BBC News
Saturday, 22 December, 2001, 02:13 GMT

Creditors and investors start to cast around for scapegoats, as Argentina's
economic and political crisis continues to deepen.

US President George W Bush has urged Argentina's next leader to carry out the austerity measures proposed by the International Monetary Fund (IMF).

He said if the policies were carried out, it could clear the way for Argentina to get more money from the institution.

The IMF were really the last lenders to Argentina and have exacerbated the debt overhanging the country

Hans Humes
Van Eck Emerging Market Funds The austerity measures have been blamed for the scenes of civil unrest in Argentina this week, as hundreds of thousands of people took to the streets to protest at economic hardship.

But President Bush defended the IMF's role in Argentina's problems.

"The IMF made some very tough but very realistic and very necessary demands on the money, and that is that the government of Argentina must restructure its fiscal policy and its tax policy," he told reporters.

In the absence of firm new policies, many creditors and investors have criticised the IMF for its role in the crisis.

IMF under fire

Hans Humes of Van Eck Emerging Market Funds and spokesman for a New York-based committee of Argentina's foreign creditors has been particularly critical of the IMF's role.

"The IMF... were instrumental in engineering this, lending an additional huge amount of money this year," he told the BBC's Today programme.

Foreign creditors expect the collapse of the government to delay a restructuring of the nation's $132bn (£91.2bn) public debt and cause a default.

One rating agency said it will cost private investors half of the $97bn (£67bn) face value of their claims.

The International Monetary Fund decided two weeks ago to cut Argentina's $22bn credit line but denies it is to blame for the country's troubles.

Debt swap unlikely

Argentine President Fernando de la Rua resigned on Thursday as violence engulfed the country.

International investors did lend Argentina up to $155bn and in a sense we allowed the problem to get as bad as it got

Steve Sjuggerad
fund manager The widespread riots and looting were in response to more than four years of harsh austerity policies demanded by the IMF to repay the debt.

President de la Rua was only halfway through his four-year term and quit just hours after Economy Minister Domingo Cavallo.

The resignations mean the country is unlikely to be able make its planned 20 January debt swap.

By swapping out of current bonds and into new low interest bearing loans, the government had hoped to cut its heavy debt servicing payments.

Senator Oscar Lamberto has been named as Argentina's provisional economy minister by the country's interim president.

He was appointed by Ramon Puerta, the head of Argentina's Senate, the caretaker president.

Late on Friday the Peronist party named Adolfo Rodriguez Saa to serve as interim president, until elections are held on 3 March.

IMF not totally to blame

"[The IMF] were really the last lenders to Argentina and have exacerbated the debt overhanging the country," said Mr Humes, adding the IMF should take its share of losses.

Institutional investors have also been blamed for overlending to Argentina.

Steve Sjuggerad, a fund manager who says he made a lot of money out of Argentina, shipped out all of his investments in the summer.

He told the BBC's World Business Report: "International investors did lend Argentina up to $155bn and in a sense we allowed the problem to get as bad as it got."

But others aren't quite so quick to indict the international lending institution for its insistence on a workable budget and prudent fiscal policies, choosing instead to pursue a prudent course by denying aid.

"The IMF realised the current Argentine problem was a political one," says Arthur Andersen analyst Alberto Tenaillon, who is based in Buenos Aires.

"Since the [former] government was not able to get its budget approved... the IMF decided not to free certain monies Argentina was wanting," Mr Tenaillon told BBC News Online.