The downgrade of the long-term sovereign credit rating on the Republic of Argentina reflects growing strain on the cohesion of the governing coalition and the risk that it may impede efforts by Economy Minister Domingo Cavallo to implement draconian measures to balance the federal budget. Until now, support for the De la Rúa Administration has been based largely upon the expectation that Minister Cavallo's policies would succeed in triggering economic recovery by the end of 2001. Against a background of stagnant output and waning market confidence, the government's program has faced growing internal challenges, highlighted most recently by funding disputes with the provinces. Minister Cavallo's strategy is now shifting toward a belated recognition that much-stronger budgetary adjustments are required to
