Unaccountable

Argentina's messy bankbooks

Is Argentina $37 billion or $43 billion in debt? Last week Argentine leaders were asking that billion-dollar question. Only three weeks after an international rescue squad of public and private lenders had saved Argentina from missing the deadline for a $500 million interest payment, that country's finances appeared to be a more confusing mess than ever.

Buenos Aires conceded last week that it does not even know exactly how much the country owes. Official estimates over the past year have ranged from a low of $37 billion to a high of $43 billion. In an effort to determine the true amount, some 100 civil servants are combing through 6-ft.-high stacks of records at the central bank in Buenos Aires. So cluttered has that building become that the searchers have been forced to expand into new quarters next door.

Much of the confusion is due to the military government that ruled Argentina from 1976 until last year. Says Hector Valle, who served on a commission that has been probing the debt question: "What happened was, of course, that the former regime didn't keep any close reckoning of what it spent." Among the sketchily recorded outlays was an estimated $5 billion used for the 1982 Falklands war. Earlier disbursements of nearly $6 billion may have been lavished on such items as procurement of military hardware and the movement of troops. Adding to the confusion is the fact that Argentines may have quietly shifted up to $20 billion, including sums borrowed from foreign lenders, into bank accounts in the U.S., Switzerland and elsewhere.

American bankers, who believe that Argentina owes around $46 billion, are professing little concern over the country's bookkeeping mess. "Each bank knows exactly what it is owed," said one New York moneyman. He added, "You've got a lot of people doing the job for the first time down there, and it will just take a while to sort out." Bankers point out that Venezuela (estimated debt: $34 billion) also has untidy bookkeeping, but Mexico ($85 billion) and Brazil ($96 billion) have much better records.

Last week some unexpected details of Argentina's eleventh-hour rescue became known. It was revealed that officials of the U.S. Federal Reserve assured private lenders that the $100 million they contributed to the bailout would be repaid. The Federal Reserve told banks that Argentina had more than that amount on deposit with it and that those funds would be used to pay off the loan. Given that indirect guarantee, the private banks charged an interest rate that was only one-eighth of a percentage point more than what they charge one another on loans.