2 - 8 May 2002
Issue No.584
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Al-Ahram Weekly Online 2 - 8 May 2002 Issue No.584 |
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Living in limbo
The ostracism Argentina has been subjected to since defaulting on its debt repayments was intended to hurt. Hisham El-Naggar, in Buenos Aires, gauges the pain
It has seemed, in the past week, as if the world could not quite make up its mind on what should be done about Argentina. Buenos Aires was in a similar state of inaction as Argentinians ponder over what they should do about their country.
On the economic front, progress has been halting and sparse. When the majority of bank deposits was frozen in December the economy was brought to a near-standstill, the middle class's progressive impoverishment was given added impetus and confidence in the politicians running the country was further undermined.
Meanwhile, the decision to keep humouring the International Monetary Fund (IMF) in the hope of an agreement -- as elusive today as it has ever been -- yielded little results. A vicious, numbing recession that has plagued the economy over the past four years shows no sign of abating while the recent devaluation of the peso has added inflation to the list of national woes.
Two changes of government, following a peaceful popular revolt against what is perceived as an ineffectual leadership, did not result in any amelioration of the relationship between the political classes and the people. The current president, Eduardo Duhalde, is in the unfortunate position of having been "designated" a transitional president by parliament in January. His only attempt to run for the post, two years earlier, may have netted him only 34 per cent of votes cast but, nevertheless, Duhalde has made a valiant attempt at tackling the situation. He dared to do the unthinkable when he abandoned the fixed exchange rate that was choking the economy. Duhalde also stood by the decision taken by one-week President Rodriguez Saa to default on the country's unmanageable debt.
But it takes more than that to solve what the French daily Le Monde described as "the slowest derailment in history." For one thing, the "world community" (read IMF & Co) has never forgiven Argentina for opting for default over economic suicide through gradual asphyxiation.
The fact that Argentina was a model IMF pupil until only two years ago only makes matters worse. It makes the country come across as an embarrassing example of the "privatise-and-prosper" policy's fallibilities. While the "international community" drapes a collective shroud of amnesia over the prodigal country, the internal uncertainty and quickening spiral of poverty gather momentum.
For their part, the Argentinians are not taking it sitting down. It is as hard as ever to ignore the almost daily demonstrations that irate dispossessed savers and the ever- growing army of the unemployed continue to stage. Though no one expects the world's wealthiest nations to care too much for a distant if faithfully aligned country, the current insistence that "Argentines must find a solution to their own problems" borders on the disingenuous, especially when added to the growing international disengagement from the country's affairs.
After some hesitation, Duhalde appears to have decided that Argentina's salvation lies in striking a deal with the IMF. Enter Anoop Singh, an IMF big shot whose public appearances make you understand what Joseph Stiglitz -- former chief economist at the World Bank -- meant in saying that the IMF rarely recruits top-notch economists. He lost little time in diagnosing the disease and recommended fiscal austerity as a solution, an old favourite. An odd cure for deep recession, as anyone who has taken Economics 101 would agree.
Singh has flinched at being accused of imprecision and spelled out his terms in a rather unorthodox press conference. The provinces, he advised -- which are in much worse shape than the Argentinian capital, Buenos Aires -- must reduce their deficit by 60 per cent. This harsh medication must not be applied over a couple of years but immediately. In addition, the parliament must modify the Bankruptcy Law to facilitate the seizure of those mostly nationally-owned companies by mostly foreign creditors. The situation is only compounded by the devaluation's exacerbation of the debtors' repayment problems. Finally, notwithstanding the fact that the peso has lost 70 per cent of its value since the government followed the IMF's advice in allowing it to float freely, the national currency is to continue on its unfettered course even as the Central Bank makes no attempt to prop it up.
It makes no difference that these "recommendations" will almost certainly mean a massive increase in unemployment -- presently floating at 20 per cent, as well as large-scale denationalisation of the economy and further collapse of the workers' purchasing power. The truth is that Singh was merely transmitting the message that the 'world community' wishes Buenos Aires to hear loud and clear -- the sentence has been pronounced and no reprieve is forthcoming.
So what does Argentina get in return for following the IMF's chosen course? Very little fresh loans, it seems; at best, a pat on the back from the IMF which might conceivably facilitate some limited access to foreign financing. Add to that the positive rudeness with which Argentina, the defaulting villain, is treated by the very world community whose assistance is dangled before the beleaguered population's eyes and you wonder why the government doesn't tell Singh and his songwriters to take a hike.
President Duhalde came close to doing so last week. After another frustrating -- not to say humiliating -- visit to Washington, Remes-Lenicov, the minister of economy who tied his fate to signing something, anything, with the IMF, presented his resignation after his proposal to pay back savers with long-term bonds was rejected by parliament. Duhalde had the hardest time in finding a replacement that is acceptable to the governors of the provinces, a group whose support forms the mainstay of his transitional government. There was talk of fixing the exchange rate, tightening foreign exchange controls and politely asking the IMF to wait a few months while some things are straightened up.
At the same time, diplomatic sources, usually careful in what they say, started allowing themselves to be quoted off the record in opining that Duhalde ought to call for elections as soon as possible. It almost sounded like the "moving in the wrong direction" speech which Condoleezza Rice launched at Venezuela's President Hugo Chavez when he came close to being toppled a couple of weeks ago.
Buenos Aires is starting to wonder what the ulterior motive to the international financial community's current heavy- handedness is. Does the gameplan involve punishing Argentina so thoroughly that no one else could countenance defaulting? Is Argentina as friendless and isolated as the world appears bent on reminding it?
Life is tough, and when one is in financial difficulties, tougher still. But no amount of punishment is going to make Argentina disappear; countries do not die. Sooner or later the world will have to stop pretending that there is a void to the south of Brazil and east of Chile, just because the flow of revenues from there has slowed to a trickle. Argentina remains a country with considerable resources and 37 million people who are entitled to a dignified life.
Duhalde ended up naming Roberto Lavagna to the post of minister of the economy, an economist reputed to be unobjectionable to the IMF. Commentators have interpreted this move as a truce declaration.
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