Following, not fearing, Argentina

Financial Times
February 25, 2005

When Philippine president Gloria Macapagal Arroyo warned the country might go the way of Argentina, which defaulted on its loans in December 2001, officials hoped it would spur lawmakers to hasten approval of key tax proposals to avoid a similar economic collapse.

Unfortunately, the tactic seems to have backfired. Some lawmakers, including an important Macapagal ally in the Senate, would rather like to emulate the South American nation.

After all, it stood up to creditors and simply stopped debt payments.

Senator Manuel Villar, who filed a proposed law to establish a “council for debt relief” noted approvingly that Argentina now pays only a small part of its original debt.

By the cut-off date today, most holders of Argentine bonds will have accepted terms costing them two-thirds of their money. Another lawmaker, leftist congressman Satur Ocampo, said Argentina had done rather well following the loan default and has grown by 8 per cent in each of the past two years.

Its currency has stabilised and 2 million net jobs have been created since 2002, he added. Perhaps it’s time for a new scarecrow?

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