Exit Alfonsin as Economy Disintegrates in Argentina

<i> Charlene Smith is a South African journalist based in Buenos Aires</i>

On May 30, as food riots were erupting into running gun battles with police in Argentina’s two largest cities, President Raul Alfonsin stood at the country’s main port and waved goodby to Liberty.

Libertad (Liberty), the naval school frigate, was departing on its annual training voyage. The symbolism could not have been more stark. Behind the president’s back, the death toll in looting and food riots rose to 15, with dozens injured and 2,000 detained.

Two weeks later, Alfonsin bowed to public and political pressure and said he would resign on or soon after June 30. His successor, President-elect Carlos Saul Menem, who was voted in on May 14, had previously agreed to an early transfer of power, but with conditions. One was that Alfonsin agree to Menem’s economic measures and guarantee legislative support for them until a Peronist-led Congress comes into power on Dec. 10.

But rumor had it that Alfonsin vowed to resign rather than accept Menem’s purported demand for a controversial amnesty to solve the “military problem.” There are 18 pending human-rights trials against members of the security forces accused of killing several thousand Argentines during the infamous “Dirty War,” 1976-83, as well as two pending trials against army officers accused of staging three coup attempts.


Yet, in a startling accusation, Menem alleged Thursday that Alfonsin had asked him to co-sign an amnesty, without consulting his party. Menem said he revealed this to quash rumors that it was the Peronist Party wanting an amnesty, and that Alfonsin’s only reason for resigning was the “grave economic situation.” Alfonsin did not directly deny Menem’s allegation. Alfonsin, who entered office as a white knight with an overwhelming mandate, has shattered his image in these last few months.

But Alfonsin was no doubt also exhausted by his failed battle to institute workable economic plans. His determination to see out the constitutional term of office until Dec. 10 could have only further tarnished his image and destroyed the country. Within a day of his announced resignation, money markets showed signs of settling and, for the first time in months, the sharply rising black-market dollar and interest rates dropped.

Food riots calmed down when wages were paid at the end of May, but newspaper columnists warned that at the current rate of inflation, 80% monthly and rising fast, salaries would not last longer than a week to 10 days and trouble could recur.

One of democracy’s greatest foes in Latin America is the hunger cutting a deep swath across the continent. Food riots resulted in more than 350 dead in Venezuela earlier this year; pervasive poverty is the strongest ally of Peru’s guerrilla insurgents, Sendero Luminoso (Shining Path). By 1990, Latin America will have 204 million poor people, almost double the 1960 figure, according to the United Nations.


Argentina, the eighth-richest country in the world seven decades ago, is a perfect case study of how mismanagement and years of political instability bring a country to economic ruin.

The rich are ostentatious, living in mansions with holiday homes, weekend houses and armies of servants. But the poor, as Evita Peron lamented, have “become accustomed to social injustice, until now they believe that misery and suffering is natural and logical.”

A case in point is Stella Maris de Varias, a mother of six, whose husband, a metalworker, must labor six hours to earn enough to buy a one-kilogram package of sugar for the equivalent of 60 U.S. cents. Although the minimum wage is $43 a month, her husband earns $31. In common with many workers whose salaries are far below the unenforced minimum wage, he holds his job for fear of becoming one of the 4.5 million unemployed in a country of 31 million.

Significantly, the most violent rioting-- not only looting but reducing stores to shells of twisted metal and broken glass--was not in the poorest slums but in working-class areas, among people who hold down two or three jobs in vain attempts to escape poverty and ascend the vanishing ranks of the middle class.

The government response to recent food rioting was startlingly similar to events, almost to the date, two decades ago when worker riots erupted in Cordoba--the same province where the unrest began this time--against a 40% devaluation in real terms of their wages. Rioting only lasted 48 hours but divided the army, then in power, as its ruling members blamed subversives and left-wingers for the rise of popular dissent--just as Alfonsin is doing now.

Both the 1969 “Cordobazo” (as it was dubbed) and this year’s food riots quickly toppled the government. Embodying the legacy of the pro-working class heroes of Argentina, Juan and Evita Peron, Menem’s accession to power should help to end conflict and inject a dose of much needed hope for an Argentina floundering in despair and anger.

Whether or not his government can eliminate pervasive corruption, tax evasion and the exchange-control violations that are crippling the country, while raising living standards, remains to be seen. Certainly, the level of expectation for Menem’s presidency will be his greatest asset and his heaviest burden.

Economic success has not been a feature of previous Peronist administrations, and perhaps for this reason Menem has shrewdly culled two leading members of the historically anti-Peronist upper classes for his Cabinet. The economy minister will be Miguel Roig, a senior executive of one of Argentina’s largest companies, Bunge and Born, who among other interests control a fifth of the world’s grain supplies. Amalia Lacroze de Fortabat, head of Argentina’s wealthiest family, will be Roig’s roving ambassador.


While many incorrectly point to Juan Peron’s coming to power 43 years ago as the start of economic mayhem in Argentina, others emphasize the financial and political crises--including terrorism and death squads--after his third wife, Isabel Peron, took over the presidency following Peron’s death on July 1, 1974. Inflation hit 500% under “Isabelita,” who was ousted in a military coup in 1976. The rate stabilized to about 150% annually under the military but by the early 1980s, the economy was again on the verge of collapse.

In 1983, Alfonsin came to power with an economy that had been soundly looted by the military and the wealthy; it had also been ravaged by the failed Malvinas (Falklands) War against the British. Nonetheless, analysts without exception believe that he had an almost unparalleled mandate from the populace to put Argentina’s crumbling house in order.

Inflation during his term has averaged 340% a year and external debt repayments doubled to 41% of export revenues. Foreign-debt repayments have now all but collapsed, with the country clamoring for him to pay the “internal debt.” Inflation in the last 12 months has soared to 1,008%. The dollar has gained more than 2,500% against the austral while basic commodities such as potatoes now cost consumers 3,500% more than a year ago.

Real incomes have dropped more than 35% since Alfonsin took office in 1983, even while real wages were forced down 40% between 1975 to 1977, and the industrial labor force slashed 200,000 to 1.3 million in the decade to 1983. Between 1950 and 1960, Argentine wages grew only 1.2% a year, compared with the average of 4.4% for the continent.

A worker earning the present minimum wage will earn only $46 more per year than the average per capita income in 1880 of $470 per annum, and a third of the average earnings in 1930.