(Reuters: A girl scavenges among plastic cups in a garbage dump in a Buenos Aires slum. After a crippling recession, it is estimated one of every four Argentine children do not have enough to eat.)Posted on 08/26/2002 10:38:50 AM PDT by Gritty
In the first of a week-long series, the Post's Isabel Vincent examines the sudden erosion of a continent's experiment with free markets and democracy.
- - -
BUENOS AIRES - In a measure of the deep social, political and economic crisis sweeping Argentina and much of the rest of South America, the average protester here is not a teenage hooligan lobbing Molotov cocktails at army tanks, but a middle-class professional.
Someone like Marcella Beatriz Bettini. The lab technician wears a fur coat and designer sunglasses as she bangs loudly with a spoon on a tin pot and clutches a picket sign that reads in part "They are bleeding us alive." She has had a regular spot outside the Bank of Boston in the heart of the Buenos Aires financial district since the Argentine economy collapsed late last year.
Like millions of other Argentines, Ms. Bettini is demanding the banks return the savings and other deposits seized by government decree to stem the worst financial crisis in this country's history.
Since December, savings accounts have been frozen and the peso has lost a quarter of its value.
"The banks and the government have robbed us," says Ms. Bettini, 46, who has been joined by dozens of other middle-class protesters outside the bank. "We want our money back now."
But, as the protester herself notes, the crisis that has resulted in more than 25% unemployment and pushed nearly 40% of Argentina's 37 million people officially into poverty is not just about economics.
Argentines put the blame squarely on generations of government mismanagement and endemic corruption among their politicians. These same issues are at the heart of other economic and political crises across Latin America.
Despite the chaos, few analysts believe Latin America will return to the pattern of the 1960s and 1970s, when the military overthrew civilian governments to solve economic and social crises.
"Military coups are a thing of the past," says Eduardo Galeano, an Uruguayan writer and one of the region's most prominent analysts.
"It is far more efficient to send in the international financial technocrats to solve our woes than it is to send in the Marines," adds the author of The Open Veins of Latin America (1971), the bible of dependency-school theorists who argued in the 1960s and 1970s Latin America's underdevelopment was caused by North American and European investors who "raped" the region for easy profits.
But this time around, even the technocrats who have helped the region recover from previous crises may be unable to help.
"Today, the model country in South America is the disaster country," says Mr. Galeano. "There is no respect for democracy in South America. Governance here is like a circus act in which magicians transform their promises into lies and use their power to enrich themselves."
The origins of the crisis cannot be neatly categorized. Countries that embraced democracy and adopted markedly different economic models in the 1980s and 1990s all find themselves on the brink of collapse.
Chile is the exception. Under military dictator Augusto Pinochet, it began to open its economy to the free market and attract foreign investment. When the general stepped down after a referendum in the late 1980s, the economic measures endured. Chileans were also helped by the fact that, unlike their neighbours, their country does not have the same problems with institutionalized corruption.
The Chilean model influenced other countries in the region, particularly Argentina, which also embraced democracy and the free market, ushering in a decade of privatization and deregulation in the 1990s.
But the "Argentine economic miracle" has come apart at the seams. In the eight months since its economy collapsed, gross domestic product has shrunk by 15% and inflation has climbed 30%. Indec, a local polling firm, is predicting more than 60% of Argentines will find themselves below the poverty line by the end of this year. That means making less than 250 pesos (less than $80) a month. Analysts compare the situation to the Great Depression of the 1920s and 1930s in North America.
Fearing a similar collapse, Uruguay recently shut down its banking system, hoping to head off a run on the banks. In the past month, there has been rioting in the capital, Montevideo, and massive withdrawals of U.S. dollars from local banks. Reserves shrank from US$36-billion last year to just US$655-million today.
To prevent an Argentina-style collapse, the U.S. government this month approved a US$1.5-billion loan, the first time the Bush administration has agreed to directly help a country on the verge of economic collapse. The International Monetary Fund also lent a further US$494-million, taking its total loan to US$2.8-billion
Similarly, Paraguay, whose leaders are in the process of opening the country to the free market, is facing tumultuous times, with thousands of protesters taking to the streets to demand the resignation of President Luis Gonzalez Macchi, and the suspension of privatization of national industries.
Like most previous administrations in Paraguay, Mr. Macchi's has been characterized by generalized theft and corruption. The government, which is the country's largest employer, has fallen way behind on paying salaries to its employees.
Corruption also appears to be at the root of the crisis now rocking Venezuela, a country that has followed a radically different economic course than Argentina or Chile. The world's fourth largest oil producer is ruled by a Marxist populist who has resisted deregulation and privatization.
But that hasn't stopped the protesters. Thousands of them, mostly labour unionists and members of the middle class, have filled the streets of Caracas to demand the resignation of Hugo Chavez. They claim his reckless rule and mismanagement of the state oil company, which has not produced at full capacity for more than a year, has led to one of the country's worst crises.
In Brazil, Latin America's largest economy, concern centres on the possibility of a return to leftist rule when Brazilians go to the polls in October.
The possibility of victory for the Workers' Party candidate Luis Inacio Lula da Silva, a hardline Marxist who has publicly declared his admiration for Cuban leader Fidel Castro, raised fears of a default on Brazil's US$250-billion debt. This month the IMF threw the country a US$30-billion cash lifeline, the fund's biggest bailout.
If Argentina's turmoil should spread to Brazil, the situation would have severe repercussions not just in the Southern Cone, a group made up of Brazil, Paraguay, Uruguay, Chile and Argentina, but throughout the world.
Still, attention remains focused largely on Argentina, one of Latin America's most important economies. In the past eight months, the precipitous decline of a country that enjoyed the best standard of living in Latin America is staggering. Rudiger Dornbusch, a Latin America analyst, has called it "the day-to-day cannibalization of social and economic capital."
And things do not seem to be improving. President Eduardo Duhalde, picked by Congress after last year's riots brought down two successive presidents, has proved so ineffective his approval rating has dropped to 8%. He is to step down six months earlier than originally agreed and will now give up the presidency in May, 2003.
"Argentina's most difficult problem right now is the lack of support for the government of Eduardo Duhalde," says Horst Koehler, director of the IMF. The IMF continues to insist profound economic restructuring must take place before the country is eligible for an economic bailout.
But the short-term prospects for any kind of profound changes are bleak. None of the politicians who have declared presidential ambitions seems to command the people's respect. Noticias, an Argentine magazine, recently characterized the choices as picking "between flames and the fire."
Carlos Menem, the Argentine president who oversaw the economic miracle of the 1990s and is widely blamed for the current debacle, has an 80% rejection rate, but is nevertheless campaigning for the job again.
Although Mr. Menem opened the economy and at least nominally dollarized the peso, when he stepped down in December, 1999, Argentina was in a deep recession and nearly bankrupt.
Recently, the 72-year-old former leader spent six months under house arrest for alleged involvement in an international arms trafficking scheme.
And just last month, he was accused of receiving a US$10-million bribe from Iran to cover up its involvement in a terrorist attack that destroyed a Jewish centre in Buenos Aires. The July, 1994, blast killed 85 people and injured 200.
The other presidential front-runner is Elisa Carrio, a committed anti-corruption crusader who has spent much of her political career trying to put Mr. Menem and his former ministers behind bars.
A former beauty queen and professor of political science who grew up in the impoverished Chaco province, she recently broke from the Union Civica Radical party to found her own political party, Argentines for a Republic of Equals.
Although her left-leaning party is popular among some voters, it is viewed with suspicion by foreign investors and many middle-class Argentines. She recently accused the IMF of practising "predatory capitalism" over Argentina.
When asked who he would vote for in elections, which are slated for next March, Irineo Varela, a 66-year-old pensioner, does not hesitate in his reply. "No one," he says.
Along with millions of pensioners here, he saw his $60 a month pension slashed by 13% last year when then-finance minister Domingo Cavallo tried to stem the economic collapse by cutting civil servants' pensions and wages. The measure, along with a limit on bank withdrawals, sparked riots.
Today, Mr. Varela must supplement his pension with odd jobs to survive. "I'm not voting for any one of them," he repeats. "None of them are any good."
The experts seem to agree.
"The truth is that Argentina is bankrupt -- economically, politically and socially bankrupt," said Mr. Dornbusch, an expert on the Argentine economy and professor of economics at the Massachusetts Institute of Technology.
"Its institutions are dysfunctional, its government is disreputable, its social cohesion has come unstuck."
Yet just 10 years ago, Argentina was the South American success story. Democracy was flourishing after years of military rule, and a team of well-dressed Ivy-league trained economists, led by Mr. Cavallo, had stemmed hyperinflation by pegging the peso one to one with the U.S. dollar.
In Buenos Aires, the city known as the Paris of Latin America, five- star hotels were jammed with foreign investors, eager to take advantage of the country's newly introduced free market policies. They were snapping up stakes in everything from newly privatized public utilities companies to mines, cattle ranches and wineries.
During that heady period, economic growth averaged 5.5% a year. Ordinary Argentines, who found themselves in possession of Latin America's strongest currency, were also going shopping -- for new cars, appliances and other goods that were previously out of reach because of the non-existence of consumer credit.
Today, only foreign tourists can afford to shop in Buenos Aires, which has become a city marred by increasing homelessness and social violence. One day recently, a television news crew carried live footage of teenaged bandits holding up a suburban supermarket and taking more than 20 shoppers and supermarket employees hostage in what became a long, drawn-out standoff with police.
While the young men described by reporters as delinquents were raiding the supermarket, across town thousands of people marched on the presidential palace in a candlelight vigil demanding an end to the violence that has gripped the city.
The protesters, most of them upper middle class, were mourning the recent shooting of 23-year-old Juan Manuel Canillas, who was abducted and killed even after his family paid the kidnappers the ransom money.
In a letter addressed to Mr. Duhalde, the protesters noted, "We have the sensation of living in a society without any laws. We ask you, Mr. President, that your next major decision be the mobilization of government forces to stop this wave of violence." But the violence and crime continue.
Many here are so spooked by recent holdups and kidnappings on the city's taxis they refuse to ride in them. On the fashionable Calle Florida, the pedestrian shopping street in downtown Buenos Aires, banks are eerily shuttered with heavy metal siding -- some of it dented by dozens of bullet holes -- to shield against the daily protests.
Many shops and small businesses have gone bankrupt. Hotels and restaurants are practically empty, even though they have drastically slashed prices. Business hotels that used to charge more than US$150 a night, are available for less than US$30. Argentina's world-famous bife de chorizo --a steak the size of a plate -- goes for the same price as a hamburger at McDonald's.
With little money in circulation, barter markets, known as clubes de trueques, have sprung up across the city where people trade goods for services. The latest was set up in Recoleta, a fashionable neighbourhood which resembles a leafy Parisian suburb with its stately turn-of-the-century apartment blocks and designer boutiques.
Increasing numbers of Recoleta residents have made their way to the Castelli College, on the corner of Ayacucho and Vicente Lopez streets, to exchange goods and services. They even have their own currency, the "recoleto."
"People used to be convinced that Recoleta was a very rich neighbourhood," says Miguel Jorge Lantermino, president of the Recoleta Neighbourhood Association. "But we are suffering just like the rest of the country."
Ricardo Trocerli is also suffering. Already among the ranks of the urban poor when the crisis hit, he has seen his situation go from bad to worse. The former dock worker, who lost his job two years ago, spends his days outside the Ministry of Finance begging for small change, which he collects in a plastic Coke bottle.
"I have never lived through such a situation," says the 53-year-old, whose wife and adult children are also without jobs. "I have been reduced to begging to be able to buy a loaf of bread for my family."
Outside the Bank of Boston, off Calle Florida, Ms. Bettini, the protester, clutches her picket sign in beautifully manicured hands, and leads a chant against the banks.
As more and more passersby join her in the protest, Mr. Varela, the pensioner, turns up his collar against the cold.
"You know, the military used to shoot people here," he says, referring to the Dirty War the Argentine military waged against its opposition in the 1970s, which resulted in several thousand disappearances and deaths.
"Politicians today don't shoot anymore. But they are going to kill more people of hunger than the military ever did."
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.