ARGENTINA: VICE-ECONOMY MINISTER DANIEL MARX ANNOUNCES HIS DECISION TO RESIGN AS DEMONSTRATIONS OVER COUNTRY'S ECONOMIC MEASURES CONTINUE

Record ID: 639367

  • Title: ARGENTINA: VICE-ECONOMY MINISTER DANIEL MARX ANNOUNCES HIS DECISION TO RESIGN AS DEMONSTRATIONS OVER COUNTRY'S ECONOMIC MEASURES CONTINUE
  • Date: 14th December 2001
  • Summary: BUENOS AIRES, ARGENTINA (FILE) (REUTERS) SV: DANIEL MARX, EX VICE-PRESIDENT OF ECONOMY, WALKING
  • Embargoed: 29th December 2001 12:00
  • Keywords:
  • Location: BUENOS AIRES, ARGENTINA
  • Country: Argentina
  • Topics: Economic News
  • Reuters ID: LVA19HVI0U4CDF04FK11NGINJ5W
  • Story Text: Argentina's highly respected vice-economy minister has said he will resign, dealing a fresh blow to the near-bankrupt government's credibility as it scrambles to avoid a catastrophic default.
    In the latest defection from Argentina's economic team cracking from the stress of a deep three-year recession, Daniel Marx, Argentina's vice-economy minister cited personal reasons for his decision to resign on Friday (December 14) from his post, but officials said he disagreed with drastic caps on bank cash withdrawals to stop a panicky run on banks.
    At the same time, local cash-only merchants shutdown their businesses and took to the streets burning tires and passing out pamphlets in protest to the recent unpopular $1,000 (U.S.
    dollars) per- month bank limits on cash withdrawals. Their businesses are losing money due to the cash limit that is making it difficult for shoppers to buy goods.
    Marx's resignation was seen as yet another embarrassment for an unpopular government reeling from Thursday's (December 13) massive general strike to protest soaring unemployment and the unpopular $1,000-per-month bank limits on cash withdrawals Marx disliked.
    "Years and years of work and what do they do? They keep the money of all of those who work and they handle it themselves. They are the ones who should resign once and for all. It's our turn and we have reached our limit," said an angry local merchant.
    The departure of the well-connected right-hand man to fiery Economy Minister Domingo Cavallo, with whom Marx repeatedly clashed in his final days, worried tense financial markets just as Argentina is organizing a very delicate swap of foreign-held debt to reduce hefty interest payments next year.
    It has been the third major resignation of Cavallo's economic team in the last two months. Unemployment is near an all-time high at 18.3 percent and several unions as well as politicians have called for Cavallo's resignation.
    The presidential spokesperson confirmed Marx's resignation on Friday.
    "Mr. Marx will no longer be vice-president of economy due to an excess of duties under that capacity, he can now dedicate himself specifically to the task regarding the external debt." said the presidential spokesman, Juan Pablo Baylac.
    The task includes a crucial cash-saving measure in Argentina's last-ditch play to avoid what would be the biggest sovereign debt default in history -- although it was unclear in what capacity.
    Argentina needs Marx's huge network of bank contacts to help coax investors to participate in the voluntary swap of bonds for new paper with lower, more manageable interest rates, through which it hopes to save $5.5 billion (USD) next year.
    Argentina faces a minefield of potential pratfalls in coming weeks, with the debt swap in the next 90 days and negotiations on the 2002 budget, which contains politically unpopular spending cuts to balance the budget and please the International Monetary Fund.
    Marx said that Argentina would meet "at- the last minute"
    its domestic debt payments due on Friday (December 14). The government is leaning on pension fund bonds to buy $1 billion (USD) in bonds to fund the debt service. Marx reportedly disagreed with Cavallo's use of pensions funds to pay debt.
    The notoriously calm Marx was a welcome pillar of stability for investors in an otherwise chaotic economy ministry. The skilled negotiator worked for three different presidents in various stints in the public sector since 1986.
    At one point this year, Argentina had three economy ministers in three weeks as weakened President Fernando de la Rua, buffeted by divisions within his ruling coalition, sought the right formula to end the recession. Marx was a constant.
    But he also bore witness to the massive spike in government spending during the last decade that has left Argentina with $132 billion in public debt that most investors doubt can be fully repaid as tax revenues plummet amid the slowdown.
    Marx reportedly thought the banking curbs -- put in place earlier this month to halt a run on banks amid fears of a currency devaluation -- would shatter confidence in Argentina's beleaguered financial system.
    The cash limits, which Argentines can skirt by using debit or credit cards or checks, have also suffocated consumer spending, the main engine of Latin America's third-largest economy.
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