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Fear and loathing in Argentina

It wouldn't be alarmist to ask who will be leading Argentina come January. Or if the leader will have much control over the country.

Argentina is a frightening place to be two days before New Year's Eve. Early this morning, eight days after the fall of the government of President Fernando de la Rua and violence that left 27 people dead, thousands took to the streets of downtown Buenos Aires to protest against the caretaker administration of President Adolfo Rodriguez Saa.

Rioters fought police, stormed the country's Congress and set fire to the main entrance hall before being dispersed by police with water canons.

The idea of the military being more involved in restoring order and running the country after any further outbursts of violence -- unthinkable just a few months ago -- suddenly seems a bit more plausible, though still unpalatable to many here. The implications for Latin America and the rest of the developing world of the deepening Argentine crisis are dire.

In the last week Rodriguez Saa and his supporters in the Peronist party have demonstrated that Argentina's traditional political leaders remain dangerously out of touch with the rest of the country. In normal times such arrogance would just annoy the populace. Now it has enraged them.

The disconnect between Argentina's leaders and the population is similar to the situation in Venezuela just before former military officer and failed coup leader Hugo Chavez was elected president in 1998. One big difference is that Venezuelans had someone to whom they could direct their protest votes, Chavez.

There are no serious contenders in Argentina yet.

Argentines would be loath to see a return of military government after its period of death squads and disappearances in the 1980s.

Then again, if public order is seriously threatened and the police and the administration have trouble maintaining control, there may be calls for the military's help.

Argentines have been battered by more than three years of economic malaise, topped by a debt default declaration last weekend, capital controls, and talk of a currency devaluation.

Nearly a fifth of all Argentines are unemployed while a third cannot meet basic nutritional needs.

Hours before last night's protests downtown, residents of the lower-middle-class suburb of Ciudadela feared there would be more violence in their neighborhood, perhaps as soon as New Year's Eve.

Ciudadela was among neighborhoods hardest hit by last week's violence.

"People have no money," said Miguel Campos, as he roasted eight chickens at the barbeque stand he manages a block from one of the looted supermarkets. "Everyone is afraid it's going to happen again," he says.

Campos sold 60 roasted chickens last year on Christmas Eve.

This year he sold 24. Wholesalers raised the price of chicken by more than 50 percent over the last week because they expect a devaluation, he says.

Many analysts don't expect a financial contagion on the scale of the Russian and Asian financial crises in 1997 and 1998.

Yet there may be another type of contagion: a backlash against efforts of the last decade to open developing economies and make them more competitive while reducing the role of the state.

Populist politicians throughout the region are pointing to Argentina now and saying, "I told you so."

One of them is the leftist Luiz Inacio Lula da Silva, the leading candidate for the presidency of neighboring Brazil in elections slated for October. He and two other of the four leading candidates have mentioned default on Brazil's more than US$250 billion of public debt as an option.

For most of the last decade, Argentina was the poster child of the US and the International Monetary Fund for liberal economic policies.

Now both the US and the IMF appear to have washed their hands of their once-prized pupil. Their policies toward developing nations in crisis since the 1994 Mexican peso collapse were factors in Argentina's current demise, along with the government's failure to control spending and appreciation against other major currencies of the US dollar, to which the Argentine peso is pegged at a one-to-one rate.

US President George W. Bush called the presidents of Mexico, Chile, and Uruguay this week to ask about Argentina.

His administration's decision to leave Argentina to its own devices was part of an ideological point: no bailouts for countries that don't put their accounts in order.

Yet the US strategy of all stick and no carrot may soon prove to have been extremely shortsighted.

The de la Rua government fell two days after the IMF announced that Argentina's monetary and fiscal policies, many of them supported by the IMF, were not sustainable.

Protesters last night were angry that Rodriguez Saa had appointed Carlos Grosso as a top presidential adviser even though Grosso has been dogged by allegations of corruption from when he was mayor of Buenos Aires in the 1990s.

The protesters were also angry that the country's Supreme Court rejected lower court rulings against limits on bank account withdrawals of US$250 per week.

Some 60 percent of Argentina's workforce is in the cash-based informal economy, economists say.
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