ECONOMY-ARGENTINA: Alternative Plan for ‘Rising from the Ashes’

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Dec 12 2002 (IPS) - A group of Argentine experts has laid out an equitable development initiative, known as ‘Plan Fénix’, for the crisis-ridden country, asserting that it would permit annual economic growth of six percent, eradicate indigence and greatly alleviate unemployment.

The neoliberal model that has reigned in Argentina for the last 20 years is to blame for the country’s deep and prolonged recession, enormous debt, high unemployment and rapidly rising poverty, according to the bases of Plan Fénix, drawn up by 30 academics from the state-run University of Buenos Aires (UBA).

Plan Fénix, which the group will formally present to Economy Minister Roberto Lavagna on Friday, is the result of two years’ effort by economists and experts from different disciplines and from an array of philosophical backgrounds.

The group began to meet in late 2000 as concern began to mount about the acceleration of Argentina’s economic and social crisis.

The four-year decline in gross domestic product (GDP) has been severe enough to drive poverty up from 33 percent to 52 percent of the country’s 37 million inhabitants.

Unemployment, meanwhile, rose over the last 15 years from 6.0 percent to 21.4 percent of the economically active population.

Argentina, in spite of its great wealth of natural, human and material resources, bears a public debt burden of more than 125 billion dollars, which is 120 percent of GDP.

Plan Fénix seeks to resolve the serious problems plaguing Argentina today, focusing on a series of basic premises that the experts from the UBA summarise as "development with equity".

The plan includes giving the domestic market a boost through monthly employment stipends for the jobless, reactivating production and foreign sales through a high exchange rate, reinstating the government’s power as a moderator among the various economic interests, and restructuring the public debt.

The UBA Superior Council, two years after the experts’ first meetings and in the wake of Argentina’s economic and social collapse, voted to adopt Plan Fénix as a strategic project of the university itself, issuing a call to other academic institutions to join the effort with their own proposals.

"They say we are utopian, that we are not realistic. There is some truth to that because we don’t want to be left with this reality of hunger, misery and inequity," said economist Abraham Gak, director of Plan Fénix, in the public presentation of the project here Wednesday.

Joining him at the podium, Carlos Degrossi, dean of Economics at UBA, noted that "the map of poverty and indigence today is the result of the wrong-headed economic policies applied in recent years," as the only aim of those measures, he said, has been to ensure fiscal balance.

"That policy, which sought to optimise the efficiency of the private sector, ended in spectacular failure, which raises questions about the ideology that inspired it," Degrossi added.

He called on civil society and especially political parties to engage in debate on how to change the neoliberal policies that continue to be implemented.

The organisers of Plan Fénix plan to pull together other development initiatives that are also guided by ethical principles like solidarity and the common good.

"The policies that made human beings into abstractions are the ones that brought us to this devastating reality," commented Degrossi.

Economist Saúl Keifman explained that the experts’ focus in designing the short-term policies was that "there would be not a single poor household left in Argentina because there would be employment insurance and a stipend for each minor in a household with unemployed parents."

Keifman pointed out that after four years of recession the country has enormous capacity in human and material resources that are currently idle but could be utilised to drive economic growth.

This could achieve not just three percent annually as the government predicts for 2003, but rather six percent a year over the next five years, he said.

In outlining the proposal to return power to the state in overseeing the economy, political scientist Oscar Oszlak noted that in the last 20 years the state has failed to serve as an integration force and is responsible for the breakdown of all the economic policies that it put into practice.

But Oszlak also said the state has been made into a scapegoat for the failure of neoliberal economic policies. It has been used as "war booty" to colonise and exploit according to interests that were sometimes legitimate, but often times were spurious, he said.

In terms of public spending, economist Héctor Valle reports that outlays are low with respect to GDP, but that the expenditures are made inefficiently.

Collection of income tax must be increased, while the value- added tax, standing at 21 percent (one of the highest in Latin America), must be reduced, he said.

However, Valle says he agrees with the current tendency to maintain a high exchange rate for the Argentine peso with respect to the dollar because it will propel exports as well as import substitution.

His colleague Marta Beckerman maintains that Argentina’s foreign economic policy should be more aggressive, though she cautions that development "cannot be achieved through export enclaves alone."

The academics agree that it is important to maintain fiscal, monetary and trade balance, but also stress that these objectives must not take priority over equitable economic development.

Nor should urgent social problems be put on hold by the negotiations on foreign debt payments, the experts say in their plan.

In this respect, economist Alejandro Vanoli is the most outspoken about the need to reprogram the debt payment deadlines with the multilateral credit institutions and to negotiate more aggressively with the holders of public debt titles to sharply reduce the capital.

Vanoli reckons this strategy would reduce the monthly debt payments for the next five years by 10 percent, thus contributing to amassing the resources needed to comply with debt commitments while also reactivating the economy and attending to the most pressing social problems.

"All countries that have confronted crisis – including industrialised countries – have convened their creditors to negotiate," said economist Marcelo Lascano by way of justifying the need to discuss the payment schedule for Argentina’s public debt.

The 125-billion-dollar burden, 120 percent of GDP, is also equivalent to six years of Argentina’s export revenues.

Argentina defaulted on its debt payments to private lenders a year ago, and two months ago failed to make payments on its commitments to multilateral financial institutions – like the World Bank – while awaiting a new credit agreement with the International Monetary Fund.

As for the country’s foreign relations, Plan Fénix proposes deepening ties with Mercosur (Southern Common Market – Argentina, Brazil, Paraguay and Uruguay) but expresses caution about the Free Trade Area of the Americas, currently being negotiated by 34 countries of the western hemisphere.

The UBA experts say they are confident that the government will take Plan Fénix into account and that the proposal, if put into practice, could achieve six percent annual economic growth, eliminate extreme poverty and reduce unemployment to less than 10 percent.