Argentina Sees Silver Lining in Mexico’s Clouds

BUENOS AIRES â€”  Economy Minister Domingo Cavallo said Friday that Argentina is weathering the storm of the Mexican financial crisis and may even end up benefiting from it.

The devaluation of the Mexican peso has shaken stock markets in other Latin American countries as cautious foreign investors have withdrawn capital from the region. At the same time, foreign bankers have tightened credit to Latin America.

But Cavallo said in an interview that the alarm over Mexico may end up giving Argentina a chance to show investors and creditors that its economic policies are more sound than Mexico’s were and that its economy is more worthy of confidence.

“We believe that when this storm passes--hopefully it will pass rapidly--investors in Argentine bonds and stocks . . . will see that we have a robust system. And so we hope they will have more confidence even than they had before now,� Cavallo said. “I believe that Argentina is going to come out of this crisis with more credibility.�

He plans to travel to New York next week to tell investment brokers and bankers that:

* Argentina’s economy “grew 32% or 33% in the last four years, practically an annual average of 8%. Mexico’s grew 3% a year in the best of cases.�

* Argentina’s deficit in the current accounts of its foreign payments and receipts was no more than 3% of its total economic production, while Mexico’s deficit was nearly 6% of its output.

* Argentine exports rose 20% in the year, due largely to improved productivity that Mexico didn’t have.

* Argentina last year held inflation to 3.9%--the lowest rate in 50 years.

* The 1995 Argentine budget will have no deficit.

“Taking into account the Mexican crisis, we have taken additional austerity measures,� Cavallo said. President Carlos Menem recently vetoed several expenditures in the budget and his Cabinet approved a measure to cut a further $1 billion from planned disbursements.

Argentina’s peso has been stable, at one peso to the U.S. dollar, since 1991. But many economists say the peso has become overvalued, and that can lead to speculation about devaluation. But Menem and Cavallo emphatically denied that will happen. By law, all Argentine pesos in circulation must be backed by government reserves in dollars or other hard currencies. The government must meet all requests to convert pesos to dollars.