Argentina toils in the grip of a global malaise

Peter Hudson In Buenos Aires

ARGENTINA yesterday lived through its fourth day of strikes and demonstrations, with a firm promise that the unrest will continue as disenchantment with a decade of free market reforms deepens across the nation.

Speaking at a rally of around 25,000 anti-government demonstrators on Wednesday, Luis D’Elía, a left-wing local councillor who has led nation-wide street protests, promised demonstrators would block traffic on roads throughout Argentina for three days next week.

The beleaguered Alliance government of President Fernando de la Rúa has tried to minimise the protests. It estimated attendance at Wednesday’s rally at only 12,000, for instance.

It is also cracking down on the demonstrators. The labour minister, Patricia Bullrich, this week confirmed she would send more than 500 inspectors to make sure that those receiving government unemployment subsidies were not being forced to take part in the protests.

Several demonstrators have received draconian sentences. For instance, Emilio Ali in April received a five-year sentence for leading a peaceful occupation of a supermarket to demand food for the unemployed.

The demonstrations, however, are merely one sign of the government’s increasing unpopularity. The Alliance has faced six general strikes during 19 months in office. But more significantly it is also losing the support among ordinary Argentines who have no interest in protesting.

The government has only 10 per cent approval rating according to a pollster, Ricardo Rouvier, while around two-thirds of the people believe President De la Rúa is not capable of governing.

At Wednesday’s rally, Luis Deza, a physics teacher from Buenos Aires province, summed up the feelings of many who once backed the government. "I voted for the Alliance, but I have been totally disillusioned. I thought they were going to change the line followed by the previous government, but it’s more of the same: unemployment, hunger and a lack of resources for health or education," he explained.

The Alliance was elected on the promise that it would deal with rampant corruption and get Argentina back to work. But its credibility was severely dented by the resignation in October last year of the vice-president, Carlos "Chacho" Alvarez, in disgust at the failure to investigate allegations that the government had bribed opposition Peronist senators to vote for a labour reform law.

According to government figures, after more than three years of recession unemployment has surged to a record 2.2 million, more than 16 per cent of the population. Almost as many again are underemployed - unable to find more than part-time work.

Mr de la Rúa enjoyed some early approval with increased education spending, persuading teachers to halt a long-running protest outside congress that had embarrassed his predecessor, Carlos Menem. But seven IMF-inspired austerity packages in less than two years have destroyed that support.

The latest "zero deficit" package, introduced last month in response to a drying up of foreign credit, aims to achieve a balanced budget principally by cutting state pensions and salaries, including those of the long-suffering teachers.

The package has across-the-board support in congress, but many share the opinion of protesters such as Mr Deza, who reckons the austerity measures will worsen the recession, hitting tax revenues, in turn meaning more cuts.

The decline in government income in July means that cuts in state salaries and pensions could go from 13 per cent to 20 per cent next month. If the cuts eventually reach 40 per cent, as Mr Deza predicts, political support will surely dwindle.

He would like to see funds raised instead by taxing pension fund administrators as well as the banking sector, which has taken advantage of sky-high interest rates to generate record profits. "But they are the people who run the country," Mr Deza claimed. "That’s why the government doesn’t want to take the money off them."

Artemio López, director of Fundación Equis, a local think tank, is in broad agreement. "They should be raising money from the part of economy that doesn’t fund consumption," he argues. That includes the financial sector as well as a bloated political bureaucracy.

Argentina officially spends $2 billion (£1.4 billion) to maintain its political class, but the real cost is certainly higher.

All the major parties fund their activists with fraudulent claims on the state welfare system, for instance. A recent survey suggested that Argentina, where average life expectancy is 68 years, has 11,000 pensioners who are more than 110 years old.

These problems are not solely the Alliance’s fault. Former President Menem’s ten-year reign was characterised by high-profile corruption cases and increasing economic problems. Despite election promises to the contrary, Mr Menem in 1990 introduced wide-ranging neo-liberal economic reforms, throwing open domestic markets and selling off virtually all the country’s state-owned industries.

That made Argentine the darling of the IMF and foreign investment banks in the 1990s. But despite an initial spurt of growth, the poorest Argentines saw little benefit.

Wealth distribution worsened throughout the decade, as companies increasingly transferred employees to the informal sector to reduce wages and evade tax and welfare payments.

Mr López says almost half of the country’s children have no medical cover because their parents are unemployed or in the informal sector.

The privatisation process brought some improvements in infrastructure, but at the cost of tariffs that in some cases, such as road tolls, are among the highest in the world. And despite income from the sell-off, persistent spending deficits saw central government debt more than double during the last decade, to $130 billion.

All this has fuelled growing disenchantment with neo-liberal policies. Argentines are now looking beyond the mainstream parties to figures such as Elisa Carrió, a political maverick, who has split from the Alliance and threatens to put up a strong showing if she runs for senator in October’s congressional elections or in the 2003 presidential race.

Other fringe candidates also are likely to do well in October, including a left-wing priest, Luis Farinello, and Luis Patti, a hard-right former police officer. Both are attracting poll ratings in Buenos Aires province almost as high as that of the Alliance candidate, Raúl Foulkes Alfonsín, a former president and Argentina’s first president of Scottish descent.

Some favour extreme solutions, including an immediate default on the country’s debt. But although Mr López says that over 80 per cent of the population has no faith in current economic policies, he thought it unlikely that Argentina would lurch into populism, as Venezuela has done under President Hugo Chávez, a former military officer.

"There are lot of things that are still unchallenged," Mr López says. "We haven’t stopped valuing price or currency stability or the need to integrate Argentina into the world. Everyone knows that there is still a lot to lose. People do want continuity, but with certain changes that would allow them to do better."

He and a political analyst, Felipe Noguera, hope that October’s elections will define a new political map, allowing a new coalition that will bring about those changes. Mr Noguera reckons the current crisis has created an irresistible force for reform that is starting to be expressed throughout the political class.

"You can’t see much sign of it yet, but you can feel it coming," he says.

http://www.thescotsman.co.uk/world.cfm?id=96688

-- Martin Thompson (mthom1927@aol.com), August 10, 2001