Jaded Argentines brace for looming debt default

Tue Jul 29, 2014 1:10am EDT
 
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By Eliana Raszewski and Richard Lough

BUENOS AIRES (Reuters) - Factory owner Norberto Garcia was poised to launch a series of new toys this year after grafting hard for the past decade to rebuild his business following Argentina's 2001-2002 economic crash and debt default.

Instead, he's hunkering down for a possible second default this Thursday, cutting investment plans and scaling back his targets.

"We had plans to launch 11 new products. Now we are going to release just three," Garcia, 70, told Reuters inside a cavernous warehouse piled high with boxes of dolls, balls and plastic rabbits. "We would rather keep the money to support the company's structure as it is."

Rather than sink 2.8 million pesos ($342,200) into expanding production lines, he plans to cap the investment at 1.8 million pesos.

Garcia's wait-and-see attitude is typical of other businesses who anticipate a slowdown in sales in a country grappling with a surging inflation rate but are convinced any economic downturn will be moderate.

While unsettling, the debt crisis today is a far cry from the turmoil of Argentina's $100 billion default in 2002, and Garcia is optimistic things will ultimately improve.

"What we lived through in 2001 was catastrophic. The anguish was terrible, we didn't know what to do," said Garcia, whose Turby Toy SA had to shut down its machines, offload most staff and sell real estate at knockdown prices to weather the storm.

Desperate to halt a massive run on the banks and a collapse of the financial system, the authorities froze bank accounts and devalued the peso. More than two dozen people were killed in bloody protests.   Continued...

 
Pedestrians walk past a homeless man in Buenos Aires' financial district, in this picture taken July 24, 2014.   REUTERS/Marcos Brindicci