BY SEAN HEALY
Tens of thousands of Argentinians have risen up against their government's austerity plan, staging strikes and demonstrations and blockading highways throughout the country.
The three-day wave of protests, from August 13-15, is the third such outbreak in the last three weeks. More protests will doubtless come as unions, civic organisations and communities seek to defeat the "Zero Deficit" plan of President Fernando de la Rua and his economy minister, Domingo Cavallo.
"The protest will be more important and more massive than the previous ones", said Juan Carlos Alderete of the Federation for Land and Housing, as he led a blockade of a main highway leading into the capital, Buenos Aires.
"All the cuts affect us, not only because there is a reduction of social spending, but because thousands upon thousands of people are joining the already huge ranks in the army of jobless across the country", said Alderete.
Protesters have not been deterred even by harsh repression from police. On August 13, nine people were injured when police used rubber bullets to disperse protesting workers who had seized a hospital just outside Buenos Aires. More than 30 activists are presently being held under charges of "subversion".
While the Argentinian people were protesting in the streets, their government officials were in Washington, DC, negotiating with the International Monetary Fund for the immediate release, one month early, of a US$1.2 billion tranche of a promised bailout package of US$39.7 billion. Its release is expected in coming days.
De la Rua's austerity package, announced in July, is one of the harshest Argentina has ever faced. It calls for ending the government's $1.5 billion budget deficit by the end of the year, including by measures such as slashing civil servants' wages and pensions by 13%. It even entrenches in law the principle that the government cannot spend more than it receives.
The economic impact of the package is likely to be dire. The country is now in its third straight year of recession, one in six workers are already unemployed and industrial production has fallen 25% in the last year.
Cutting government spending in a downturn, when private investment has already fallen off and shows no signs of recovering, is sure to force the economy into a full-scale depression.
The IMF, however, insists that if Argentina carries out its plans, economic production will leap by 3.7% and unemployment will decline. By the end of March, the nation's gross domestic product had already dropped 2.1% compared to a year earlier.
The principal purpose of the austerity package agreed between de la Rua and the IMF is to restore "investor confidence", especially the confidence of the Western banks and managed funds which hold the majority of the country's US$130 billion debt.
Western financiers are becoming increasingly worried that, instead of prescribing more austerity for the country's masses, the government might be tempted to default on part or all of its debt instead.
To get their way, investors have threatened a capital strike, demanding outrageous rates of interest for further loans and exacerbating the country's debt crisis. On July 11, they used a routine auction of US$850 million of short-term government debt to jack up interest rates to 14%, up from 9% only two weeks earlier.
Such demands sent the Argentinian stock market into a spin and provoked considerable capital flight — bank deposits have fallen 7% in the month since.
Within four days of being whacked by the financial markets, de la Rua had announced his austerity package. He has also reassured Wall Street that his government has no plans to default on debt or to abandon the country's currency arrangement, whereby the peso is "pegged" one for one against the US dollar.
Western banks will likely be the immediate, and perhaps only, beneficiaries of the IMF's package.
Columnist Gregory Palast, analysing previously unreleased IMF documents in the August 12 Observer, estimates that, in order to both meet its repayments and keep enough US dollar reserves to maintain its currency peg, Argentina will have to pay US$27 billion to Western banks in the next year.
"In other words, Argentina's people probably won't net one penny from the ... loan package", he commented. "Little of the bail-out money escapes New York, where it lingers to pay interest to US creditors holding the debt."
But while de la Rua may have regained the confidence of investors, he has lost whatever last shred of it he may have had with his own people.
That may yet prove his undoing: with protests mounting, the austerity package is looking all but impossible to implement.