ARGENTINA: Relief, Concern and Fear Greet Cavallo’s Exit

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jul 27 1996 (IPS) - “I hope (my leaving) will serve to show the strength of the (economic) model” said Argentina’s ousted Economy Minister Domingo Cavallo Friday, as he left to join the swelling queues of unemployed outside.

The economic plan he brought in five years ago is still going ahead, but will do so under the control of his replacement, Roque Fernandez, a man with an excellent academic record and proven mettle as former director of the Central Bank.

However, it has yet to be seen if the model will survive the more orthodox handling of its new master, a situation which will become a little clearer when the markets reopen Monday.

The destitution of Cavallo, early Friday evening, caused shock waves throughout the nation, even though it had been almost expected given his frequent confrontations with President Carlos Menem.

Fernandez, the man who managed to keep the peso on a par with the dollar despite the ravages of the 1994 “Tequila effect,” slipped easily into his new post Saturday, immediately starting to seek collaborators.

“The model with continue because it is the model of the world,” said leading economist, Juan Alemann, “but within this framework there will be discussions and I think Fernandez will have to fight tax evasion and the fiscal deficit.”

Alemann said one of the main challenges the new economy minister must face is to balance the fiscal accounts which are currently running with a deficit of more than 2.5 billion dollars for the first half of 1996, a figure way beyond that foreseen by the International Monetary Fund (IMF).

Cavallo’s exit was taken with a mixture of relief, fear, concern and satisfaction in Argentina, a situation of conflicting sentiments which was clearly shown in a demonstration by the unions opposed to Menem Friday.

For after their initial jubilation, the marchers warned they were still concerned because of the continuity represented by Fernandez, a piece of information which proves those who seek to calm the uncertainty of the investors are right.

Various opinion polls this week showed a high level of discontent with Cavallo – a drastic swing in opinion, as, despite themselves, the majority had continued to back the minister in the name of stability.

The first adverse signals came in the Buenos Aires local government elections a month ago, when most of the population voted for the alternative parties, meaning the ruling party was effectively rejected by 80 percent of voters.

At this time, many people called for Cavallo’s resignation, but Menem postponed the solution of the crisis once again.

Persisent unemployment – at 17.1 percent – the hope for growth which never arrives and the fiscal deficit, have all been fought with an adjustment plan funded by the taxpayer, something whiche market the population far beyond their debt of gratitude to the man who triumphed over hyperinflation.

The arguments between Menem and Cavallo, which first began to surface in 1994, had recently become unbearable. “Cavallo was a great minister, but he had overstepped the mark. He should not have tried to overrule the president, nor take measures without consulting (him),” said Alemann.

Hence, the feeling of relief spread as far as Menem, who had been especially tense in recent days because of the conflict with the minister – a man who made it patently clear that he aimed to become president himself in 1999.

In these elections he will either run for president or vicepresident alongside Ramon “Palito” Ortega, governor of the northern province of Tucuman, though it is not yet clear who will be top dog.

Once the impact of the change has been assimilated, the problems will go on and neither the business sector nor the workers believe the employment situation will improve under the new minister, nor that growth will recover the levels it reached in the first years of convertibility when it hit annual levels of eight percent.

The General Confederation of Workers, which support the governing Justicialist (Peronist) Party confirmed the general strike planned for Aug. 8 would still go ahead.

“The strike was not against Cavallo but against the measures he brought in, and these measures will continue with Fernandez,” said union secretary general, Gerardo Martinez.

During recent years, a time marked by the wearing down of the relationship between the president and the minister of economy, Argentine society, the foreign investors and the government itself had developed a kind of “Cavallo dependency.”

“If Cavallo goes the abyss will open,” was the subliminal message he had fed them all.

Finally, Menem, who had seen his image tarnished daily by an economic policy which did nothing to confront the crisis, took the plunge and rid himself of the man he supposedly could not do without.

It only remains to be seen whether the economic model is sufficiently mature to become independent of its creator and whether, as the experts believe, Fernandez will really be able to give the economy a kick-start.

Meanwhile, Cavallo said Saturday that his successor was “a great economist and an excellent person,” a tone of support also reflected in the attitude of several of the outgoing minister’s collaborators, though they will all be jumping ship along with their captain.