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REPORTS: ARGENTINA |
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ARGENTINA:
Two Economic Models Compete in Elections
Marcela
Valente
BUENOS AIRES, May 12 (IPS) - The two
presidential candidates competing in the
May 18 runoff vote in Argentina both
promise economic stability, although Néstor
Kirchner looks more inclined to put
priority on strengthening production and
generating employment, while Carlos Menem
has the confidence of the financial
sector.
''I want the public accounts to add up,
but not at the expense of the people,''
said Kirchner, governor of the southern
province of Santa Cruz and the
front-runner in the second round of
elections, with a more than 20-point lead
on his rival.
Former president Menem (1989-1999) has
appealed to people's fond memories of the
economic boom period during his first
years in office, and promises to benefit
business and to provide relief for the
poorest of the poor, his main support
bases.
The differences between the candidates'
platforms are expressed most clearly by
the two men who would be their economy
ministers.
Kirchner has already announced that he
would keep current Economy Minister
Roberto Lavagna in his post. Lavagna, who
has held that position for a little over a
year, stabilised prices, curbed the
devaluation of the peso, implemented a
work-fare scheme for unemployed heads of
households, and has taken a firm stance in
renegotiating the foreign debt.
After several months in which it looked
like Argentina was about to cease payments
to the multilateral lending institutions,
Lavagna negotiated an agreement with the
International Monetary Fund (IMF) allowing
Argentina to suspend payments until late
August, in order to allow the
crisis-stricken economy to begin to
recover.
Argentina's Gross Domestic Product (GDP)
shrank 11 percent in 2002, after the
December 2001 collapse of the economy and
the government of Fernando de la Rúa, who
was forced to resign after several days of
looting, rioting and protests.
The IMF has revised an earlier projection
of one percent GDP growth, up to four
percent for this year.
Argentina's foreign debt amounts to a
hefty 142 billion dollars, 60 billion of
which are owed to the holders of private
bonds, who have not received a return on
their investment since December 2001,
while they await a restructuring of the
debt.
The new government to take office on May
25 will have to negotiate with the
bond-holders, and will face six billion
dollars in debt payments to the
multilateral lending institutions that
fall due this year.
Lavagna says he would put an emphasis on
strengthening the domestic market, while
taking advantage of the devaluation to
implement import substitution policies.
In addition, he would promote the creation
of a public works plan to generate
employment, put a higher priority on
strengthening the public banking sector
than the private, fortify the Mercosur
trade bloc (made up of Argentina, Brazil,
Paraguay and Uruguay), and negotiate a
significant reduction of the foreign debt
held by private creditors as well as a
grace period for meeting payments to the
multilateral lenders.
''To everyone's surprise, including
mine,'' Argentina has once again begun to
grow without falling into hyperinflation,
IMF First Deputy Managing Director Anne
Krueger -- the biggest opponent of
renegotiating Argentina's foreign debt
payment schedule during Lavagna's first
few months as economy minister -- said
this month.
The Argentine economy ''has stabilised
notably,'' she acknowledged.
But, Krueger added, there is still much to
be done, including a renegotiation of the
foreign debt with private creditors and
multilateral bodies, a restructuring of
the banking system, and the adoption of
postponed hikes of the rates charged by
privatised utilities.
The financial markets see Menem as the
ideal candidate for carrying out those
pending tasks.
The corruption-tainted former president
announced that he would appoint Carlos
Melconián, an economist who also enjoys
the confidence of financial circles, as
economy minister.
''The market is not 'Menemist','' but it
has the impression that foreign debt
negotiations with a Kirchner government
would be tougher than with a Menem
administration, which is why we would have
liked the former president to have won
outright in the first round, Pablo
Goldberg, an analyst with the Merrill
Lynch investment firm, said in New York.
That viewpoint concurred with the results
of a survey carried out by the Graciela
Romer polling firm among ''business
community opinion leaders'' in Argentina.
Of the respondents, 58 percent said they
voted in the first round for independent
centre-right wing candidate Ricardo López
Murphy, who came in third, while 17
percent said they voted for Menem, and
just seven percent said they cast their
ballots for Kirchner.
With the independent López Murphy out of
the running, 48 percent said they planned
to vote for Menem in the runoff, while 42
percent said they would back Kirchner.
Both Menem and Kirchner belong to the
governing Justicialista (Peronist) Party.
Opinion polls among the broader population
show that many people would like to see
Lavagna stay on as economy minister,
despite the fact that unemployment remains
sky-high, at 17.4 percent, and that an
unprecedented 54 percent of the people in
this once-rich nation are living in
poverty.
Of those interviewed by the local polling
firm Equis, 42 percent said they hoped
Lavagna would remain in his post, with
Kirchner as president.
Melconián says the rates of public
services need to be raised, as demanded by
the new owners of privatised utilities. He
also promises to achieve a big enough
fiscal surplus to meet Argentina's debt
servicing obligations.
But Menem was forced to ditch another key
member of his economic team, Pablo Rojo,
who had promised to reduce or even
eliminate the taxes paid by companies and
exporters, and to achieve a fiscal surplus
in order to live up to the country's
foreign debt payments.
Melconián recommends a policy that would
give a strong boost to exports, suggests
allowing the peso to continue to float
freely against the dollar, and says he
would only cut taxes if that did not
affect the goal of posting a fiscal
surplus.
Economist Claudio Lozano with the Central
de Trabajadores Argentinos, a central
trade union, told IPS that Menem had
modified his platform after the first
round due to the need to reflect the new
make-up of the economic elites in
Argentina, because of the shake-up that
occurred during the late 2001 collapse and
the nearly four-year recession that led up
to it.
The currency board that pegged the peso to
the dollar for a decade was put in place
by Menem during a time in which foreign
financing was abundant, and companies that
acquired utilities made heavy investments
in the country, turning to a banking
system that also grew considerably, he
pointed out.
''In that period, debt was paid off with
new debt. But now, after the devaluation,
meeting debt payments at a time when
foreign financing does not abound, and
when the banks are in crisis, will require
an increase in production and exports, in
order to obtain a surplus,'' said Lozano.
''Given the shake-up in the composition of
the economic elites, Menem, who has always
tried to be a faithful reflection of those
who wield economic power, has realised
that the conditions do not exist for
reviving the model he followed in the
1990s.
''That is why his platform now
acknowledges devaluation as a fact, as
well as the need for taxing exports and
obtaining a fiscal surplus,'' said the
economist.
According to Lozano, in order for
Argentina to leave the crisis behind, it
must ''ignore the agenda of priorities set
by the IMF.'' If it fails to do so, he
argued, it will be ''condemned to
moderate, slow growth like what we are
currently experiencing, which produces a
trade surplus barely big enough to meet
debt servicing payments.''
''If, instead of implementing policies
that bolster production and the creation
of jobs, Kirchner and Lavagna continue to
follow the current strategy of moderate
growth, the limited revenues brought in
will have to go towards servicing the
foreign debt, while the goals of
generating employment, providing
incentives for production, and improving
the distribution of wealth -- aims that
both have promised to meet, in the
campaign -- will be left by the wayside,''
he maintained.
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