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IMF puts the screws on Argentina

In May, President Duhalde’s new economics minister, Roberto Lavagna (the sixth Argentine economics minister in 14 months) promised to sign a deal with the IMF by June. Not long after, a phone conversation with the IMF’s number two, Anne Krueger, put paid to his optimism. Since December when Argentina defaulted on its $140 billion government debt, the IMF has been blocking access to loans until the Government fulfils its conditions.

One of these, that the state governments stop running large deficits and issuing their own “currencies” to pay their workers, appears now to have been achieved. In June the province of Santa Fe joined Buenos Aires and Cordoba in agreeing to cut its deficit by 60 per cent. These three provinces dominate Argentina’s economy and the cuts are predicted to result in big job losses. Some estimate up to 500,000 jobs will go. But this was not enough for the IMF.

They have two other major concerns. They want the repeal of parts of a Bankruptcy Law which gave some protection to indebted companies from being taken over by foreign firms. It’s an anathema to the IMF which wants complete freedom for the multinationals to buy up Argentine firms at knock down prices.

Another struggle has been over an Economic Subversion Law which gave judges wide ranging powers to investigate banks if they tried to avoid exchange controls.

The IMF wants Duhalde to veto these laws which threaten the international banks’ freedom to spirit billions out of the country – as they did just before the Government froze bank accounts. Duhalde is in a cleft stick. The IMF’s prescriptions will deepen the recession and allow the multi-nationals to benefit from the fire sale of national assets that will result. But he is faced with growing resistance in the streets and from the unions, and with wafer thin majorities for his policies in the Peronist dominated congress.

The banking crisis remains the most intractable. An attempt to swindle depositors out of the remains of their deposits, by offering government bonds in exchange (a measure favoured by the IMF) was too much for Duhalde to swallow. It led to the resignation of his last economics minister who proposed it. When the “corralito” or freeze on deposits was introduced it effected an estimated $40 billion of savings.

After the devaluation of the peso by 70 per cent these are now worth only about $8 bn. Lavagna is trying to get the banks to decide whether to give back the deposits or give bonds – and neither the banks nor the IMF like it. As a result the IMF declined to send a team to Buenos Aires in June, and Lavagna is now talking about a deal in July.

No doubt the “exploratory” team the IMF is now promising will come up with new demands when the letter of intent is signed. The ongoing crisis has led to new speculation about Duhalde’s ability to survive until planned elections in autumn 2003. Some Peronist governors have been suggesting bringing forward the election to early 2003.

The former president Carlos Menem – a bitter opponent of Duhalde within the deeply split Peronist party – has thrown his hat into the ring. Duhalde is pinning his hopes on an agreement with the IMF that, he hopes, will restore foreign business confidence. The economy continues to nose dive. Industrial production was down 14.8 per cent in the year to April, inflation was 20 per cent in the first four months of this year and is expected to reach 80 or 90 per cent by the years end.

Job losses continue to mount. Official unemployment stands at 24 per cent. the National Institute of Statistics believes that 50 per cent of the 36 million Argentine population are now below the official poverty line. Two of the major unions called general strikes against government policies in May: the dissident CGT on the 22nd, and a much bigger strike called by the CTA on the 29th.

The official CGT remains tied to the Peronist government and has refused to call actions against its policies. Duhalde has moved to shore up his support from this quarter by giving the Labour Ministry to Graciela Camano, the wife of a CGT radical in the senate. In the week of the general strikes he also extended the freeze on lay-offs in the big firms for another six months as a concession to his CGT supporters. But Duhalde’s room for maneuver is growing smaller.

A deal with the IMF on their terms could be the final nail in his coffin, but only if there is a united response from the unions and the popular assemblies. The divisive policies of the trade union bureaucracies will continue to weaken the movement unless the workers can force them into a into a united struggle to bring down the austerity government of Duhalde.

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