As the economic and financial crisis has deepened, the government has come under increasing pressure to end the one-to-one link between the peso and the dollar. The move earlier won wide support in the country because it broke a cycle of runaway inflation, but with the dollar strong on world markets, it has made Argentina's exports expensive, especially in countries such as Brazil where the value of the currency has fallen. Declining exports have pushed the economy into what is now a three-and-a-half-year recession and led to extensive borrowing by the government, pushing the country's foreign debt up to $132 billion.

Declaring it could no longer pay rising interest payments, the Argentine government last month announced it would exchange current bonds for ones with a lower interest rate, a move widely seen as a massive default.

Some 35 percent of total Argentine bank deposits have been withdrawn this year, and a run on the banks was stopped only by a December 1 decree by Economy Minister Domingo Cavallo limiting the amount Argentine citizens could take out to $250 a week for the next 90 days. Cavallo placed no limit on credit card or check transactions.

The minister announced the restrictions after depositors withdrew $1.3 billion in one day, amid rumors that the government is preparing to break the link of the peso to the dollar--a move that would lead to a massive devaluation of the Argentine currency. The economy minister, who served in the same role in the government of former president Carlos Menem from 1991 to 1997, demagogically claimed that he had responded to "speculative attacks by people who seek to benefit from a devaluation.... These measures will serve to preserve the savings of Argentines."

The stopgap measure has not eased pressure from the International Monetary Fund (IMF) and other imperialist agencies on the government to either devalue the peso or adopt the U.S. dollar as the national currency.

On the first business day after the government decree, many people, increasingly convinced that they will never see the full value of their bank deposits, waited anxiously for banks to open or lined up at automatic teller machines to withdraw money.

The measures will have an immediate impact upon workers who are paid in cash. What the government calls the "informal economy" is estimated to be worth around one-third of the gross domestic product. Among those who rely on cash payment from employers or customers are many maids, cab drivers, and tradespeople. In response to concerns raised about how these workers would be paid, the government callously said they should open up bank accounts in order to be paid with checks.  
 
Layoffs and closures likely to follow
The government claimed that tax revenues would benefit from companies that, lacking cash, would be forced to establish legal accounts and pay taxes for the first time. Others pointed to the more likely impact: many businesses will face a new income squeeze, leading to layoffs, closures, and more hardship. According to official figures, which understate the true picture, close to one in five workers is already unemployed.

Joblessness is just one aspect of the social impact of the crisis. According to the Wall Street Journal, "each day an estimated 2,000 Argentines [in a country of 36 million people] cross an invisible line from middle class to poverty. Not only is there no inflation, but consumers have so little money that prices are actually falling." The economy is forecast to shrink by 10 percent next year.

The International Monetary Fund, representing the interests of the U.S. government and other imperialist powers, announced December 5 that it would withhold payment of a $1.3 billion installment of a previously approved $22 billion funding package. The decision effectively stalls payment of the whole package, and a further $18 billion pledged by other lenders. Over the past year the IMF has put together a total of $48 billion worth of emergency loan and "aid" packages for Argentina.

The announcement followed a weeklong review of the country's finances by IMF officials. Three months earlier the agency had approved a new $6 billion loan after Cavallo and President Fernando de la Rúa gained agreement for a budget incorporating deep cuts in retirement pensions and state workers' salaries, and reductions in spending on public health. State workers and others organized widespread protest actions against the cutbacks.

In spite of its "zero deficit" billing, the budget in fact allowed for a $6.5 billion deficit. With government revenue declining--tax receipts fell by 11 percent in both October and November compared to the same period last year--the government overshot the goal by almost $1 billion. The failure apparently played a key part in the IMF's decision to freeze payment of the loan.

Cavallo flew to Washington on December 6 to try to persuade IMF officials to reverse their decision. He returned three days later "without a check in hand," the Wall Street Journal reported. An IMF spokesperson said that in their "fruitful discussions" Cavallo and the fund had agreed to further reductions on spending--cuts that, according to reports in Argentina, might go as high as $4 billion, or nearly 10 percent of the projected spending in the draft 2002 budget.

The government is scrambling to pay $4.5 billion in interest payments by April of next year, due on its $132 billion foreign debt. Scraping together what it can find, it has taken control of $3.5 billion in private pension assets to pay interest on debt to foreign banks and wealthy creditors, "exposing pensioners even more to the government's precarious finances," reported the Journal. Officials are also contemplating the postponement of an $800-million payment of civil servants' twice-yearly bonus, and a delay in transfers of tax income to provincial administrations.

Cavallo is pressing a debt-swap deal of massive proportions, the biggest ever by a semicolonial country, on both local and foreign holders of government bonds. Among the banks hired by the government to negotiate the restructuring of the debt with overseas investors are many that profited from the sale of Argentine bonds over the last decade. More than $20-billion-worth of bonds have been sold in the last three years.  
 
A technical default
To most capitalist commentators, the attempted debt swap has already signaled a default by Argentina. However, "analysts say the IMF decision could force Argentina into a full moratorium on debt payments. That could provoke a more massive and disorderly default," reported the Washington Post.

Publicly, Cavallo has rejected the IMF's prescription of devaluation of the peso or a sweeping adoption of the U.S. dollar, and continued to defend the one-to-one peg of the two currencies, supervised by a currency board that also includes the value of the euro in its calculations--a system he instituted 10 years ago.

A steep devaluation of the peso--following a 7 percent devaluation already enacted this year--would have a catastrophic impact on working people and many others. One reason is that some 75 percent of loans and bank deposits are denominated in dollars, while wages and salaries are frequently paid in pesos. In value terms, one would soar and the other would plummet.

With the economic crisis devastating the living standards of millions of Argentine working people and formerly more prosperous layers, the two wings of the General Confederation of Workers (CGT) have called a 24-hour strike in opposition to the emergency measures, to be held on December 13--the fourth such national action under the administration of de la Rúa. The unions are demanding the immediate payment of all wages, rather than their deposit into bank accounts, and the restoration of the levels of family benefits, gutted during the austerity drive of the last 10 years. Announcing its support for the strike, the Argentine Workers Federation (CTA) adopted the slogan, "Neither devaluation nor dollarization."  
 
 
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