Argentine Leader Declares Default on $132 Billion Debt

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Last updated at: (Beijing Time) Monday, December 24, 2001

Argentine Leader Declares Default on $132 Billion Debt

Adolfo Rodriguez Saa, a moderate governor from a tiny rural province, became the unlikely caretaker president of Argentina Sunday after several days of civil disturbances. He immediately declared a default on the country's $132 billion debt, promising to use the money saved to create jobs and fortify social programs.

The default is the largest in history, but is not considered an imminent threat to other countries, developed or developing. That is because the crisis has been slow to unfold, and many creditors had opportunities to limit their risk.

That is in contrast to the experience of Russia in 1988, when it defaulted on part of its $200 billion in foreign debt, causing economic harm in many developing countries. But the default here does stand to cause damage locally, for Argentine banks and pension funds, and Argentines of every class are already suffering badly in the economic crisis.

Mr. Rodriguez Saa will serve for only three months, until an unusual national election is held on March 3 and a new president is inaugurated.

Neither elected nor experienced on the national stage, Mr. Rodriguez Saa will be responsible for shepherding the country through a crisis, with its economy in free fall and the electorate furious over years of government corruption. The banking system is on the point of collapse, one in five workers are unemployed, and the system of public health care and retirement benefits is in trouble.

Immediately, the new president must try to stabilize the country after a week of food riots, looting and political demonstrations left at least 29 dead and forced Fernando de la Rua to resign as president on Thursday.

"We must take the bull by the horns," Mr. Rodriguez Saa, 54, told a joint session of Congress today after they ratified him as the interim president. In his speech, he announced the suspension of debt payments, without indicating when or how the government would resume the payments.

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