[stop-imf] Despite Aid, Argentina Will See More Pain

[Robert Weissman]

New York Times
August 23, 2001

Despite Aid, Argentina Will See More Pain

By LARRY ROHTER

      BUENOS AIRES, Aug. 22 =D1 The Argentine government told a weary
population today that even deeper cuts in spending and more national
sacrifice are in the offing, despite an
      emergency rescue agreement it signed with the International Monetary
Fund on Tuesday.

With unemployment surging, currency reserves dropping, tax revenues
plummeting and credit virtually impossible to obtain, that was not the
news Argentines hoped to hear after their
government spent nearly two weeks weeks in tough negotiations with the
I.M.F. Furthermore, the forecast of more severe austerity was accompanied
by predictions that this is, as one
newspaper here put it this morning, the country's "last chance, really."

Though President Fernando de la R=9Ca told the country's 36 million people
late Tuesday that "we should all be happy" with the new accord, reaction
here today was mixed. Markets responded
with cautious approval, with stocks rising 8 percent in light trading. But
political parties, unions and other groups expressed skepticism about the
latest effort to pull the country out of a
three-year recession and prevent a default on $128 billion in debt.

The Argentine press had been talking, perhaps unrealistically, of a much
larger lifeline, up to $15 billion to supplement a $39.7 billion deal
negotiated with international creditors last
December. What the country got instead was a more modest $5 billion now
and another $3 billion to be dispensed if Argentina made sufficient
progress in what was described today as a
"voluntary debt swap" with its creditors.

"This is a financial umbrella to help weather the storm that Argentina has
been going through in recent weeks," said Mart=92n Redrado, chief economist
for Fundaci=97n Capit=87l, an economic policy
research group.

At a news conference here early this evening, the minister of the economy,
Domingo Cavallo, provided no details of how the debt swap would work,
urged Argentines to have faith in the
battered banking system and in the government, but promised no quick
improvements. "It is not an easy solution, what we have to achieve," he
said.

Mr. Cavallo argued, as he has consistently for months, that the success or
failure of the government's plan to right the economy ultimately depends
on complying with the promise of "zero
deficit" made to the I.M.F. That, in turn, involves cutting government
salaries and pensions by at least 13 percent and restructuring inefficient
government agencies.

But putting the agreement into effect is contingent on congressional
approval of a series of austerity measures. And with the de la R=9Ca
government appearing vulnerable and riven by internal
differences, that endorsement is by no means assured.

"When things get complicated, they come asking us for support," complained
Carlos Ruckhauf, the Peronist governor of Buenos Aires Province. "Enough
is enough. De la R=9Ca is the one who
is governing, we are the opposition."

Jos=8E Luis Gioja, the Peronist Party's leader in the Senate added that
"there is not the slightest possibility that we are going to vote for the
government's fiscal adjustment norms."

From=20a political point of view, the timing of the agreement could hardly
be worse. Congressional elections are scheduled for Oct. 14, with people
irate at the travails they are being asked to
endure and eager to punish those they view as responsible.

"Argentina must show it is capable now of carrying out commitments that
have remarkable demands when the government is facing a probable electoral
defeat in the legislative elections," said
Rosendo Fraga, a leading political commentator. "On top of that,
government candidates in the main districts are beginning their campaigns
by proposing a `reprogramming' of the foreign debt
with a discourse that appears to be more that of the opposition."

In another sign of the difficulties the government must confront,
thousands of teachers and doctors protesting the planned budget and salary
cuts marched on the presidential palace today,
carrying banners denouncing the government's "submission" to the I.M.F.
and the United States.

But Felipe Noguera, a leading political analyst here, dismissed those
efforts and opposition threats as mere "brinksmanship" that will not prove
successful. "The idea of zero deficit, the notion
that the government shouldn't spend more than it collects, is now firmly
installed in Argentina," Mr. Noguera said.

"This is an idea that has won acceptance in media, intellectual and
political leadership circles, and I don't see much space available to
promote any deviation from it."

But both in and out of government, there is lingering resentment of
Treasury Secretary Paul H. O'Neill of the United States for the unusually
harsh criticisms he made recently of Argentina.

In an interview with The Economist last month, Mr. O'Neill said that
Argentina has "been off and on in trouble for 70 years or more," has no
export industry and that "they like it that way.
Nobody forced them to be the way they are."

=E7ngel Rozas, a provincial governor and vice president of the ruling party
rejected Mr. O'Neill's sentiments, saying on Monday: "We are making a
tremendous effort, with a great deal of
suffering. This should be recognized."