Argentina`s `National Bankruptcy` Imminent

With the report that Argentina would effectively default on its debt, stocks in the world markets fell together.

Having influenced by the economic crisis of Argentina, the Korean Stock Composite Index dropped by 14.0 points (2.56 percent) yesterday.

Bloomburg press and Wall Street Journal reported on Monday that Argentina indicated that it is impossible to fulfill its debts amounting to at least 38 billion dollars, and hired Merril Lynch as a consulting company to restructure debt. Argentina is carrying out a plan that transfers the existing bonds to the long-term bonds, which have lower interest rates, in order to lower the debt burden.

Price of Argentine bonds (expires in 2005) fell to the lowest price in 5 years, and the bond earning-rate marked 43.3 percent, up twice from June. Argentina`s country risk rating soared 175 points to 2,003, and the benchmark MerVal stock index ended down 8.67 percent, closing at 219.54 points.

With the fear of Argentina`s default, New York`s NASDAQ dropped by 3.93 percent (69.44 points), closing at 1,699.52. Stock index in the major Europe stock markets, such as London, Paris, and Frankfurt, also dropped by 2-3.3 percent. Tokyo Nikkei closed at 10,512.82, down 0.94 percent, yesterday.

Economy Minister Domingo Cavallo said, ``Debt restructuring is voluntary and will receive credit guarantee from the international financial organizations.`` However, he did not mention as to what kind of measure Argentina would take if creditors do not accept the debt restructuring plan.

lailai@donga.com