Political Risk Latin America Blog @PolRiskLatam

Not-so-smooth sailing for Fernández government

Posted in News and Articles by politicalrisklatam on August 19, 2010

by Jude Webber for Financial Times, August 19th, 2010.

The d-word – default – is as dirty a word as there is in Argentina. It’s not something the government ever likes to admit is possible – no one, after all, wants to return to the horrors of 2001-02, when Argentina’s default on nearly $100bn, the biggest sovereign default in history, made it an economic pariah and pushed half the country into poverty.

But these are tough times for President Cristina Fernández, who used the word today. Nothing seems to be going her way in congress – as was proved by a vote in the early hours of this morning, when the lower house passed a bill to jack up pensions to 82 per cent of the minimum wage (moving higher whenever the minimum wage does).

The minimum wage has just increased to 1,740 pesos (£283, $442, €343) while the basic pension is some 895 pesos, and the minimum will rise to 1,840 pesos in January. There is no way Argentina can support any such pension increase, says Fernández. Hence the rhetoric-loving president whipped out the d-word, warning: “If the bills that (the opposition) are presenting get passed, in three months we’ll default.” (continue reading… )

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