Argentina’s Economy Minister and Aides Resign

The Argentine government’s economic team resigned Friday in the face of a deepening economic crisis just six weeks before the presidential election, in an attempt to rescue the campaign of the ruling party’s candidate.

Economy Minister Juan Sourrouille, Treasury Secretary Mario Brodersohn, Central Bank Governor Jose Machinea and other senior economy officials stepped down one day after the governing party’s candidate, Eduardo Cesar Angeloz, publicly criticized their policies.

Angeloz is trailing badly in opinion polls in his campaign against Peronist candidate Carlos Saul Menem, the feisty populist governor of the tiny province of La Rioja. Soaring inflation, rising interest rates and the steady slide of the Argentine currency against the dollar have dimmed Angeloz’s chances of overtaking Menem in the May 14 election.

President Raul Alfonsin had insisted that he would not yield to demands from business leaders and opposition politicians that he fire Sourrouille and other economic planners. But Angeloz’s statement Thursday that the team lacked the capacity and the public confidence to right the foundering economy apparently broke Alfonsin’s resolve. Alfonsin named Juan Carlos Pugliese, 74, a respected veteran of the ruling party, the Radical Civic Union, as economy minister. The other senior posts were not immediately filled. Pugliese, Speaker of the House of Deputies, Argentina’s lower house of Congress, served as economy minister from 1964-66 during the government of President Arturo Illia.

Under the Argentine constitution, Alfonsin cannot seek reelection, and the party nominated Angeloz, governor of Cordoba province, as its candidate. Angeloz, from the center-left party’s conservative wing, has called for more emphasis on free-market policies, budget cutbacks and the privatization of inefficient government-owned industries.

The Argentine currency, the austral, has depreciated sharply against the dollar since early February, when the government was forced to abandon its policy of selling off hard-currency reserves to shore up the austral.

The austral, worth more than $1 when it was created in 1985 in an audacious economic program engineered by Sourrouille, sank from an exchange rate of 17 to the dollar on Feb. 1 to nearly 50 australs this week as the sense of economic disarray deepened. Word of Sourrouille’s departure eased the pressure somewhat, and the currency closed at 47.80.

Rather than move toward a unified exchange rate that could spur exports, the government adopted a three-tier exchange rate, in which exporters are paid about one-third the free-market dollar rate for the goods they sell abroad. Thus, exporters have been holding back products from the market, or under-invoicing their sales, and Argentina’s foreign reserves have plummeted.

Argentina has barely made any payments in the last year on its nearly $60-billion foreign debt and owes nearly $2.5 billion in back payments. With the election approaching, Alfonsin’s government has resisted pressure from international financial organizations for austerity measures and structural changes such as unifying the exchange rates, which would cause an immediate jump in inflation.

Inflation, brought down to less than 10% a month late last year, has surged to an estimated 15% in March, for an annual rate approaching 400%.

Menem, asked if the resignations might help Angeloz’s campaign, said, “The problem is not one of changing men, but of changing the direction of the economic policies.”