1988 and by 321.7 percent from the 12-month period ending June 30, 1988.

Financial institutions have been jittery for weeks. Unsure about pending changes, they refused last week to sell certificates of deposit for longer than seven days. The interest rate was 19 percent.

The opposition Peronist Party and the 3-million-member General Labor Confederation complained Monday that they were not consulted about the changes.

Alfonsin spent most of Monday at his official residence in suburban Olivos with top advisers, including Economy Minister Juan Sourrouille, Central Bank President Jose Machinea and Treasury Secretary Mario Brodersohn.

Machinea and Brodersohn returned Sunday from Washington, where they reportedly negotiated a $1.2 billion standby loan from the International Monetary Fund.

The $10.6 billion budget Alfonsin presented to Congress two months ago included a $3.5 billion deficit, and followed last year’s $8 billion shortfall.

The budget has been blocked in Congress by the Peronists.

While the economic adjustments under consideration are significant, they fall short of Alfonsin’s June 1985 overhaul. That was when he introduced the austral as Argentina’s currency to replace an almost worthless peso; froze wages and prices, and put a cap on government employment.

Success was immediate, but temporary. Inflation dropped to its lowest rate in the 1980s when it hit 82 percent in 1986, but that rate more than doubled the following year.

The economy is shaping up as the major issue in elections that will be held next year.

The candidate from the governing Radical Civic Union political party, Eduardo Angeloz, is seen as having little chance of defeating the Peronist candidate, Carlos Menem, if the situation does not improve.

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