Argentine Hopes Rest on Economic Rescue Program

The government of Argentina will launch its program to rescue the country’s troubled economy today, after a month of political wrangling, meetings with the high priests of global finance and a constitutional crisis or two.

A series of new banking regulations is scheduled to take effect today, a day after the government presented its 2002 budget to Congress. Together, the measures form the heart of President Eduardo Duhalde’s plan to pull his country out of its economic wreckage.

The success or failure of the plan could determine the fate of Duhalde, who came to power Jan. 2 in the wake of violent demonstrations that drove Fernando de la Rua from power. Now Duhalde faces a similar whirlwind of political intrigue and street protests, forces that threaten to consume the nation’s fragile democratic institutions.

“If there is no order, there is no democracy,” Duhalde said Tuesday in response to criticism that he has concentrated too much power in his hands. “A president who has authority is not the same as an authoritarian president. . . . The people will not tolerate anarchy.”

On Monday, the government issued a decree ordering all banks to sell their dollars to the Central Bank in exchange for Argentine pesos. A decade-long effort to shore up the value of the peso against the dollar had driven the country to the brink of bankruptcy.

As of today, the dollar will no longer be valid currency for any transaction. That in itself is a monumental transformation in a country where more than two-thirds of bank deposits have been in greenbacks.

Officials fear that the value of the peso could fall precipitously. That drop could in turn provoke the high rates of inflation last seen here in the 1980s, a time of instability that still traumatizes the nation.

Billions in Reserves to Prop Up the Peso

For more than a decade, the peso has been equivalent to a dollar. Last month, the government established an official exchange rate of 1.4 to the dollar. Now the peso will float at a single rate of exchange, determined by the market.

A government spokesman said Duhalde’s administration has $14 billion in reserves to prop up the peso, which some analysts fear may soon be worth as little as 33 cents.

The government had imposed a two-day banking holiday as an emergency measure. Late Tuesday, officials decided to keep some functions shut down today, including currency exchange.

No one knows, exactly, what will happen once banks and exchange houses open.

“It’s going to be a war here,” one currency trader said in the heart of the Buenos Aires banking district, known as “La City.” “If the Central Bank doesn’t step in quickly and decisively [to support the peso], this will become chaos.”

These are days of reckoning in Argentina, with more than just the economy at stake. The past few weeks have seen an ugly tug of war and settling of accounts among the nation’s political elite.

Former Economics Minister Domingo Cavallo has been subpoenaed to testify before a federal judge investigating his actions in the last days of the De la Rua administration. The former police chief of Buenos Aires has been subpoenaed too, in connection with the deaths of several protesters gunned down by police during the rioting that brought down De la Rua.

In addition, a majority of Supreme Court justices are facing impeachment by Congress.

On Friday, those same justices ruled that a key element of the government’s economic program was unconstitutional--a strict limit on bank withdrawals that is preventing many depositors from getting all their money until 2003 or 2004.

The justices, most of whom were appointed by former President Carlos Menem, are facing charges of cronyism and corruption. Menem has been sharply critical of Duhalde since the latter took power, and many observers saw Menem’s hand behind the court’s ruling.

“I am not a weak president,” Duhalde said, responding to the court’s ruling in a nationwide address Friday evening. He charged the justices with trying to “blackmail” his government.

‘There Is a Conflict Between Powers Here’

The court action would have allowed depositors to withdraw all of their savings, threatening at least three banks with collapse. But the government, which has increasingly ruled by special decree, ordered that no one could enforce the court’s judgment for six months.

Some constitutional scholars bristled at Duhalde’s actions.

“There is a conflict between powers here, and we don’t know for sure if the constitution is still in force,” said Eduardo Barcerat, a constitutional lawyer. “I wonder if the constitution is capable of surviving another attack against it.”

Duhalde’s government also finds itself under enormous pressure to address the social ills caused by five years of recession. Unemployment stands at 20%, according to a report released last month.

Every day appears to bring a new form of demonstration. On Tuesday, poultry producers set loose dozens of chickens in front of government offices in the city of Mendoza and called for government subsidies.

In recent weeks, unemployed workers have blocked roads throughout the country. On Tuesday, 2,000 jobless protesters marched through downtown Buenos Aires to the Pink House, the seat of government.

“We want our unemployment insurance--or real jobs,” said Paula Quasi, 29, who has been out of work for more than a year. “The [last] government promised us 1 million new jobs, and nothing happened.”

Duhalde, in contrast to De la Rua, has portrayed himself as a man deeply concerned about the problems of ordinary Argentines. Portraits of the president almost invariably show him with his hands clasped in front of his face in a pose of deep worry, as if in prayer.

Several times each week, he takes questions on a radio program called “Speaking With the President.” Last week, he met with representatives of 15,000 unemployed workers who had blocked roads and marched on the Pink House.

“If I were in your position,” he told the marchers, “I’d be blocking the highways too.”

Times special correspondent Vanessa Petit contributed to this report.