Argentina Aflame

ARGENTINA HAS been witnessing an insurrection of sorts. The crisis here brought about by neo-liberalism is worse than anything witnessed so far in East Asia, Mexico or Brazil. It all began on December 14. The week that shook the country witnessed the resignation of the minister in charge of the economy, the imposition of emergency, its withdrawal in the face of a defiant popular uprising and the ouster of the president. One is only reminded of Comrade Charu Mazumdar’s words that the development of a revolutionary crisis is revolutionary and not evolutionary. The Argentinean story is very instructive for those students of capitalist crisis in the era of globalisation and neoliberalism.

The explosion comes in the wake of a four-year long recession that is estimated to have impoverished a third of the population. None of the neo-liberal prescriptions peddled by the IMF and international aid packages put together by G-7 could prevent the explosion.

The country is desperately struggling to avoid a default. The Argentinean currency has been pegged to the dollar one-to-one since 1991 so as to have exchange rate stability and prevent a sudden run on it. But it only served to conceal the gradual maturing payments crisis. In the past few weeks, anticipating a meltdown the people rushed to convert their pesos into dollars. To prevent a capital flight bank deposits were frozen and cash withdrawals were restricted, affecting ordinary people.

The country’s official debt was $132 billion. To avoid defaulting on the loans, the ousted president offered to convert several loans into long-term bonds of higher yield. But there were no takers. In any case, this debt swap is nothing but swapping the present debt crisis for a future one.

The financial crisis is only a symptom of an underlying deeper crisis of the economy. It cannot be managed by innovative financial management. That is why firms are restructuring and downsizing if they are not going under, throwing out workers. The official unemployment rate is 16%. But this is not a true measure as 40% of the country’s economy and a greater share of its employment are in the informal sector. The austerity package introduced by the ousted president included 13% wage cut for government employees. The President, during the two years he held office, imposed six spending cuts and heavily slashed the budget. However, a series of tax cuts to stimulate the consumer spending didn’t work.

Some have even expressed the doubt as to whether the current is being utilised for a forced dollarisation of the economy through banking restrictions and making the position of peso precarious.

The general strikes had become so frequent. De la Rua faced eight general strikes in two years. During the recent upsurge that began on December 14, there were widespread riots in the country. The workers fought pitched battles with the police. A section of the rioters also looted the shops. The international media sensationalised the supermarket looting but downplayed the organised working class action as ‘riots’.

The Harvard-trained Economy Minister (sic) Domingo Cavallo, the Argentinean version of Manmohan Singh or Chidambaram, who stabilised the Argentinean economy in the early 1990s was brought back only in March this year with the hope that he would perform some miracle. He was made a scapegoat and was given the marching orders by the President Fernando de la Rua on December 15. The same day the embattled President also declared a state of siege and assumed emergency powers. These desperate measures failed to put out the flames of popular insurrection. Day after day the entire people were virtually on the streets. Everyday there were police firings. But protesters would accept nothing short of his resignation and rollback of the austerity measures and neo-liberal policies. The state of emergency however had no effect on the insurrectionary masses, which he revoked hours before he was forced to step down.

Despite full-scale deployment of the riot police and imposition of emergency the violent mass upsurge continued unabated. Tens of thousands of protesters laid a siege around the presidential palace in Buenos Aires. The beleaguered President finally quit on 20 December, 2001. He had to be taken away to safety in a helicopter. The same day the police shot dead at least 5 protesters bringing the toll in the current wave of protests to more than 20.

The new caretaker president, Ramon Puerta, the Senate majority leader from the Peronist opposition who has taken over from Rua, has partially reestablished the state of siege. The popular demands for a policy rollback have not been met. The cash withdrawal restrictions are still in place. The peso continues to remain artificially propped up and it is bound be devalued sparking off greater protests. Both the Argentinean establishment as well as the working class and popular masses are bracing themselves for a bigger confrontation.

Argentina is not alone in this crisis. The recession in Peru has also been on for a similarly long period. The financial markets are shivering. The global recession is about to cause synchronised explosions in Latin America. The conditions in many other LA countries are equally precarious. The US has to stretch itself hard to pull up Mexico so as to save NAFTA. September 11 threatens to bring some more tottering economies crashing down. The emerging markets have become submerging markets. The Argentinean crisis has also made the authorities in Brazil nervous. These countries which simply survive by rolling over old debts with new cannot withstand a ‘high-risk’ financial environment. They fear that the contagion might spread to Brazil at any moment pushing it to default. Wait for the domino to fall.