Opinion
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News Analysis
Hard days
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The uncertainty in Argentina is expected to last a while for the Government has to calm its citizens who are worried about their money. Sridhar Krishnaswami reports.
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A soup kitchen in Buenos Aires.
IF ARGENTINA is heading for more trouble, that is not going to surprise many in that part of the world. The big question is how many other nations Argentina will take down with it as financial uncertainty and the potential for riots persist.
The distinct impression is that Argentinians will not be content merely banging pots and pans from the balconies of their homes.
And the populist Government of Eduardo Duhalde is hanging tough on some of the new economic measures which have been questioned overseas and which have led to renewed protests at home.
The immediate saving grace is that the streets are mush quieter than about a month ago when deadly riots took the lives of nearly 30 persons and toppled a Government.
Since the exit of Fernando de la Rua last month, the country saw a brief tenure of at least three other Presidents - two of them lasting hours - before settling for Mr. Duhalde.
The uncertainty is expected to last awhile for the Government in Buenos Aires has to calm its citizens who are genuinely worried about their money.
The latest showdown between the Government and the ordinary folk is about a set of draconian measures, including the freezing of bank accounts.
A nervous Government, which announced that all checking accounts over $10,000 and savings accounts over $5,000 would be turned into fixed deposits for at least one year, is making sure there are no panic withdrawals again.
Last December, over $2 billion was withdrawn from banks in a single day. The people are incensed that further banking regulations are being added to the tough ones already in place. ``We want our money and we want it now,'' seems to be the refrain in the streets.
The curbs on bank withdrawals or forcibly making accounts into fixed-term deposits are not the only things troubling the people.
Many are worried about the implications of the de-linking of the equal peg between the peso and the dollar and a general apprehension on what the real rate will be once the foreign exchange transactions - banned for the last three weeks - resume next week.
The Government has set the dollar rate at 1.40 to the peso for imports, exports and large-scale businesses in the hope that this will spur exports and bring in investments to revive a battered economy.
However, the peso is already trading at 1.6 to the dollar on the black market and financial analysts predict it will got to 2.70 to the dollar by year-end.
The fear then is of a natural rise in prices of imported goods.
Of course, there was an element of political theatrics thrown in.
The ruling Peronists offered to reduce seats in Parliament, both in the Lower House and in the Senate, and a 50 per cent cut in political appointments, with a view to sending the message at home and abroad about the cuts the Government was willing to make. But no one is sure how much money will be saved on this account.
A drift towards the mess of the late 1980s when a devaluation triggered a disaster of sorts with runaway inflation and price hikes is a nightmarish scenario which no one even wants to think about. Argentinians wonder how long the Government can ask the businesses to keep the prices steady knowing fully well that prices of imports have in fact risen steadily.
The economic crisis and the ensuing social unrest has led to apprehension in the Americas, across the Atlantic and in the United States. The initial impression was that the rest of Latin America would remain unscathed.
That was until Brazilian bonds dropped by 0.7 per cent and its currency took a hit against the U.S. dollar.
Spain, with many large companies in Argentina, is watching, rather nervously, the unfolding situation, especially the changing economic rules. Madrid wants to discuss with the Duhalde Government the economic reform parameters.
The latter, however, has said it will not bow to any pressure. ``We want to defend Argentine jobs and the Government will defend national interests without restrictions,'' the Chief of the Cabinet said.
The Bush administration is monitoring the situation carefully and at least one major auto maker has expressed fears about the impact of the crisis. General Motors Corporation - which has an assembly plant in Argentina - has said it will have to post lower earnings as the devaluation has brought down share prices.
Mr. Duhalde, however, feels the worst may be over. ``We went down step by step: recession, depression, a pre-anarchic state, chaos.
The people got an enormous fright about 20-25 days ago when they saw that one step more was a bloodbath in Argentina,'' the President said.
But this confidence is not shared across the board, with some even taking the position that a continuing uncertainty could give ideas to the brass hats.
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