[RT] Bear Stearns warns of 3rd world debt crisis... renewed angst surrounding Argentina............

[Dorothy Carter <dorothy.carter@xxxxxxxx>]

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10/05 10:01A (DJ) DJ Bear Stearns Warns Of Third World Debt 
Crisis                 
Story 2688 (N/DJN, N/DJWI, N/BON, N/COB, N/DJS, N/DJWB, N/EBD, 
N/EMD...)           
   NEW YORK (Dow Jones)--Bear Stearns warned Friday that renewed 
investor          angst 
surrounding Argentina's ability to remain solvent could push 
the             
developing world into a wholesale financial 
crisis.                                
  "We worry that global conditions have deteriorated to the point that 
a third     world debt crisis like the one in the 1980s 
could result," the investment bank     said in a 
research 
report.                                                         
  The dire outlook comes as Argentine debt markets were crushed this 
week          after Monday's 
bearish tax collection data raised questions about whether 
the      government's "zero deficit" budget plan 
will save the country from a 
$130          billion bond 
default or a 
devaluation.                                             
  "Argentina has been sinking for several years under the weight of 
dollar         strength and the 
resulting deflation, the global recession, bad IMF 
programs,      and serious policy mistakes," Bear 
Stearns said, referring to tax hikes 
and        the decision not to 
dollarize.                                                     
  Amid heightened risk aversion following the Sept. 11 terrorist 
attacks on        the U.S., Argentine 
bonds spreads have shot up to six year highs. 
The              
country's yield spread on the J.P. Morgan Emerging Markets Bond Index Plus 
now     trades 1922 basis points over comparable U.S. 
Treasurys, up from 1510 the day      before the 
attacks and from around 750 at the start of 
2001.                       
  The Institute of International Finance said last month in a report 
that in the aftermath of the terror strikes net capital flows to 
emerging markets are      likely to drop about 36% 
this year and "flight to quality" owing to 
worries        about Argentina and Turkey 
will be 
reinforced.                                     
  While Bear Stearns doesn't think Argentina will devalue its 
dollar-linked        peso, the firm says 
it's increasingly likely that Argentina "stops paying 
its      debts and forces bondholders to accept 
something less than their present book      
value."                                                                            
  "A possible scenario is that the Oct. 14 election will force a 
tradeoff:         external debt 
payments versus internal needs for cash.... At that 
point,           Argentina 
may chose not to make some of its debt payments," Bear Stearns 
said.     The country is holding mid-term congressional 
elections on Oct. 
14.                
  -By Angela Pruitt, Dow Jones Newswires, 
201-938-2269,                            
<A 
href="mailto:angela.pruitt@xxxxxxxxxxxx";>angela.pruitt@xxxxxxxxxxxx                                                         
                                                                                   
  (END) DOW JONES NEWS  
10-05-01                                                   
  10:01 
AM                                                                         
Additional Codes ( N/EMT, N/FRX, M/NND, M/TPX, P/DAF, P/DAS, R/AF, 
R/AG,           R/LTM, 
R/SF, 
R/SM)                                                               







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