Financial Times; Aug 20, 2002
Bankers urge delay to IMF accord
By Thomas Catán in Buenos Aires
Foreign banks operating in Argentina are demanding that the country's crucuial agreement with the International Monetary Fund to be delayed, the Financial Times has learnt.
The are furious about a batch of new proposals they say could heap hundreds of millions of dollars in fresh losses on to their already tattered balance sheets.
The Association of Argentine Banks - which represents the local subsidiaries of international banking groups such as Citibank, HSBC, BSCH and BBVA, has met ambassadors from the Group of Seven industrialised nations to press them to delay the IMF deal until the government backs down on the controversial proposals.
The banks are also seeking an urgent meeting with Eduardo Duhalde, Argentina's interim president, to relay their concerns about the new laws. Some have also written to their head offices asking them to exert pressure on the Argentine government and lobby the US Treasury and the IMF on their behalf.
Last December the government of Fernando de la Rúa was swept from office amid nationwide rioting after it decreed a freeze on bank withdrawals. Seeking to assuage popular anger, Mr Duhalde's interim government then tried in January to force foreign banks and investors to shoulder much of the losses from the currency devaluation and debt default.
It transformed dollar assets and liabilities of the banking system into devalued pesos at different rates - making many banks insolvent at a stroke. It also enacted a new bankruptcy law that made it hard for banks to collect on bad debts.
As part of its seven-month negotiations for a new deal, the IMF pressed Argentina to scrap the bankruptcy bill and several other measures that hurt the banks. But now foreign bankers are complaining that Congress is quietly resurrecting many of its provisions through the back door.
"This is pure populism," said one senior bank official. "We're back to the bad old days of January."
On Friday the government sent a draft letter of intent to the IMF, inching closer to an agreement to roll-over debt repayments to multilateral lenders this year. Yesterday, however, the IMF was studying the new complaints which have been relayed by the banks to the fund's local representative in Buenos Aires.
Some bankers also claimed that they had been asked for bribes from lawmakers in exchange for blocking the proposals.
Among the flurry of measures currently going through Congress, one would make the foreign parent of any Argentine bank liable for new deposits, something they will strongly resist. Another measure would create a retroactive 10 per cent tax on anyone who withdrew more than $100,000 (#65,000) from the banking system last year.
Another bill reinstates a 2 per cent tax on interest payments or bank commissions for a bankrupt union-run health scheme scrapped several years ago.
Finally, Congress has approved a further 90-day extension of a ban on mortgage foreclosures or repossessions of cars and business-related items.
Mr. Duhalde has said he will not veto these provisions.