Asia Times: Argentina encounters more currency woes


	January 17, 2002	atimes.com

Global Economy

Argentina encounters more currency woes
By Marcela Valente

BUENOS AIRES - Argentina's President Eduardo Duhalde spoke out on Tuesday against the "asymmetrical" global policies that he said have translated into trade protectionism for the industrialized North and trade liberalization for the developing South.

Duhalde said he would not follow the prescriptions of the International Monetary Fund (IMF) for pulling his country out of its deep crisis but would instead present the multilateral organization with an alternative development plan - one, he said, "that I think they will understand". Duhalde's remarks come after IMF Managing Director Horst Koehler criticized developed countries at a poverty eradication conference for using trade subsidies to protect their own industries at the expense of developing countries.

When a government sets out to resolve its problems, it takes for granted that it will receive aid from the multilateral financial institutions to which it belongs, particularly if the country is in a crisis as severe as Argentina's, the president told the foreign press in Buenos Aires. But if the IMF does not offer the assistance we need, "we'll see how we manage," he said.

Duhalde, who Congress named president on January 2, commented that previous administrations have gone before the IMF with "programs that failed and promises that were not kept". But he said that his government will approach the IMF with "our own development model", not an adjustment plan that aggravates the recession, which is in its fourth year.

Shortly after Duhalde made his statements, the director of the IMF's Western Hemisphere Department, Claudio Loser, said that "in the context of a coherent economic program like the one being discussed in Argentina, the support of the IMF would be a reasonable outcome". Loser added that the IMF is going out on a limb to support Argentina, though he did not mention what sum of money the institution's assistance might entail.

Meanwhile, presidential spokesman Eduardo Amadeo stated that the economic program being drawn up by the Duhalde administration is founded on strong "orthodox" lines and is very well put together from the fiscal and monetary perspectives.

Duhalde said Tuesday that his criticisms of the IMF "are nothing new". Argentina should have modified its economic model three years ago, when there was a cash surplus, he said, lamenting that the country had followed the IMF's recipe, which was "part of the problem".

"We disagree with the design of the absolutely asymmetrical global policies that have meant protectionism in the North for the products in which we are competitive and indiscriminate trade liberalization in the South. This is the new order we have created, and we ended the century under domination," he said. The president added, "If we want an independent, sovereign country with justice, we have to go forward with our proposals, take a serious attitude and, through all means possible, make them respect us as we respect all countries."

In describing the development model his administration plans to take before the IMF, Duhalde said that it is similar to the Chilean model. The development plan will involve characteristics of an open economy in some areas, and of a protectionist economy in others, particularly domestic production. Duhalde said he would work closely with the business sector. He stated that he had been calling since 1996 for an end to the policy that pegged the Argentine peso to the dollar at one-to-one parity, a law that was scrapped just last week.

Duhalde said that by 1996 the policy had already achieved the main objective of overcoming hyperinflation. "They accused me of trying to isolate Argentina from the world," he added. However, foreign telecommunications executives view possible government intervention warily. Although most welcome the Duhalde administration as a harbinger of stability, says the New York Times, a heightened government presence is feared to lead to even more instability.

Many foreign telecommunications companies are entering difficulties because of the economic crisis. Mainly as a result of Argentina's currency crisis, US wireless carrier Nextel Communications defaulted on a US$8.3 million payment to banks December 31, while AT&T, Verizon Communications, BellSouth, and Telefonica of Spain are seeing a decline in hard currency revenue and are deferring the possibility of further investments in Argentina until concrete regulatory plans are made.

Ironically, Argentina had been considered one of the more stable Latin American markets because of its currency board system, which had pegged the Argentine peso to the American dollar. In the last decade, foreign companies invested more than $12 billion in the country, half of it in the past two years. Now, Argentine telecom industry revenue is expected to fall to $7.79 billion from $7.87 billion in 2001, according to US-based Pyramid Research.

The new Argentine president, a member of the Justicialista (Peronist) Party, said the country is living a serious crisis that has put it "on the brink of a bloodbath", with violent incidents that he described as symptoms of a "pre-anarchic" society. "We feel like we are standing in a swamp and we don't know yet if we've touched bottom," he admitted before a press conference of nearly 100 foreign correspondents.

With respect to the government-imposed banking limits, Duhalde said his administration is studying measures to roll back some of the restrictions on access to deposits in order to jump-start the economy. "I am confident that no bank will collapse," he said, though he admitted that the money the savers are demanding is not at the banks, but has been loaned and does not come due until four-and-a-half years from now, on average. He said Congress and the justice authorities should investigate the capital flight and the run on the banks that occurred late last year, phenomena that forced the Fernando de la Rua government to impose the first banking restrictions - 17 days before de la Rua resigned on December 20.

Banks have been the target of much Argentine anger. Protesters in two provinces - the eastern Santa Fe and northwestern Jujuy - trashed banks, breaking windows and destroying computers and automatic teller machines in violence similar to incidents on January 10 in Buenos Aires. Some 7,000 people mobilized in the Santa Fe town of Casilda, throwing eggs at the local offices of the Credicoop and Galicia banks, while a more violent contingent threw rocks at the Bisel bank and nearby retail shops. The riot police, who used tear gas and rubber bullets, brought the protesters under control. The police were heavily armed and wore bulletproof vests.

Similar scenes played out in Jujuy province, where a demonstration staged by government employees, who have yet to collect their December wages, escalated into attacks against at least five banking institutions and against a company that provides public services. The protesters threw computers, bookshelves, and office furniture into the streets and set them on fire. Also in Jujuy, rioters destroyed the facade of the provincial energy company, which has repeatedly raised its rates despite complaints from local residents. In this case, the police did not intervene.

Argentina's deep recession has lasted 42 months and unemployment now affects 20 percent of the economically active population. Perhaps even more alarmingly, much of Argentina's middle class is thinking of leaving. Descended from immigrants seeking more opportunity in Argentina, many are looking to return to the lands of their heritage where futures are less uncertain. Socio-economic indicators like these have worsened in recent months, contributing to the profound institutional crisis that put five different presidents in the "Casa Rosada" (presidential palace) within a span of just 12 days.

(Asia Times Online/Inter Press Service)