Feature: Economic campaign in Argentina

By BRADLEY BROOKS, UPI Business Correspondent

BUENOS AIRES, March 13 (UPI) -- Leading candidates for Argentina's presidential elections next month are jockeying for position as they woo voters with their financial policies.

Former President Carlos Menem, who early in his 1989-1999 presidency pegged the peso 1-to-1 with the dollar, said in an interview published Thursday that if elected, his government would maintain a freely floated peso.


"We're going to opt for a floating currency, with a free float," Menem told the Argentine newspaper La Nacion Thursday.

It is the first time Menem has relented on the peso issue. He has repeatedly defended the linking of the peso to the dollar in the early 1990s. Wall Street applauded the move at the time but turned critical as the policy became unsustainable and helped spark the country's default in December 2001.


Late last year, Menem floated the idea of adopting the dollar as Argentina's currency, but the idea was denounced by critics.

Earlier this year, he said he would push for a fixed exchange rate if elected.

While appearing to abandon those ideas -- both now frowned upon by the business world -- Menem still hedged in the interview.

Asked if he would break all peso-dollar links, he said: "We'll see how we receive the government. What I can say is that we lack a strong currency now.

"The best thing would be to have a strong peso, with a parity to the dollar lower than it is now," Menem said.

For good populist measure, he also said he would ensure lower food prices and "salaries that Argentines really deserve" should he win in the April 27 vote.

He also characterized last week's supreme court ruling that a bank must re-dollarize a province's accounts as "an absurdity."

Meanwhile, fellow Peronist Party candidate Nestor Kirchner -- governor of Santa Cruz province, who leads in many polls -- will apparently back a gold standard.

The Buenos Aires Herald, quoting Kirchner's economics adviser, reported Thursday that the gold standard idea would be part of a system that would neither dollarize nor use multiple currencies.


Kirchner's adviser, Jose Maria Las Heras, said the idea is meant to prepare Argentina for the day when the countries of the Mercosur trade bloc -- Argentina, Brazil, Uruguay and Paraguay -- have a single currency.

Meanwhile, there were signs from the current government that it might bail out banks that lost money when accounts were forcibly converted from dollars to pesos last year.

Officials from the Central Bank and the Economy Ministry have worked this week to hammer out a deal for the banks. Central Bank Gov. Alfonso Prat Gray was to speak to a closed-door session of a congressional committee about the matter late Thursday.

Last week, the supreme court ruled against a state-run bank in regard to the forced conversion of a province's accounts from dollars into pesos.

Depositors across the country have protested and filed lawsuits against the government, as the deposits were converted at a rate of 1.4 pesos per dollar. The dollar now brings 3.1 pesos, cutting by up to 50 percent the value of some depositors' accounts.

Banking officials say the real problem is that loans were also converted, but at a rate of 1-to-1, thus saving debtors money.


If widespread re-conversion is forced on banks, analysts say the cost will surpass $10 billion. And banks will lose money if loans aren't re-converted as well.

Earlier on Thursday, Argentina's lower house of congress passed into law two tax bills that the International Monetary Fund has demanded in return for a debt roll-over agreement.

The congress killed a tax plan introduced in 2001 by former President Fernando de la Rua, which gave tax breaks to different industries -- especially the media.

Also, a new law was signed that forces exporters to pay income tax on tax rebates.

Both bills must still be signed by President Eduardo Duhalde.

The Senate did, however, send back to committee a bill that was part of the country's IMF agreement. The bill requires the fuel tax to fluctuate with prices. Now, the fuel taxes will be fixed.

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