ECONOMY-ARGENTINA: Cavallo Negotiates Support amid General Strike

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Mar 21 2001 (IPS) - Argentina’s new Economy Minister, Domingo Cavallo, opened negotiations Wednesday to build political support for his proposals to cut taxes, fight tax evasion and reactivate the economy.

Cavallo’s overtures toward provincial governors and national lawmakers took place while a general strike paralysed public transport, government offices and schools, as well as other private and public sector services.

Cavallo did not give details on the measures he will propose, but there have been repeated mentions of privatising tax collection, coordinating the four members countries of Mercosur (Southern Common Market – Argentina, Brazil, Paraguay and Uruguay) to raise tariffs in order to protect domestic industry, and lifting tariffs on imports of capital goods.

Efforts have not been ruled out concerning renegotiating short- term deadlines on Argentina’s foreign debt with the United States and the International Monetary Fund (IMF). Under current agreements, Argentina is to cancel 11 billion dollars yearly in addition to confronting a deficit of 6.5 billion dollars.

The new economy chief, who was sworn in Tuesday, won backing from governors belonging to the opposition Justicialista (Peronist) Party for his request before Congress. He is asking the legislative body to grant extraordinary powers to the Executive so that it can act decisively and independently on a determined set of economic measures.

Cavallo will also attempt to win the support of the Peronist legislative deputies.

Meanwhile, political shuffling continued Wednesday after Cavallo’s incorporation into the Cabinet created a new governing coalition, one that no longer includes among its first ranks any of the principal members of the centre-left Alianza that won the 1999 elections.

Raúl Alfonsín, former president and current leader of the ‘Unión Cívica Radical’ party (UCR), met with President Fernando de la Rúa, also of that party. Alfonsín afterwards said only that he had wished De la Rúa “success.”

Meanwhile, within the Country of Solidarity Front (Frepaso), the other member of the Alianza coalition, deliberations continue about the fallout from the nation’s political crisis.

Despite Cavallo’s request that a Frepaso leader be included in the Cabinet, no agreement was reached based on the ministerial positions De la Rúa offered and those the party was willing to accept – at least for the moment.

But both ‘Radicalistas’ and ‘Frepasistas’ refrained from making any statements about a break-up of the coalition as they await the unfolding of events, especially of Cavallo’s efforts to pull the economy out of a recession that is nearing the three-year mark.

The UCR’s National Committee is drafting a document that affirms the party “will continue to accompany (the president) in his ongoing efforts to defend the institutions of the Nation, seeking an effective national autonomy and greater economic and social development.”

Wednesday’s general strike had been called last Friday by two leading union centrals after then-minister of economy, Ricardo López Murphy, announced severe fiscal adjustment measures, with deep cuts in spending on public education.

Though López Murphy resigned Monday and was immediately replaced by Cavallo, the strike order remained, and not just because the new minister conditioned withdrawal of the austerity package on the support he receives from Congress, but because the trade unions reject the figure of Cavallo himself.

Víctor de Genaro, leader of the Congress of Argentine Workers, said that the paralysis of activities “was a clear and categorical message of popular rejection of any adjustment policy.”

“The rebellion of the Argentine people has to put an end to Domingo Cavallo and his economic model,” Hugo Moyano, leader of a faction of the General Confederation of Labour (CGT), declared on the eve of the strike.

But the CGT did withdraw its convocation for the strike after receiving a reportedly vague promise from Cavallo related to hopes for a rapid economic reactivation.

Cavallo is the target of a great deal of criticism from trade unions and a range of political parties that condemned his actions as Economy Minister under the government of Carlos Menem (1989- 1999), when he initiated a programme for price stabilisation, trade opening, deregulation and privatisation.

That model, directed by Cavallo during a five-year period, led to four years of rapid economic growth, but was accompanied by a jump in unemployment – which at one point reached 18.4 percent -, an increasingly regressive distribution of income, and a controversial privatisation of the country’s pension system.

Though he performed during that crisis as a competent captain through a storm, maintaining Argentina’s credibility on the financial markets, Cavallo is not a very popular figure. In fact, as a candidate in the 1999 presidential elections, he won just eight percent of the vote compared to De la Rúa’s nearly 50 percent.

But the president is now showing signs of political weakness and has not been able to redirect his government, especially since October, when his vice-president, Carlos Alvarez, resigned.

Political leaders and analysts alike seem to agree that now, from his Cabinet post, Cavallo will be able to cultivate the support he did not have at the ballot box – if he can keep his promises to jump-start the economy, halt tax evasion and create jobs.

The task ahead is not at all easy. Assistant chief of the Cabinet, Caro Figueroa, has already had to publicly repudiate rumours from numerous sources that Cavallo had threatened to resign the night after his swearing-in.

The Economy Minister, known for his sharp temper, reportedly became irate when UCR governors and legislators attempted to limit his authority and initiatives, which he says are essential for halting the Argentine economic crisis.