For all the hand wringing that Argentina has inspired in world capital markets lately, this country’s problems are fundamentally more political than economic. Few seem interested in making the sacrifices necessary to put its public finances in order.
”Don’t cut mine. Cut his,” says local columnist Jorge Vilchez, mocking a prevalent local attitude. Like honey from a beehive, subsidies, transfer payments, and public-works programs have flowed from the capitol into this nation’s 23 provinces.
Now, with Argentina struggling to pay interest on its $128 billion external debt, President Fernando de la Rua’s government has adopted a “Zero Deficit Plan.” Designed to reduce public profligacy amid a 16.4 percent unemployment rate, deflation, and a recession now in its third year, the plan’s principal feature is a 13 percent reduction in pensions and salaries of government officials.
They, not surprisingly, are unimpressed. Bureaucrats and other public workers have taken to the streets in sometimes violent strikes. Leaders of government-employees unions and other labor organizations have filled the airwaves and news columns with predictable complaints.
“Coups are no longer military,” said Jose Rodriguez, head of the mechanics union. “Now they are economic.” Rodriguez and other labor bosses met last week to plan a march on Argentina’s congress for later this month.
Members of the CTERA teachers’ union, meanwhile, didn’t bother to show up yesterday, the first morning of classes after a two-week nationwide school hiatus. After returning to work today, teachers will stage a national strike tomorrow.
“The measure is a form of resistance against an act of vandalism against teachers’ wages,” CTERA chief Marta Maffei told the Buenos Aires Herald
Government employees in Buenos Aires province, which abuts this charming and lively city, are especially peeved at Gov. Carlos Ruckhauf, a member of the Justicialist Party, once led by Eva and Juan Peron. Facing dry public coffers, he has decided to pay his state employees in provincial bonds rather than cash.
The Zero Deficit Plan, masterminded by Economy Minister Domingo Cavallo, may cool politicians’ unquenchable thirst for fresh government spending. Legislators apparently don’t want theirs cut, either.
In the 62 days that the Argentine congress met between March 1 and May 31, 59 bills were introduced that would hike public spending if approved. Devised by the Atlas Foundation for a Free Society here, the “Bureaucratometer” identified — among many others — a $125 million project to advance “the sustainability of small-to-medium-sized fruit growers.” Another gem would authorize the Argentine executive to request $2 billion worth of new American debt to promote investment in isolated provinces. These bills are tantamount to a struggling alcoholic’s pleas for “just one more drink.”
As investors worry that the government either will default on its debt obligations or devalue the peso from its one-to-one link to the U.S. dollar, local banks have been leaking like car tires after a drive through a thumbtack factory. Between July 31 and August 1, international reserves fell 2.15 percent, according to a Central Bank announcement Friday. In July, total peso and dollar bank deposits dropped 7.01 percent, Since July 19 last year, total gold and currency reserves have plunged by 40 percent.
With pesos and dollars interchangeable here, I have noticed that in all but one transaction with restaurants, bars, taxis, and my hotel, when I pay in dollars, I receive change in pesos. Argentines seemingly want to horde greenbacks and let a gringo take pesos home as souvenirs.
And who can blame them? Such uncertainty breeds anxiety and, in some, a search for greener pampas. La Nacion reported Friday that some 10,000 Argentines have sought permission to emigrate to Spain. That figure is triple the number who applied last year.
With financial markets teetering and exit signs luring some away, one wants to cry for a delightful country filled with robust red wine, Earth’s best beef — hands down — and a remarkably warm and hospitable populace. If their government can stop spending money it doesn’t have, cut taxes, clean up the courts, and deregulate sclerotic labor markets, perhaps America would do its part by opening the U.S. to Argentine goods. With such reforms in place, there is no reason the sun cannot shine on this nation once again, as brightly as it radiates on its flag.
U.S. Treasury Undersecretary John Taylor’s pleasant visit last week with de la Rua and Cavallo seems to have eased local jitters a bit. Still, the situation here perhaps is summarized best by cartoonist Sergio Ibanez. In his August 3 “Metahumorfosis” feature, a scrawny and anxious man consults his physician.
“But doctor,” he says. “Stress, heart palpitations, hypertension, an ulcer…shouldn’t I be worried?”
“Well, it depends,” the M.D. reassures him. “If you lived in Switzerland, I would worry. But living in Argentina, believe me, you’re doing reasonably well.”