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Argentina to repay 6.7 bln dollars to Paris Club countries

Argentina announced Tuesday it will pay off its 6.7-billion-dollar debt to the Paris Club of international creditors, as the South American country slowly regains its footing following the disastrous economic crash of 2001.

"I have instructed my Economy Minister (Carlos Fernandez) to use the available Central Bank reserves to pay off the debt to the Paris Club," said President Cristina Fernandez de Kirchner.

The Paris Club members include the United States, Japan and other members of the Group of Seven economic powers, which crafted a financial bailout for formerly bankrupt Argentina following its 2001 meltdown.

Argentina's business community hailed the announced debt payoff as a welcome bid to put the country's financial house right, after years of economic disorder.

"I believe that (the debt repayment) is going to have a positive effect domestically and internationally," said Juan Carlos Lascurain, president of the Argentine Industrial Union manufacturers' group. "I think creditors will respond well to it."

"It will give us the possibility of improving the (economic) situation, and will give businesses a chance to get better financing," he said.

The peso crashed in 2001, leading to widespread riots by desperate Argentines who lost their life savings.

The crisis nearly caused the government to default Argentina has been struggling ever since to recover.

Washington welcomed the move. "This decision represents an important first step in consolidating Argentina's position in international markets," said US State Department spokesman Sean McCormack. "We hope that this important step will create opportunities for US financial institutions and international investors to resume operations in Argentina," McCormack said.

The US government also "reiterates its commitment to work closely with Argentine government authorities in strengthening and expanding the rich bilateral and multilateral agenda with Argentina," he said.

Osvaldo Cornide, head of the Argentine Chamber of Mid-sized Businesses, said getting rid of the country's debt will give private business access to loans at much more attractive rates - perhaps six or seven percent - rather than what he considers the unreasonably high rates he says Argentine businesses have had to pay. "At present, these rates are usurious in Argentina," he said. "This announcement will radically change the conditions of financing, both outside and inside the country."

Despite its struggles, Argentina's economy has grown by an average of eight percent over the past five years and government reserves are still near 50 billion, according to official statistics. Last year, Argentina reimbursed a 9.5 billion dollar debt to the International Monetary Fund, after the dramatic 2001 default that triggered the worst economic crisis in the country's history and which plunged more than half the population into poverty.

BUENOS AIRES,

Wednesday, AFP

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