ECONOMY-ARGENTINA: Urgent Social Demands Weigh upon New President

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, May 17 2000 (IPS) - An explosive protest in a northern Argentine province has sparked action from the somewhat sluggish government of Fernando de la Rúa, who took office last December amid promises to attend to the nation’s social problems.

The president says that even before he won the elections he had grown increasingly concerned about Argentina’s social problems and affirms that all programmes under his government are focussed on mitigating their impacts and finding solutions.

“I want my country to have growth with equity,” De la Rúa declared Tuesday, at a time when residents of Argentina’s interior are demanding that social subsidies be restored after recently suffering cutbacks.

These demands erupted in Salta province last Friday into protest, as demonstrators trashed and set fire to public offices, then were quashed by police repression, leaving dozens of people injured and as many arrests.

The people of Salta, who until 10 years ago lived in a local economy buoyed by the petroleum industry under the state-run YPF oil company, began to see their standard of living erode as the industry went through privatisation in the 1990s and refineries shut down.

At first they got by on severance pay, and later government subsidies helped pull them through, but now they are left without income or employment.

Dozens of Argentina’s rural communities are in similar situations and have demanded attention by blocking roads, organising protests to greet the federal officials arriving at the sites and threatening destruction if their demands were not met.

But five months into its five-year term, the new government – a centre-left coalition – is finding it difficult to launch social reforms without first taking the bitter medicine of strict fiscal adjustments that, so far, include tax increases and cuts in government spending, with promises of future growth.

Vice-president Carlos Alvarez takes every possible opportunity to underscore that the administration has just begun. It has not had the 10 consecutive years of its predecessor, Carlos Menem, who left a legacy of fiscal deficit, social deterioration, high unemployment and a sharp economic consolidation into the hands of a few.

Within the ministerial Cabinet, Alvarez is one of the most anxious to take action on the promises made for social reforms, and proposed that the International Monetary Fund (IMF) take up some of the government and society’s concerns about the high social deficit, as well as the growing inequalities that will result if they continue to be ignored.

Though polls indicate that De la Rúa still enjoys widespread public support, and the Alianza coalition that got him elected celebrated a resounding victory in the important Buenos Aires municipal elections just last month, some of his ministers are showing signs of strain under the slow response to the nation’s most urgent social problems.

Polls also show that the Argentine public’s principal concern is unemployment, which currently stands at 13.4 percent. More than a third of the population subsists in poverty, unable to meet their needs for food, health, education and housing.

This scenario, which could only be contained by far-reaching social programmes, coincides with a steady decline in economic activity, while the nation’s fiscal deficit is the worst in a decade and foreign creditors are demanding the implementation of adjustment measures.

The government originally proposed to balance the public books, clean up the economy, recover the confidence of foreign investors, lower interest rates and, as a result, reactivate credit lines, economic activity and employment.

But its standout measures have been bad news for the lowest income sectors. First came the tax increase – which has yet to impact government coffers because collections have gone up a mere two percent -, and then came a controversial labour reform package.

The government presented the labour reforms as an initiative that would legitimise the existing reality of the labour market: the ongoing liberalisation of the terms of employment.

With the outbreak of protests in Salta – where thousands joined forces to demand unemployment benefits after the government suspended public works programmes as part of its budget cuts – the nation’s social problems have reached a point where the government can no longer afford to postpone action.

Waiting for investor confidence to gain strength and for public funds to recover is untenable for many Argentine towns if they are not provided, in the immediate term, with a framework of social services that includes food, medicine and even cash.

But the government’s Social Development agency, raised to ministerial status by the De la Rúa administration, is feeling the heat because it has been slow to act on these problems. Its officials claim that the priority has been to restructure the assistance plans in order to concentrate efforts and resources.

Economy minister José Luis Machinea said Tuesday that the additional cuts proposed for public administration will not affect social spending, though he pointed out that the president had instructed him to better co-ordinate the sector’s programmes in order to increase efficient use of resources.

‘Página 12’ newspaper reported this week that a government study is underway on the feasibility of providing the neediest sectors of the population with some 40 dollars per month, additional food, and scholarships for children of up to 90 dollars per month. The total money available to each family, however, would be nowhere near Argentina’s legal monthly minimum wage of 500 dollars.

In exchange for this assistance, the government would require programme participants to take part in regular follow-up, especially for children’s health, and in the case of families receiving scholarships, minors would have to commit to staying in school until age 18.

But the government has yet to confirm these reports or announce such plans for the short term. In contrast, it has been revealed that the Ministry of Economy is holding up credits granted by the Inter-American Development Bank because it has not authorised the required matching funds to be paid out of public coffers.

The BID’s 1.5 billion dollars await investment in development projects – and continued immobilisation will rack up penalties for Argentina – as Machinea resists providing the government’s portion of 270 million dollars.

The economic outlook grows ever dimmer under the unexpected interest rate hike announced by the US Federal Reserve this week. In an economy like Argentina’s, where the dollar is practically the national currency, this translates into millions in additional interest payments on the foreign debt.