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The agenda to avoid a default
Ambito Financiero
July 22, 2008

It's essential to dispense with all doubt about the possibility of a default. In accord with the market perception through the price of the CDS (credit default swaps), that doubt is growing. It's urgent to cover the fiscal flank, as much through the reduction of subsidies as through structural measures to improve the quality of public spending and even to reduce it.

The straightening out of the system of prices will have to be boxed into a review and change in the model applied for the last six years.

Additionally, the national government as well as the provincial ones will have to work on administrative reforms to achieve efficiency, transparency and improved spending.

Markets

These plans for reform and institutional strengthening will have to contemplate the instruments and measures to cushion the social effects of the change.

The government has to recover its capacity to access international capital and debt markets. For that, it's not only necessary to get the internal economy in order and assure fiscal solvency. As a prior condition it will have to normalize the situation with the Paris Club and with the holdouts, overcoming ideological and populist limitations.

Lawsuits

It also has to resolve through means of agreements the accumulation of lawsuits and arbitrations from the contractual ruptures of 2002. They have to tamp down on price controls and end the manipulation of the indexes. Gradually the relative pricing structure will have to reach international levels to generate incentives and an efficient spread of investments.

There are other issues of the institutional and political order. I'm referring to the independence of the judiciary, the reduction in corruption, the compliance with international treaties, the respect for property rights, the improvements in security and the substitution of the permanent climate of confrontation with another of conciliation.