ECONOMY-LATAM: Reg’l Business Summit Debates Argentine Crisis

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Nov 21 2002 (IPS) - Argentina’s severe economic, political and social collapse is one of the main focuses of debate at the Latin America Business Summit organised in Brazil by the World Economic Forum.

Argentina is suffering a dearth of leaders, with weak parties that lack popular support, said Buenos Aires Mayor Aníbal Ibarra at the Wednesday through Friday meeting, which has drawn some 400 business, government and civil society delegates to Rio de Janeiro.

The outcome of the early presidential elections scheduled for April is absolutely unpredictable, with the possibility of a triumph by former president Carlos Menem (1989-1999) ”or anyone else,” and the risk of a ”fragile government” with insufficient support for implementing and enforcing effective solutions, he said.

Juan Peña, the executive president of the Fundación El Otro, an Argentine non-governmental organisation (NGO) that provides assessment, capacity-building and support referring to sustainable enterprises to NGOs, companies and governments, told IPS that ”the country’s institutions have failed” and left society without alternative channels for expressing itself.

The separation between the state, the private sector and civil society or the ”third sector” – none of which are homogeneous blocs to begin with – is an error, said Peña, whose NGO is working to overcome the fragmentation of Argentine society.

”Argentina’s institutions must be carefully revised, and new, mixed ones that are needed should be created,” bringing people together around issues rather than driving them apart, he said.

For Argentine society it would be better to postpone the elections, in order to prolong the current debate, which encourages an overhauling of Argentina’s political institutions, Peña added.

Some civil society umbrella groups have already chosen to step up the organisation of society based on grassroots movements, he noted.

But the burning concern brought up at the three-day Latin America Business Summit was the Argentine economy.

Argentine Finance Secretary Guillermo Nielsen outlined a desperate financial panorama. The basic problem is a ”crisis of confidence,” he said, after acknowledging that it was ”very difficult to explain how a country could have accumulated such a bulky foreign debt” of over 140 billion dollars.

The agreement Argentina continues to seek with the International Monetary Fund (IMF) would go towards paying off debt to international financial institutions like the IMF itself, the World Bank, and the Inter-American Development Bank, to which Argentina is to make payments totalling 9.5 billion dollars before May.

Without a new IMF loan, Argentina would have to use up its hard currency reserves or default once again, as it did last week on an 800 million dollar payment to the World Bank, he said.

Nielsen said agreement with the IMF was being held up by ”the lack of a clear definition” on the flood of legal rulings guaranteeing the right of hundreds of thousands of savers to withdraw their dollar deposits, which have been partially frozen in the banks since early December, at the rate of one dollar=one peso – the exchange rate in effect until January.

Argentina, the ”spoiled child” of the financial community in the 1990s and the IMF ”poster child” up to 1998, paid the price of combining a fixed exchange rate with fiscal laxity, said several speakers at this week’s regional meeting convened by the World Economic Forum, which brings top business executives and government leaders together at the start of every year in the alpine resort town of Davos, Switzerland.

In just a few years, ”the country went from one extreme to another, from ‘model’ to ‘horror’,” with 23 percent unemployment, no credit, and a full-blown depression, pointed out another Argentine national, Eduardo Elsztain, the president of the Dolphin investment fund.

Despite the dim outlook, both Nielsen and Elsztain believe that Argentina is ”on the right track,” and that the economy will revive, with less costs for all if the creditors ease their requirements and demands.

U.S. Under-Secretary of State for Economic, Business and Agricultural Affairs, Alan Larson, blamed the failure of Argentina’s currency board, which fixed the peso by law at par to the dollar for 11 years, on ”external shocks” like the southeast Asian and Russian meltdowns, and on Argentina’s fiscal weakness.

He also said it was possible that the next Argentine government would have the elements needed to resolve the crisis.

But he underlined one disadvantage – the country’s small flows of foreign trade – and advocated the creation of the Free Trade Area of the Americas (FTAA), and greater opening of the market as factors that will contribute to the development of the country’s economy.

Larson insisted on the need to liberalise and increase trade in order to boost economic growth in the Americas as a whole.

He also said that Latin America must remain strongly democratic, while implementing ”second generation” reforms, aimed at bolstering transparency and fighting corruption and organised crime.

But criticism was also voiced in the meeting against the protectionism and production subsidies employed by rich countries like the United States, which hamper international trade.

The help that Latin America needs is trade that is truly free, and investment, said Carlos Bulgheroni, the president of the Argentine Bridas Corporation.

While the debates continued, demonstrators from small extreme- left parties protested outside the venue where the meeting is taking place.

The leftist Workers’ Party (PT) was not present in the protests.

Until PT leader Luiz Inácio Lula da Silva became president- elect of Brazil in October, the party was a fixture at demonstrations against the World Economic Forum, the FTAA, and the IMF.

The PT ”never espoused a socialist model,” which is why its absence from the protests comes as no surprise, demonstrator Marcelo Filippo, a member of the central committee of the Marxist- Leninist Communist Party, told IPS.

Lula’s government, which takes office in January, will have moved to the right in less than a year, he predicted.

ECONOMY-LATAM: Reg’l Business Summit Debates Argentine Crisis

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Nov 21 2002 (IPS) - Argentina’s severe economic, political and social collapse is one of the main focuses of debate at the Latin America Business Summit organised in Brazil by the World Economic Forum.
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