The administration of President Eduardo Duhalde is seeking new loans to resume interest payments on its existing foreign debt of $141 billion. The government suspended payments in late December after defaulting on the debt.
At the same time, the government is feeling the heat at home from daily demonstrations by working people and others devastated by the economic collapse. In late January thousands of unemployed workers took to the streets of Buenos Aires, while middle-class protesters held pot-banging actions known as cacerolazos.
Duhalde was appointed by Argentina's congress January 1 after a nationwide eruption of mass protests forced the resignation of President Fernando de la Rúa December 20. Duhalde, a leader of the Peronist party, has tried to defuse the protests by posing as a friend of "the people."
Since World War II Peronism has had overwhelming support among working people. Juan Perón, who was president in 1946–55 and again in 1973–74, promoted the image of a champion of workers who stood up to imperialism, while tying the unions to his Justicialist Party and to the capitalist state. Although the Peronists' image has been tarnished, especially after a decade of assaults on workers' jobs, wages, and social rights under the Justicialist administration of Carlos Menem in the 1990s, the labor movement remains that party's base of support.
One of Duhalde's first actions was to devalue the peso, which since 1991 had been pegged to the U.S. dollar at a one-to-one exchange rate, an increasingly unsustainable policy as Argentina's economy weakened. Two exchange rates were established, one fixed at 1.40 pesos to the dollar for business and trade, and a floating rate for most individuals that has now plunged to 1.8 pesos to the dollar.
The devaluation has led to price hikes for many consumer goods, including a 30 percent increase for all imports, from medicine to food. Everything that was dollar-denominated, from utility bills to car loans and mortgages, has gone up.
The government's partial freeze on bank withdrawals has particularly squeezed small merchants and professionals. After promising to return deposits in their original form, the government backtracked and announced that those accounts would be redeemable only in devalued pesos because there simply weren't dollars left.
To lessen the blow to the middle classes, the Duhalde administration has slightly relaxed the bank restrictions, converted dollar debts under $100,000 into devalued pesos one-to-one, and announced it is considering doing so for loans over $100,000. It has also promised to compensate banks for the losses.
The new government initially announced a stance of pursuing closer trade ties with European imperialist powers, which Ruckauf called a shift toward "polygamy" away from the policy of abject subordination to U.S. imperialism that Menem had boasted of as "carnal relations" and "automatic alignment."
In another move to strengthen Argentina's maneuvering room with imperialism, the government in Buenos Aires has pledged to improve relations with its neighbor in Brazil and promote the regional trade block Mercosur.
Imperialists let Argentina take the blow
After years of U.S. support for pouring billions of dollars in loans to Argentina--which has increasingly chained the nation to imperialist debt bondage, with workers and farmers bearing the brunt of the squeeze--the Bush administration in December opposed further credits to bail it out and forestall default. The imperialist ruling families decided to let Argentina take the blow, even at the cost of some banks and companies going under, with the aim of buying up cheaply the bankrupt businesses while minimizing their own losses.
Argentine officials sputtered in protest. In response to criticism from International Monetary Fund (IMF) officials that the dual exchange rate was not viable and to their demands for a "coherent" economic plan, Deputy Economy Minister Jorge Todesca declared, "They should talk less if they don't have anything interesting to say."
Imperialist spokespeople quickly cranked up the pressure and reminded the Argentine government of its subordinate place. An article in the February 4 issue of Fortune magazine warned that the policies of Buenos Aires "could help drive a region once firmly in the democracy-oriented, laissez-faire camp back toward the old, state-dominated political and economic model" that marked Argentina from World War II until Menem took office in 1989.
An editorial in the British Financial Times chastised Duhalde for his "populist gestures" and warned that "he must realise that he cannot offer illusions forever" to the Argentine population.
The 15 European Union finance ministers issued a statement January 22 instructing the Argentine government to "adhere to the principles of a market-based economy and avoid discriminating against foreign direct investors and creditors." They added, "The financial sector in Argentina should not bear an unreasonable amount of the costs of the devaluation." The imperialist ministers singled out a proposed bankruptcy law that, according to the Financial Times, "would give Argentine companies the upper hand in bankruptcy negotiations and make it hard for creditors to collect on debts."
Several U.S.- and European-owned companies and banks have reported big losses from the Argentina crisis. FleetBoston Financial Corp. announced it would take a $500 million charge. Moody's Investors Service reported that Telefónica de Argentina and the oil company YPF, both owned by Spanish capitalists, are at risk of defaulting on their bonds.
The Argentine regime quickly beat a retreat. Duhalde toned down his mildly nationalist rhetoric. Ruckauf was sent to meet with top officials in Washington "to convince the U.S. that the new government will not institute protectionist measures or turn back the clock on the country's free market reforms," the Times reported.
"Argentina is a country that will comply with the rules of the game," Ruckauf told the media.
Buenos Aires reportedly seeks at least $15 billion in IMF loans. Officials of the World Bank and Inter-American Development Bank said they would lend about $1 billion each if the Argentine government's austerity budget met their approval.
Protests demand jobs, relief from crisis
Meanwhile, the government faces growing anger at home at the intolerable conditions, above all the record unemployment--now officially 20 percent and as high as 60-70 percent in some areas outside the capital.
Some 15,000 working people and others blocked highways and carried out a march January 28 from the depressed outskirts of Buenos Aires to the downtown Plaza de Mayo to demand jobs. The march was sponsored by two organizations that speak for unemployed workers, the Land and Housing Federation (FTV), affiliated to the Argentine Workers Federation (CTA), and the Combative Class-Struggle Current (CCC), a union formation. The CTA is the smallest of the country's three labor federations.
The demonstrators demanded that the Duhalde government fulfill its promise to create 1 million jobs, establish unemployment insurance for all the jobless, and pass a budget that is not "balanced against the people." Other workers as well as merchants lined the streets of the capital to greet the marchers as they headed to the presidential house.
Three days earlier, some 20,000 people held a cacerolazo in Buenos Aires to demand relief from the economic crisis. Organized by a collection of largely middle-class neighborhood groups, as well as small businessmen and farmers, the pot-banging protesters' main slogan was "Out with all of them!" Angry at the impact of the devaluation and the restrictions on bank withdrawals, they condemned the corruption of "all" politicians as the source of the problem.
"We can't solve all of the country's problems in three weeks," said Duhalde in a radio address just hours after the cops fired tear gas and rubber bullets at the demonstrators and left 13 people injured. Duhalde inaugurated the radio program, called "Talking with the President," in order "to create the perception that the President keeps himself close to the people," according to a report by the U.S. investment firm Goldman Sachs.
Duhalde appealed to the jobless workers and pot-bangers to "help me, because we think alike." He promised to carry though on his jobs promise, which consists of offering short-term, minimum-wage make-work "jobs" such as raking leaves.
The president also met with a delegation from the dissident wing of the General Confederation of Labor (CGT), headed by Hugo Moyano, which asked him to meet the unions' demands for jobs and the repeal of antilabor legislation. Moyano, a Peronist, told Duhalde, "We're with you." The unionists, however, left the meeting with few commitments from the president.
In Neuquén, 10,000 unionists and their supporters marched January 24 to demand the release of four union officials who had been locked up since January 11 on frame-up charges of assaulting the head of the provincial Social Security Institute. Three of them were released the following day. The four face charges of up to 10 years in prison.
Front page (for this issue) | Home | Text-version home