Debt: A Little Lifeblood for Argentina

In the medical bulletin on ailing Latin American debtors, the condition of Argentina, which owes $48 billion to foreign creditors, changed last week from critical to merely serious. The International Monetary Fund said that it had reached a preliminary agreement with Argentina on an economic program that will qualify the country to borrow nearly $1.2 billion from the agency. Buoyed by the prospect of new credit, Argentina was able to pay foreign banks some $250 million in overdue interest.

The bankers have little reason to rest easy, however. To satisfy the IMF, Argentina made promises that will be very hard to keep. The country pledged to slash its 1,010% inflation rate to 150% by next spring. To help do that, the government of President Raul Alfonsin agreed to cut public spending by 12%, to hold wage hikes to only 90% of inflation and to set up a new unit of currency called the austral that will be worth 1,000 old pesos. Such measures could increase social unrest, but Alfonsin seems determined to see them through. Said he on nationwide television: "The new plan is not being imposed to save a government. It is to save a political system. It is to save a way of life."