The executive is trying to do something about this situation without impinging on the central bank's autonomy. Last week it announced that employees will be able to borrow up to five times their take-home pay at rates to be negotiated between the banks and the unions, and using their salaries as security (repayments will be docked by their employers). Also, finance minister Antônio Palocci announced a line of credit for purchases of household appliances worth up to R$900 (US$300), repayable over 36 months at `minimal' interest rates. Union sources say both measures together would translate into a reduction of interest on consumer credit from about 8% a month to 3%.
The government's aim is to stimulate family consumption, which in the first half of this year was running 4.7% lower than a year earlier. Retail sales in July fell for the eighth month running, to accumulate an annual 5.4% decline.
ARGENTINA | Recovery decelerating. The second quarter of the year saw the rate of recovery slow down significantly. GDP grew by only 1.6% on the first quarter, leaving first-half GDP 6.6% higher than a year earlier (with year-on-year comparisons, it must be kept in mind that last year Argentina's GDP shrank by 10.6%).
Economy minister Roberto Lavagna clearly expects (as does the IMF) further deceleration in the second half, leading to GDP growth of 5.5% for the year as a whole. For 2004, the draft budget just drawn up by the executive assumes GDP growth of 4%.
Industrial production has been continuing in the same pattern: in August it was 1.8% up on July, leaving it up 17.5% on the same month of last year.
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