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Argentina

President de La Rua has taken advantage of his honeymoon period and confronted two difficult issues head on: shrinking the fiscal deficit and reforming the nation’s archaic labor laws. Federal auditors discovered that the outgoing Menem administration had under-reported the 1999 fiscal deficit, now believed to have reached 2.5% of GDP. De la Rua worked quickly upon entering office to negotiate caps on transfer payments to provinces and convinced provincial governors, most of which belong to the opposition Peronist party, to cut their own budgets. Most analysts agree that the federal deficit will be kept to $4.5 Bn USD or 1.5% of GDP. This will help Argentina to negotiate better terms on expiring external debt.