ECONOMY-ARGENTINA: Crisis Persists Despite Cabinet Shuffle

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Mar 20 2001 (IPS) - The incorporation of former economy minister Domingo Cavallo into the Fernando de la Rúa administration did not turn out to be the hoped-for panacea for Argentina’s profound economic and institutional crisis, accelerated by Friday’s announcement of severe fiscal adjustments.

Financial markets reacted Monday with distrust, fuelled by the lack of political and social backing for the initiative to cut spending launched by the new economy minister, Ricardo López Murphy. It apparently was not the impact of naming Cavallo – architect of the Argentine currency exchange regimen – to the Cabinet.

After the surprise presidential appeal Sunday to form a government of national unity in order to confront the country’s serious financial difficulties, the only sure support Monday was that of Cavallo.

Meanwhile, the allies of the governing coalition, Alianza, and of the Justicialist (Peronist) Party – the principal opposition force – distanced themselves from the invitation.

The Radical Civic Union, the chief party of the Alianza, expressed its sharp rejection of the latest measures to reduce spending by two billion dollars, and conditioned future dialogue with the government on a withdrawal of the adjustment measures, which would largely affect public education.

Likewise, within the Country of Solidarity Front (Frepaso), the other party of the governing coalition that abandoned its government posts Friday, positions were divided between those willing to support a future change of political path, and those who wish to remain outside the process.

During a Frepaso plenary meeting Monday, among those who expressed a desire to participate in the government was the party’s leader, former vice-president Carlos Alvarez.

Cavallo wants Alvarez, who stepped down from the vice- presidency last October due to disagreements with President De la Rúa, to return to the government and reinvigorate the Alianza. In that blueprint, however, minister López Murphy would be a fifth wheel.

De la Rúa, isolated from his principal bases of political and electoral support, has surrounded himself with new allies who are not necessarily very popular.

López Murphy, for example, belongs to the market-oriented Foundation for Latin American Economic Research, and Cavallo – though considered less orthodox – shares his economic ideology.

Cavallo, who served as foreign minister and economy minister under president Carlos Menem (1989-1999) was presidential candidate in 1999, running against De la Rúa, and won just eight percent of the vote.

“Those people were not elected, and they’re governing. And they still want us to give them more power,” complained Alianza lawmaker María González, referring to Cavallo and López Murphy.

González, like the bloc of Peronist deputies, rejected the president’s request for Parliament to grant extraordinary powers to the government for a period of time in order to make decisions without having to go through legislative debate.

Another deputy from the governing coalition, Elisa Carrió, explained why, in her judgement, there are no longer any political designations that can halt the economic crisis.

“The regime is crumbling, so it resorts to its best cards, but they are no longer good enough. The people are demanding another personality each time in order to recover investor confidence, but they are delegitimised, one by one,” Carrió said.

De la Rúa began Monday be ratifying López Murphy, an economist who assumed his post 15 days ago with the challenge of taming the financial crisis that is heading towards the country’s inability to make debt payments, amid an economic depression that is in its 34th month.

López Murphy’s recipe, consistent with cutting spending, won applause only from the business and financial communities.

His statements did not find a warm audience in the Buenos Aires stock market. Shares and debt titles on Monday followed the downward trend of last Friday, while the country’s risk index jumped more than 40 points with respect to last week.

Cavallo does not yet hold a definitive post in the Cabinet, there are still three ministries without a leader, and the president spent the entire day in Chile.

De la Rúa went to Santiago for the annual meeting of the Inter- American Development Bank (IDB) to assure government officials, bankers and financiers that Argentina will honour its foreign debt, “without a doubt, without a question and without a problem,” and that it will maintain parity between the Argentine peso and the US dollar.

In response to the weekend’s events, trade unions called for a march of the unemployed on Tuesday and a general strike on Wednesday. Teachers and professors are to start a 48-hour work stoppage Tuesday.