ECONOMY-ARGENTINA: Gov’t-Provincial Discord Delays IMF Credit

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Nov 17 2000 (IPS) - The financial backing Argentina awaits from the International Monetary Fund (IMF) and other credit sources has been postponed due to the failure of the federal government to reach an agreement with the provinces about the scope of budgetary cuts required as a condition for the funding.

After five days of talks, in a race against time, the governors of the opposition Justicialist (Peronist) Party on Thursday once again refused to sign an accord with the administration of President Fernando de la Rúa.

The discrepancies are based on how the finances would be distributed and on the requirement to freeze provincial spending levels until 2005.

The governors refuse to accept a freeze on expenditures because the measure does not take into account expected population growth in the provinces, their social crises or an eventual economic expansion. In addition, they do not want the national government to continue its unilateral management of a social assistance fund.

Carlos Ruckauf, governor of Buenos Aires province, said Thursday that the talks would not be finalised until next week, once the provincial leaders of his party have considered a new proposal.

President De la Rúa admitted last Friday that the country faces a severe financial crisis and needs the backing of multilateral loan organisations to finance, at low cost, the country’s deficit and foreign debt payments, an expenditure that totals some 20 billion dollars.

At nearly one year in office, and despite having executed strict adjustments by cutting public sector salaries and boosting taxes, De la Rúa was unable to drive an economic recovery, on the decline since 1998. Now market analysts fear Argentina is on its way toward halting debt payments.

In addition, unemployment, which reached 15.4 percent this year, is thought to have risen during recent months in a context in which the authorities have been curtailing subsidies to the unemployed due to lack of funds in the public coffers.

The so-called “credit shield” being negotiated with the IMF, World Bank, Inter-American Development Bank (IDB) and the Spanish and Italian governments, among others, would help Argentina obtain the lowest cost financing, but includes conditions that demand strict compliance.

One is the five-year freeze on provincial expenditures, a requirement that opposition governors refuse to accept if they receive nothing in exchange. Another is the elimination of an allocation the national government pays retirees in order to boost their incomes.

Under the latter measure – which the president has threatened to impose by decree – thousands of workers who are at the point of retirement would receive a further reduced portion of the wages they are currently earning.

A schoolteacher, 51, told IPS Thursday that she has worked a double shift for 31 years and paid into her retirement programme. If the government initiative goes into effect, she could soon retire, but her income would be 317 dollars per month instead of the nearly 600 she was expecting to receive.

“I am going to get the same amount that I have been paying in, month after month for so many years,” she calculated, indignant. She subtracted from her future income the universal subsidy of nearly 300 dollars that the government has granted since 1994 to Argentina’s pensioners.

The creditors that are willing to give Argentina a new loan are also demanding that the government win the approval of the 2001 budgetary law as soon as possible. The legislative bill includes cuts that even the governing coalition’s lawmakers are refusing to vote for.

IMF deputy chief Stanley Fischer said Wednesday that “it would be good” if the credit negotiations would conclude before the end of the month. But he emphasised that IMF support depends on the government finalising an agreement with the provinces, which it has so far failed to do.

Of Argentina’s 23 provinces, in addition to the city of Buenos Aires, there are 14 governed by the opposition Justicialist Party, which has been the core of resistance against the accord.

The provinces governed by the president’s Alianza coalition or by provincially based parties, have accepted the national government’s terms.

De la Rúa and his Economy Minister, José Luis Machinea, warned last Friday that the measures requested are essential for obtaining the “credit shield,” and, in turn, this credit is vital for preventing “chaos.”

But despite the alarmist discourse, governors and legislators have refused all week to approve the measures the president had wanted finalised last Monday.

The social situation, with loud protests in several provinces and the threat of a general strike for next week, is strengthening the opposition governors’ position against accepting the measures the government is demanding.

Some governors, like Néstor Kirchner, of Santa Cruz province, have explicitly expressed their refusal to accept the conditions. Others say it is necessary to continue negotiating in order to avoid “pushing the government over the edge,” as Ruckauf commented.

Kirchner charged that the Cabinet’s leaders are trying to negotiate separately with some heavily populated provinces in order to reach individual agreements in exchange for certain benefits. He stressed that this is not the way to reach a clear and transparent accord.

Social discontent has expanded in recent weeks, with rural roadblocks – the protest method of choice among the unemployed – spreading throughout numerous provinces, and the three major union centrals joining forces to call a national strike for next Thursday and Friday.

The first to announce the strike were the leaders of the Congress of Argentine Workers, which unites public employees, teachers, health workers and justice authorities, and leaders of the dissident faction of the General Confederation of Work (CGT), which represents employees in the private sector.

The faction broke off in March from the CGT after the mainstream leaders agreed to support a legislative bill to liberalise labour protection measures, which lower labour costs for employers and facilitate layoffs.

But two days after the call for the general strike was made, the main CGT announced Thursday that it would join the protest with a 24-hour strike Friday. CGT secretary-general Rodolfo Daer warned there would be further protest measures in December.