December 22, 2001	Saturday	Shawwal 6, 1422

NEW YORK: The 16 corpses lying in Buenos Aires morgues on Thursday marked the endgame of the International Monetary Fund’s long and doomed fight to prevent Argentina from becoming the world’s biggest ever bankrupt nation.

As panicked Argentineans queued at banks to withdraw their savings, the financial chaos which has enveloped Latin America’s third largest economy threatened to trigger a further night of violent rioting.

Massive street protests had earlier claimed the scalp of the country’s hardline finance minister, Domingo Cavallo, who was blamed for introducing austerity measures which have thrown a third of the population below the breadline.

But analysts warned that his departure could mark the final step towards a financial meltdown unless the country’s president, Fernando de la Rua, rapidly devises a new economic plan.

“Argentina is hurtling down a road to disaster right now and I’m not sure anybody can save it,” said Ruben Pasquali, an analyst for local Mayoral brokerage.

As financial analysts lined up to count the cost to foreign investors should Argentina default on its 132 billion dollars public debts, nervous financial markets were waiting to see if Argentina’s final collapse would trigger a rerun of 1997’s emerging markets crisis which toppled the tiger economies of south-east Asia.

At the time, the US was still growing strongly and was able to drag the crisis-hit economies out of recession. But the backdrop to Argentina’s meltdown could not be grimmer, with the world’s three largest economies already facing their first synchronised recession for more than 25 years.

The root of Argentina’s problems lies in the fixed exchange rate system set up by Cavallo when he was last finance minister ten years ago; this locked the peso at a one-to-one rate with the US dollar. Initially successful in combating Argentina’s endemic hyperinflation, the currency peg subsequently proved a millstone, pushing the country into a recession three years ago which it has been unable to shake off.

With no control over interest rates, the government was unable to kickstart the economy. Plummeting tax revenues led to it consistently overspending its budget, adding to the country’s already mountainous foreign debts.

The IMF finally lost patience last month when Cavallo raided pensions savings in order to meet the latest interest payments and slapped cash limits on bank withdrawals. It froze a promised 1.3 billion dollars loan instalment, tipping the country closer to default.

Analysts said that whoever takes over from Cavallo has three options but no chance of avoiding further economic pain.

Default appears inevitable. On the streets of Argentina, however, few spared any thoughts for foreign bondholders, in their rush to exchange what they fear will soon be the worthless peso for US dollars.—Dawn/The Guardian News Service.