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Argentina: Economic Measures Reflect Peronists Platform - 2001-12-25


The policies announced by Argentina's new interim President Adolfo Rodriguez Saa - including a suspension of foreign debt payments - are the product of consensus by leaders of Argentina's dominant political party, the Peronists. Some analysts say this means many of the measures represent the party platform of the Peronist party, which now is expected to win the March 3 Presidential election.

Mr. Rodriguez Saa, who was governor of a western province until being sworn-in as interim President Sunday, has unveiled a program to try to stabilize the country following widespread riots and protests that brought down his predecessor, Fernando de la Rua.

The measures include some cuts aimed at reducing government spending, but also the pledge to launch a program to create one-million jobs with money saved from suspending foreign debt payments. Also, a third form of currency will operate alongside the Argentine peso and U.S. dollar, in an effort to inject much-needed cash into the economy.

It is unclear if this third currency, which reportedly will be called the "Argentine", will work as intended. It appears to be designed as an internal currency, while the peso and dollar are maintained for external use.

Some econommists fear this internal currency, made up of either bonds or paper scrip, could rapidly lose value, and produce inflation. Alberto Viglioni of the Latin American Foundation for Economic Investigations in Buenos Aires says it is only a short-term solution. "This new money could stimulate production but only if not too many of these bills are printed," he says. "They could prime the pump, he says, over the short term. but if too many are printed, then you have inflation - so it is not a long-term solution."

Interim President Rodriguez Saa announced the creation of this third currency as a way of maintaining Argentina's exchange rate regime of pegging the peso one-to-one against the U.S. dollar. This peso convertibility, established in 1991, helped at first to end hyperinflation and promote economic growth, but in recent years kept prices for Argentine products too high - a factor contributing to the country's economic crisis.

This stabilization program is the product of consensus by the political leaders of the Peronist party - which has dominated Argentine politics since being founded by dictator Juan Domingo Peron in the 1940's. The Peronists are once again the majority party because former President de la Rua's failed economic policies gave them control of the Congress in last October's elections, and now they have the Presidency.

Even though Mr. Rodriguez Saa, a career Peronist politician, is only an interim President, the candidates with any chance of winning the March 3 election are all Peronist governors. The election process itself, under rules adopted by the Peronists and passed in Congress Sunday over objections by opposition parties, also are stacked in favor of a Peronist victory.

Political analyst Ricardo Rovier says this is why the March election results appear to be almost a foregone conclusion. For this reason, he tells VOA the program unveiled by Mr. Rodriguez Saa Sunday not only represents the party's election platform, but the policies a new Peronist President will likely pursue. "The candidate that becomes President will surely pledge the continuity of this plan that has just been announced." He went on to say these policies were clearly discussed and endorsed by the party leaders so that there would be continuity after March 3.

Much will depend, of course, on how successful the interim President is in stabilizing the crisis, and bringing about some form of recovery.

But for analyst Felipe Noguera Argentina is suffering from more than just an economic crisis - making the prescriptions announced Sunday unlikely to resolve what he sees as the country's deeper structural problems. "I believe Argentina's crisis is not economic in origin. I think that what has happened in Argentina is that we have several structural political problems that have caused the economic crisis. We have an ill-defined relationship between the federal government and the provinces which allows for all kinds of accountability and loopholes," says Mr. Noguera. "This has meant that public spending has been out of control at the federal and provincial levels...and until this is resolved it's very difficult for Argentina to implement in an executive way any kind of austere or reasonable economic policy or budget, and I think this is a political problem not an economic problem.

Mr. Noguera adds that Argentina desperately needs political reform, and until this happens the kind of crisis that has just brought down .President de la Rua will continue.

But this remains to be seen. Right now, most Argentines are waiting to see if the country can survive a foreign debt default, and what will happen to their currency. If the Peronist party, and its interim President, can achieve some successes with their program in the crucial coming weeks most Argentines may give the new government a chance. If not, there may be more trouble ahead for Latin America's third-largest economy.