Argentina Economic minister quits

Facing a deadlock in negotiations with international lenders and stiff domestic resistance to a bank bailout, Argentina's economy minister resigned abruptly, sending new shock waves through the battered nation.

Demonstrators renewed their pot-banging protests outside the National Congress in Buenos Aires, forcing lawmakers to retreat from approving a plan to swap deposits for bonds. Unemployed workers, pensioners and government employees held protests around the country, some marching on supermarkets to demand food.

Later Tuesday, eight governors, top labor leaders and other key political figures met with President Eduardo Duhalde, attempting to hammer out a new emergency economic plan in the face of the resignation of Economy Minister Jorge Remes Lenicov.

Airwaves and financial circles were swirling with reports and rumors that the entire Cabinet was ready to offer resignations to allow Duhalde to form a new team. News reports said that Alieto Guadagni, who held trade posts in the former government of President Carlos Menem, could be tapped to succeed Remes Lenicov, although other names were being considered, including former Central Bank president Javier González Fraga.

Late Tuesday, media in Buenos Aires reported that three other top officials had resigned: Cabinet chief Jorge Capitanich; Interior Minister Rodolfo Gabrielli and Production Minister José Ignacio de Mendiguren. Those reports could not immediately be confirmed.

Average Argentines are straining to get by; banks were shut down last week to halt a steady run on deposits that threatened to collapse the entire financial system. Residents were strapped for cash since the ATM machines were drained of money over the weekend, while stores, shops and restaurants halted all credit card payments.

Tuesday's economic reports were dire, with the news that industrial production plunged 18 percent in March compared to a year earlier, and seven foreign banks in Argentina placing their losses at $8.5 billion.

Under the plan to save the banks developed by Remes Lenicov, depositors would receive five-year peso bonds and ten-year dollar bonds. Although only limited withdrawals have been allowed for five months, wealthy depositors have been winning lawsuits against the measure and obtaining their funds.

''No bonds! No bonds!'' protesters chanted outside Congress, raising banners with the word ''Liars'' to describe politicians and bankers.

Nearly into the fifth year of recession, faced with new budget cuts and separated from access to bank accounts that hold severely devalued currency, Argentines have marched, looted and rioted since December.

No solution is in sight. Allowing depositors to withdraw their money would cause the banks to collapse. Duhalde and other officials have been unable to restore any public confidence in the government or the banks.

The international impasse is equally difficult.

After generous loans in the past half decade, the International Monetary Fund suspended a loan package in December, triggering an expected default on the $141 billion debt.

Efforts to renew the loans have stalled over IMF demands for a coherent strategy and new austerity. Much of the money -- some $7 billion out of $9 billion in the pipeline -- would simply allow Argentina to pay what it owes to the IMF, the World Bank and other multilateral lenders.

''With every day that goes by, the situation gets worse,'' said Martin Schubert, head of European Inter-American Finance in Miami.

''They [the IMF] are making an example of Argentina, but are they jeopardizing the region?'' Schubert said.

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