[News] Argentina in Turmoil

Wed Oct 31 10:30:30 EDT 2018

https://www.counterpunch.org/2018/10/31/argentina-in-turmoil/

  Argentina in Turmoil

by Jérôme Duval <https://www.counterpunch.org/author/jerome-duval/> - 
October 31, 2018
------------------------------------------------------------------------

Seventeen years after the 2001 crisis in Argentina, the Macri 
government, which came to power in December 2015, is reinforcing a 
fierce structural adjustment 
<http://www.cadtm.org/Structural-Adjustment,1133> plan for its 
population following the loan requested from the IMF 
<http://www.cadtm.org/IMF-International-Monetary-Fund,1114>. The 
country, which in 2018 holds the presidency of the G20 
<http://www.cadtm.org/G20,1176>, is one of the most affected by the rise 
in interest rates <http://www.cadtm.org/Interest-rates> in the United 
States, the leakage of capital, the soaring dollar and speculation on 
the stock market, as with the crisis that is emerging in Turkey.

In the context of President Trump’s trade war to favour US exports over 
others, the rise in interest <http://www.cadtm.org/Interest> rates in 
the United States has led to a rush on the dollar, which is now seen as 
safer than ever. Dollars are being repatriated to the United States to 
take advantage of the interest rate hike, cash flows suddenly dry up, 
the currencies of so-called “emerging” countries fall sharply.

*Turbulence in Argentina*

The peso is in free fall, prices are exploding, consumption is reduced 
to a minimum, the middle classes are being squeezed, many firms and 
businesses are closing, hunger is spreading in outlying areas and 
speculators are panicking without knowing what to invent to avoid the 
shipwreck that has been announced. However, we could have learned from 
past crises not to reproduce them: Argentina has already seen this 
situation before… the people remember it, 2001; there was hunger, the 
clatter of empty pots hit by hammering spoons in front of closed banks. 
This was the “corralito” [1 
<http://www.cadtm.org/Argentina-in-turmoil#nb1>]. On the other side, 
capital flitters away discreetly to await better times. The scenario 
orchestrated by the IMF all over the globe infinitely repeats itself, 
which does not prevent it from distilling its same nauseating 
recommendations whatever the latitude of the country concerned.

“Zero poverty” Macri repeated during his election campaign. Today his 
popularity is plunging, and this slogan lies among his many election 
promises that will never be fulfilled, once again the people’s trust has 
been trampled on, betrayed by the power of money. At fault, the 
austerity cure that only aggravates the social situation already rolled 
out by more than two years of a hard right government.

The first 15 billion dollars of the IMF’s 50 billion dollar mega-loan in 
June does not seem to be enough to stabilise the economy, which has been 
buffeted by inflation <http://www.cadtm.org/Inflation,1115> of around 
30%, itself stimulated by a depreciation of its currency. The Argentine 
peso lost nearly 20% of its value against the dollar in two days, 29^th 
and 30^th of August, and 98% over the last 12 months (more than 50% 
since the beginning of the year) reaching an historic all-time low at 
over 40 pesos for a dollar.

In a frenzy, the Argentine Central Bank 
<http://www.cadtm.org/Central-Bank> raised its key rate from 45% to 60% 
on 30 August, one of the highest in the world after having increased it 
from 40% to 45% on 13 August, to encourage investment in local 
currency [2 <http://www.cadtm.org/Argentina-in-turmoil#nb2>]. However, 
this action, like the efforts of the Central Bank of Argentina, which 
has sold more than 12 billion dollars of its foreign exchange reserves 
since the beginning of the year to stabilise the peso [3 
<http://www.cadtm.org/Argentina-in-turmoil#nb3>], failed to contain 
investors’ fear of default, or to mitigate falling prices. As if 
provocatively, on 31 August, the day after the spectacular rise in 
central bank rates, the US rating agency 
<http://www.cadtm.org/Rating-agency-Rating-agencies>, Standard & Poor’s, 
placed the note of the Argentine debt “under negative watch”.

*IMF austerity*

Argentine President Mauricio Macri announced, on 3^rd September, a 
brutal austerity plan <https://www.youtube.com/watch?v=sIoo6zKjX6A> 
under IMF supervision. This included the introduction of a tax on 
agricultural exports of 4 pesos per dollar exported [4 
<http://www.cadtm.org/Argentina-in-turmoil#nb4>], which Macri himself 
acknowledged were “very bad taxes”, but the level of the budget deficit 
required emergency action. After so much austerity applied to the poor, 
this measure may not appeal to the producers of soybeans and maize, the 
largest purveyors of foreign exchange of the state, hard hit by a record 
drought early this year. In addition, Macri announced the removal of 12 
out of 22 ministries! Mr Macri is claiming to eliminate the ministries 
of Culture, Labour, Science and Technology, Energy, Agribusiness, 
Health, Tourism and the Environment to convert them into State 
secretariats under the dome of other ministries: Culture and Science and 
Technology pass for example under the mandate of the Ministry of 
Education, Work under the orbit of the Ministry of Production, Health is 
absorbed by that of Social Development and Agro-industry moves to the 
Treasury Department while dismissing 600 workers. So far, only the 
dictators Pedro Eugenio Aramburu and Juan Carlos Onganía had ventured to 
eliminate the Ministry of Health.

On 4 September, Argentine Economy Minister Nicolas Dujovne and Central 
Bank Vice President Gustavo Cañonero went to the IMF in Washington to 
negotiate a revision of the agreement signed in June and speed up 
payments. Argentina is sorely lacking in cash. At the same time, the 
prosecutor Jorge Di Lello indicted President Mauricio Macri for abuse of 
authority and violation of the duties of a public official for signing 
the agreement with the IMF on 7 June, without submitting it to 
Parliament, thus violating the Constitution. For his part, President 
Macri is unable to calm the growing discontent. He has said on TV and 
keeps repeating, “This crisis is not just another crisis, it must be the 
last (…) the worst is behind us. [5 
<http://www.cadtm.org/Argentina-in-turmoil#nb5>] However, the same 
mistakes produce the same effects and history repeats itself…

In the street, soaring prices are resurging popular discontent. In 
Buenos Aires, La Plata, Rosario, Mar del Plata, or in other cities of 
the country, the people express their anger at the rise in prices or the 
budget cuts imposed on the public administration in exchange for the IMF 
loan, like those applied to public universities. On strike for more than 
a month, the professors of the fifty-seven public universities are 
demanding pay rises. Awakening the tragic memories of the financial 
collapse of 2001, soup kitchens are again overwhelmed, not only with 
children but entire families… Galloping inflation is reducing margins on 
falling consumption and the US supermarket giant, Walmart, has sold a 
dozen hypermarkets. The price of bread has increased by more than 20% in 
a few days [6 <http://www.cadtm.org/Argentina-in-turmoil#nb6>]. As in 
2001, the people are hungry, for social justice and bread.

/This article was originally published on the French blog *Un monde sans 
dette * 
<https://www.politis.fr/blogs/2018/09/largentine-dans-la-tourmente-34320/>from 
the journal Politis <https://www.politis.fr/>./
/English translation by Jenny Bright./

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