White House Rejects Bailout of Argentina

The White House on Friday refused to help Argentina with its growing financial crisis.

President Bush’s national security advisor said Argentina should work to stabilize its economy, South America’s second largest, and adhere to a course of fiscal responsibility that it had already set with the International Monetary Fund.

The blunt remarks by Condoleezza Rice made clear that the Bush administration has no interest in putting together a bailout package, as Washington had in the mid- and late 1990s to deal with financial crises in Mexico, elsewhere in Latin America and in Asia. The comments came before the Argentine stock market rebounded for the day. The market was still down sharply for the week.

“The best course right now is for Argentina to be able to take the steps that it needs to be able to take at home to stabilize the financial situation,” Rice told reporters at the White House. She said Bush had written to President Fernando de la Rua, making that point.

White House Press Secretary Ari Fleischer said Bush told De la Rua that he was paying close attention to Argentina’s economic situation. “His note was an expression of support for President De la Rua,” Fleischer said.

In Buenos Aires, the IMF said it had no plans to speed disbursements under the program it had worked out with Argentina or to provide new loans. The IMF led a $40-billion bailout in December.

On Thursday, there was concern that a run on the banks in Argentina might be beginning--and that Argentina could be on the verge of defaulting on its $128-billion debt. One day earlier, the economy minister, Domingo Cavallo, decreed sweeping budget cuts and new taxes to trim $1.5 billion from spending and achieve a “zero deficit” for the second half of the year. The largest impact would be on retirees’ pension benefits and government salaries.

The cut in spending is a necessary step to rein in a burgeoning budget deficit and obtain new IMF loans.

The turmoil has prompted fears that Argentina’s problems could spread northward, and currencies and stock indexes have been dropping over the last two weeks in Mexico, Brazil and Chile.

Rice said the administration is monitoring the situation “very, very carefully.” She said Treasury officials have been in touch with their counterparts in Argentina, and that Treasury Secretary Paul O’Neill has been in contact with Cavallo. However, O’Neill and other senior U.S. officials have looked critically upon the sort of emergency bailouts the Clinton administration assembled, in which the United States and other wealthy nations contributed aid to boost the IMF rescue packages.

Asked whether the administration would support a request from Argentina for a $15-billion line of credit or a $5-billion IMF package, Rice said: “The Argentines have an IMF program that they’re working, and that’s what we’re asking them [to do], to work with the IMF on that program.”

An IMF spokesman, Thomas Dawson, said the international agency supports Argentina’s budget cuts.

The proposals, he said, “demonstrate a very clear commitment to try to tackle this problem.” But he said he was unaware of any plan to lend additional money to Argentina.

Argentine stocks rebounded 5.6% Friday. The benchmark Merval stock index ended up at 329.08 points but was still down 11% on the week. At its lowest point Thursday, the Merval index was down 27.8% over seven consecutive trading sessions.

The market rout this week was touched off by the sale of $827.7 million in 91-day Letes Treasury bills Tuesday at 14.01%, the highest rate in at least five years. The decline set off fears of a debt default that broadsided emerging-market bonds, stocks and currencies from Eastern Europe to Asia.