/IPS DEVELOPMENT BULLETIN/ ARGENTINA: Camdessus Visit Sparks Debate

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Sep 14 1996 (IPS) - Michel Camdessus, the IMF managing director, left economists in Argentina perplexed by what they perceived as contradictions between his call for continued adjustments, and the need to prevent negative social effects.

In an interview with IPS, economist Arnaldo Bocco called the discourse of the IMF (International Monetary Fund) “profoundly contradictory.”

His colleague Roberto Lavagna, meanwhile, said the contradiction is between Camdessus, a cultured man with broad philosophical conceptions, and the “technostructure” he represents.

During a high-level international seminar last weekend in Uruguay, Camdessus said macroeconomic adjustments continue to be necessary in the region. But he warned that “the pendulum has swung too far to the right.”

Camdessus’ descriptions of such deviations from the neoliberal model pushed by the IMF coincide with today’s scenario in Argentina, where runaway inflation has been tamed and reforms of the State and privatisations were pushed through hard and fast.

But six years after the start of that process, and with the help of the “tequila effect” set off by Mexico’s late 1994 crisis, unemployment and poverty have been steadily rising, while the Gross Domestic Product (GDP) shrank 4.4 percent in 1995.

Nonetheless, the day after the Montevideo meeting ended, Camdessus met with President Carlos Menem in Buenos Aires, and recommended even more stringent adjustments, in spite of widespread protests and discontent, and the loosening of regulations governing hiring and firing, a measure that is staunchly opposed by the unions.

The IMF managing director did not suggest a loosening of the reins in Argentina, but rather “macroeconomic rectitude and reforms of the State.” And he pointed out that Economy Minister Roque Fernandez, who has a doctorate from the University of Chicago, “knows a lot about this.”

After Camdessus’ visit, IMF experts met with governing party lawmakers to convince them of the advantages of the fiscal adjustments proposed by Fernandez, which aim at balancing public accounts through a series of measures which industry and business consider recessive.

Argentina’s unemployment rate is 17.1 percent. Menem has proposed the elimination of workers’ benefits such as severance pay – a gain won by unions more than 50 years ago, the abolishment of which would not guarantee new jobs, according to the business community itself.

Camdessus backed Menem’s controversial announcement, and the loosening of norms on hiring and firing should figure among the commitments made by Argentina to the IMF in order to to receive fresh financing over the next three years.

On the other hand, the IMF official failed to mention the social unrest in Argentina, which is contrary to the “joy of living” necessary in today’s new phase of adjustments, as he stated during the seminar organised by Uruguayan President Julio Sanguinetti.

He also neglected to mention the advice he gave in Montevideo to “tone down the discipline” through a return to a stronger role played by the State.

The social discontent in Argentina has not only been revealed by protests this month – ranging from a blackout organised by the opposition, to a 36-hour general strike by the country’s main labour organisation – but also by the waning popularity of Menem and his economy minister.

Two weeks ago, a mere 18 percent of those surveyed in a Gallup poll said they supported Menem, who was reelected by 50 percent of voters in 1995.

And the Buenos Aires daily ‘Pagina 12’ reported that survey results the government does not want released indicate that the president’s popularity has crashed to nine percent, while that of Fernandez, who was named economy minister in late July, is three percent. (The newspaper did not mention the name of the polling firm).

Arnaldo Bocco, an economist who has close ties to the opposition Solidarity Front, said this is not the first time Camdessus contradicts himself. He pointed out that in his last visit to Argentina, the IMF managing director’s speech sounded like one by an opponent of Menem’s government.

“He spoke of the need to boost employment, and of the backwardness of regional economies,” said Bocco, who argued that “there is a big contradiction” in the IMF. The international lending institution apparently backs Argentina’s economic course in words, he said, while acting otherwise, and hiding its concern over today’s situation.

According to Bocco, the IMF believes Argentina should devalue its currency (on par with the dollar for the last five years), that the level of corruption here conspires against the achievements of the economic model, and that in the long-run the foreign debt, which has doubled in the last 13 years, should be rescheduled.

But none of that came out in the press conference Camdessus gave after meeting with Menem and Fernandez in Buenos Aires, Bocco said. On the contrary, he pointed out, the only things heard were praise, support and confidence in Argentina’s economic model.

“Camdessus preferred a cautious speech,” said Bocco, who added that public recognition by the IMF of the gravity of Argentina’s situation, and the need for changes in its economic model, would imply enormous risks.

Roberto Lavagna, an economist who has been affiliated with both of Argentina’s leading parties – the ruling Justice Party and the opposition Radical Civic Union – said the contradiction is between Camdessus and the organisation he represents.

“It is important to differentiate. Camdessus is a very cultured Frenchman, and when he speaks, he expresses comprehensive philosophical conceptions of problems, that include not only the economic aspects, but also social ones,” he said, referring to the IMF official’s statements in Montevideo.

“But when he speaks as the head of a technostructure or an international bureaucracy such as the IMF, he stands by the traditional prescriptions, which are not his but those of the institution he represents,” Lavagna added.

He echoed Bocco’s observation that the IMF is changing: the “exchange anchor is no longer so secure,” for example.

But he insisted that the philosopy of the institution “has not changed,” and that fiscal balance, reforms of the State, privatisations and the freeing up of trade continue to be the mainstays of its prescriptions.