Argentine Tax Talks Make Headway

by Amanda Banks, Tax-News.com, London

15 November 2001

Reports from Reuters news agency have confirmed that a small number of opposition-run Argentine provinces have accepted the government's austerity package and agreed to a reduction in their share of federal tax revenues to help the country avoid what could be the biggest debt default in history.

Only four of the provinces have agreed, leaving efforts to gain political unity in tatters. Provincial governors allied to the government's centre-left coalition have already agreed on the proviso that they receive low interest on their bank debts. But without the consent of the remaining ten opposition-led provinces including Buenos Aires, the biggest and most indebted area, the government will have a huge fight on its hands to avoid an economic meltdown.

Economy Minister Domingo Cavallo has said that if the provinces sign up, they will be permitted to exchange their bonds or credit for guaranteed loans, which could save them around $1 billion a year - in total the 23 provinces collectively owe about $20 billion.

Cavallo told reporters: 'The provinces included in this initial offering are those that have already signed the pact with the government. The provinces will make an annual saving of more than $1 billion in interest rate payments

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