One thing emerging markets nations should learn from Argentina is don't make budget promises that can't be kept. That is doubly important when the IMF is listening.
The promise that Argentina may not be able to keep is Economy Minister Domingo Cavallo's decree to balance the federal budget immediately. Cavallo intends to run Argentina on a cash basis -- what taxes he takes in each month he can spend, but that is all.
To accomplish this, Cavallo says he has to cut government employees salaries and pensions by 13 percent.
Yet that doesn't fly with Judge Roberto Pompa, who on Friday blocked Cavallo's salary and pension reductions. Austerity, as always, is easier said than done.
Nonetheless, Cavallo expects the Senate to ratify his budget plan tomorrow. As always, he is optimistic, saying "We have plenty of political support."
Plenty of political support? Then how come it took so much arm-twisting to get it even this far? Moody's, for one, didn't buy it. It lowered Argentina's foreign and local debt rating to "Caa1" from "B3" Thursday.
For the record, Argentina is now seven levels below investment grade.
More importantly, not only are the rating agencies not buying Cavallo's line, the IMF may not be either. And this gets to the crux of the issue. Cavallo boldly announced his plan to put Argentina on cash basis before he sought out the help of the IMF.
Wouldn't it have been craftier to have gone to the IMF with the promise of zero budget deficits to obtain commitments for new money, and then, and only then, announce the deal to the people? As it now stands, the IMF has every right to wait and see whether the austerity plan has any chance of working before it gets further involved with Argentina.
As it is now apparent, not only is the federal state of Argentina on the ropes, financially speaking, but so are some of the provinces.
For a radically different financial solution, consider what Buenos Aires Governor Carlos Ruckauf is doing. Ruckauf appears to have invented his own currency, the patacon. The mint is printing up US$500 million worth.
Though it presumes a lot to say a pile of patacones, no matter how tall, could ever be worth US$500 million. Who is to say what the patacon is really worth? Ruckauf has ordered the provincial treasury to pay part of government workers' wages in patacones. Unlike the peso, the patacon bears a 7 percent yield. Rackauf plans to redeem all of the patacons with interest after a year.
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft