Foreign firms furiously lobby in Argentina

 



  BUENOS AIRES -- Foreign multinational companies trying to avoid 
billions in losses furiously lobbied Argentine lawmakers and the 
new government ahead of today's final vote on emergency 
legislation to devalue the peso and end the country's decade-old 
currency parity with the U.S. dollar.

  U.S. and other foreign banks, telecommunications, transport and 
energy companies are expected collectively to lose billions of 
dollars if lawmakers approve President Eduardo Duhalde's 
controversial economic package.

  Presidential spokesman Eduardo Amadeo said Duhalde was stunned 
by the intense efforts to reverse the package. Amadeo said the 
president told him, ``I have never had so many calls in my life 
from all the groups saying they don't want us to touch them.''

  The economic package nonetheless was passed by Argentina's lower 
house late Saturday night and is expected to gain easy passage 
through the Senate today.

  The most frantic lobbying Saturday came from banks, phone 
companies and petroleum firms from Spain. Analysts estimate they 
stand collectively to lose more than $3 billion.

  The companies are worried by Duhalde's proposal to devalue the 
peso and scrap a policy known as convertibility that kept the 
peso's worth the same as a U.S. dollar.

  It attracted much foreign investment in the 1990s because 
companies were promised that their profits in pesos would always 
be worth the same in dollars.

  But the rock-solid link between the peso and dollar made 
Argentine exports overpriced abroad and manufacturers moved next 
door to Brazil, where it is half as expensive to operate.

  Argentina is now broke. The government cannot pay pensioners or 
state workers. To prevent a run on the banking system, it has 
maintained a $250-per-week limit on cash withdrawals.

  Many political analysts fear a return to street violence when 
the devaluation measure passes and companies seek to avoid 
losses by raising prices for food and medicine.

  On Saturday, Congress began debating an emergency package that 
would grant vast special powers over the economy to Duhalde, 
Argentina's fifth president in less than three weeks.

  He has announced that Argentina cannot pay its creditors the 
$132 billion they are owed. His package of legislation seeks -- 
at the expense of foreign and domestic companies -- to ease the 
pain on an increasingly angry middle class, the largest in South 
America.

  
MOST DEBT IN DOLLARS

  More than 80 percent of personal debt in Argentina is in 
dollars, and most of that debt is held by the middle class.

  To help them, Duhalde proposes converting mortgages, car loans 
and other consumer debt under $100,000 into pesos.

  If the Argentine peso is also devalued about 30 percent, as is 
expected, a car loan of $10,000 would be worth about $7,000.

  Foreign banks control almost half of the deposits in Argentina. 
They want the dollar value of debt to remain constant, no matter 
what the devaluation of the peso. Duhalde does not agree and has 
resisted the lobbying, his aides said.

  But to help banks make up losses, he plans to take gas exports 
and direct that money to shoring up banks.

  Foreign companies are also trying to reverse a portion of the 
emergency package that proposes to end a decade of billing in 
dollars at the gas pump, or for fixed and cellular phone 
services, water and power bills and the like.

  For foreign companies, especially those from Spain that have 
invested heavily throughout Latin America, the issue goes beyond 
how Argentina resolves its crisis. They fear that if Argentina 
can break promises made in contracts, other nations may try to 
do the same in less dire times.

  ``If it is successful in Argentina, it could become a 
reference,'' said Eduardo Curia, an independent economist in 
Buenos Aires.

  
CONTINUING EFFECT

  ``It's a ripple effect. It doesn't just hit the initial direct 
investment in Argentina but all those suppliers throughout the 
chain of supply that can be impacted,'' said Meril Markely, a 
Houston-based director of tax and accounting services in South 
America for KPMG.

  Foreign companies that took over former state transportation, 
phone and energy companies want -- but appear unlikely to get -- 
some form of indexing so they can raise their prices to 
compensate for what is expected to be a widening gap between the 
peso and dollar.

  U.S. companies had investments totaling more than $16 billion in 
Argentina through 1999, according to the State Department. Much 
of the investment is in petroleum and gas, telecommunications 
and energy.



Copyright 2001 Miami Herald