REQUEST FOR APPROVAL TO DISTRIBUTE INITIAL DRAFT TO NFIB REPRESENTATIVES OF NIE 3-84: THE POLITICAL REPERCUSSIONS OF THE DEBT CRISIS IN MAJOR LDCS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00759R000100200040-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: November 16, 2010
• Sequence Number: 40
• Publication Date: September 5, 1984
• Content Type: MEMO

Sanitized Copy Approved for Release 2010/11/16: CIA-RDP87T00759R000100200040-1
Perspectives on the Argentine Debt Crisis
Once again Argentina is moving toward a confrontation with the IMF
and the main creditors, with the likely focus being 30 September, when
many outstanding US bank loans to Argentina will become nonperforming if
interest is not paid. The problem will be hard to be patch up this
time; the banks probably will not make any accommodations until there is
an Argentine agreement with the IMF on a Letter of Intent. There is
also a strong possibility that the Argentine loans would be reclassified
as "value impaired." Argentina will try to drum up support for its
positions at the IMF/IBRD annual meeting scheduled for 22 - 27
September. Its strategy has been discussed with the other countries in
the so-called Cartagena Group, which includes most of Latin America.
If there a ears to be no agreement in prospect with the IW by
Se temb r
pressure would be counterproductive. External pressure would almost
certainly make it politically impossible for the Argentine government to
come to terms with the IMF. On the other hand, the Argentines will have
to develop an economic stabilization program for their own reasons.
Once they have done so, agreement with the IMF and the creditors will be
much easier.
Recent press articles suggest that
inflation, which has reached an annual rate of 600 percent, is becoming
viewed by Argentines as the critical problem. Labor appears to realize
that promises to raise reaT wages do not mean much when inflation is so
rapid. Consumers spend more and more time shopping, inventories are
disappearing, and I suspect production is being disrupted, although
there are no good data on this. The government has announced elements
of a program to gradually reduce inflation, but this is unlikely to work
because events are so far out of control and because it is almost
impossible to take gradual steps that will appear equitable to different
groups. More drastic measures will probably become necessary before the
Argentine economy can resume economic growth. All this is quite apart
from the external debt problem, which itself is very serious.
Until the Argentines decide how they want to deal with the inflation
issue, trying to pressure them into agreeing on a stabilization program
with the IMF seems pointless. We, and the IMF, should stay out of the
way until they have sorted out their own problems
ILLEGIB
25X1
25X1
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