The Sacking of Argentina
by Tom Frasca
The Nation magazine, May 6, 2002
It is sobering to witness one of the greatest cities in the
world slip, despite its deceptively placid surface, into a state
of pre-modernity. Traffic lights in this metropolis of 12 million
people still turn from red to green, newspapers in the kiosks
report the latest bad news and Argentines occupy cafe tables,
smoke a lot and shake their heads in disgust as they have for
centuries. But money has ceased to exist. Oh, there are coins
and bills, and cash still manages to facilitate exchange except
when the peso's value oscillates by 40 percent in three days,
as it did in March. But money as the basis of a modern, capitalist
economy, money that can be lent and borrowed, created or liquidated
by central banks, money as the lubricating oil of investment and
production-that has disappeared.
In normal times, Maria Esperanza Alvarez, 63, could be fairly
considered a bit eccentric, if not a nut case. Standing outside
the Spanish consulate where her niece is trying to get papers
in order to abandon the country, she confides that for the past
thirty years she has kept her savings in a box-thousands of dollars
(which were always available) accumulated from her clothing business,
which once employed twenty-three seamstresses. Having defied all
common and expert sense for three decades, Maria Esperanza now
deserves an Einstein award: She never for a moment believed the
banks' basic pledge that they would give her back her money when
they promised to do so. And she was right.
Lisandro Orlov, by contrast, was more trusting, perhaps in
keeping with his professional outlook as a Lutheran pastor. Engaged
for years in projects aimed at reintegrating social outcasts-street
dwellers, drug users, people facing AIDS-related discrimination-the
59-year-old Orlov lost his pension fund in the December bank freeze-up.
Like many Argentines, Orlov assumed that the austere entities
in cavernous downtown palaces like HSBC, Citibank and BankBoston
would honor their commitments. Now he's fighting in court to regain
access to his dollars, already forcibly converted to 1.4 pesos
each, or less than half the 3-to-1 rate the greenback now commands
on the street.
In December of last year, Argentina's decade-long and highly
celebrated experiment as the poster child of monetarist orthodoxy
came to a crashing halt. While the International Monetary Fund
is not the only responsible party, its spokespeople have now conveniently
forgotten their laudatory worship of the main architect of the
project, former President Carlos Saul Menem, and the fund's gleeful
funding of it throughout the 1 990s. The IMF is now forcing Argentines
to pay the price of its decade-long collusion with what it now
says was a flawed performance all along.
So a once-wealthy country is suddenly seeing its sophisticated
middle class driven into the streets, both to protest and to put
food on the table. However, this extraordinary descent cannot
simply be blamed on the opportunism of the free-trade globalizers.
The sacking of Argentina could not have occurred had not a willing
political class put out the FOR SALE signs long ago. Peronism,
Argentina's peculiar form of nationalist populism from the 1940s
and '50s, capitalized on the country's postwar largesse and lulled
the populace into accepting political rot in exchange for fairly
broad access to a share of the loot. After Menem came to power
in 1989, he took a major detour from the Peronist vision. While
preserving the rhetoric, the party structures and the patronage,
he engineered huge privatizations, dismantled trade barriers and
freed financial flows into and especially out of the country.
The cornerstone of his monetarist policy, adopted at a time of
hyperinflation, was the guarantee that a peso was a dollar was
a peso, now and forever.
As a result of Menem's policies, what was once just old-fashioned
corruption gave way to bargain-basement sales of the family silver.
Now, with nothing left, citizens have awakened to the calamity.
Although they may not be staging an active revolt for the moment,
their unprecedented rejection of a whole generation of leaders
has profoundly changed the political landscape.
Argentina's current plight is a lesson for those countries
and their citizens that have toed the free-trade line and assume
they will be rewarded accordingly. Now that things have fallen
apart, the foreign beneficiaries of the fat years quickly wash
their hands of responsibility and blame local elites, while turning
their sights elsewhere for the next opportunities.
Last December the IMF, realizing that Argentina was a bottomless
pit, turned off the cash spigots. Facing bankruptcy, President
Fernando de la Rua of the Radical Civic Union and his financial
Rasputin, Economy Minister Domingo Cavallo, declared a corralito
on bank deposits. This apt metaphor, suggesting cows liable to
wander off and teams of neoliberal horsemen reining them in, meant,
in practice, seizure. Confiscation. Argentines suddenly could
withdraw only 1,000 pesos a month of their own money; otherwise,
old-fashioned bank runs would have collapsed the system.
Implicit in the corralito was acknowledgment not only of the
country's bankruptcy but also of the huge falsehood that had underpinned
the entire economy for a decade: that the Argentine peso was worth
one US dollar. Like the military dictatorship's assurances to
the public in 1982 that the Falklands/Malvinas war would conclude
with a glorious triumph, the political leadership simply couldn't
give up its steady fix of convenient mendacity until it was far
too late. The Argentine military still hasn't recovered from that
debacle and the subsequent airing of its horrendous crimes during
the local version of the war on terrorism, and in fact no one
suggests the generals are in any way itching to get back into
the political game, much less stage a coup.
But neither does the country's discredited political leadership,
mostly Peronists and Radicals, seem to have much of a clue how
to navigate the ship of state. "While the businessmen bankrupted
the country," says Santiago Kovadloff, a former de la Rua
official, "the political leadership was directly complicit."
Although not everyone would have subscribed to that radical indictment
until recently, today Kovadloff's views are probably on the moderate
side. The implications of this repudiation for Argentina's future
are enormous. There is even a name for spontaneous outbursts of
popular rage: the escrache, which in the local slang means, "in
When the impact of the nationwide grand larceny first set
in, the dispossessed victims surged into the streets. In December,
police killed twenty-seven demonstrators before the teetering
Radical government realized it had lost all legitimacy. De la
Rua had to be hauled from the presidential palace in a helicopter.
His first replacement, a delusional provincial governor who immediately
promised to create a million new jobs, lasted a week. Finally,
on January 1, Eduardo Duhalde, a Peronist warhorse from Buenos
Aires's suburban rust belt, took over. Duhalde, the loser in the
1999 presidential election, made immediate noises about breaking
the deadly grip of the financiers and boosting the "productive"
Virtually all progressive voices in Argentina today say a
new strategy of this sort is urgently needed: pump-priming to
generate internal demand, help for pulverized local industry and
a break from the monetarist straitjacket. But even some of Duhalde's
direct collaborators, who have since resigned, say it's all talk.
Economist Hector Valle, who worked for Duhalde for thirty-five
days in the ministry of production, says his team's emergency
recovery plan assumed that no foreign investors would touch
Argentina with a ten-foot Brady bond and that the regime would
have to cast its lot with local industry to reactivate the economy.
"This meant confronting powerful interests and generating
political support for more sacrifices," says Valle. "But
Duhalde has no stomach for bold moves; he's a ribbon-cutter, and
he's wasting crucial time."
Patacones and Quebrachos
What do governments do when they have no money? Under the
theory on which convertibility of the dollar and peso was based,
the governors of Argentina's twenty-three provinces should have
slashed their payrolls and cut costs. But in some areas, over
half the work force is state-employed' and salaries were often
held up due to cash shortages even before the current disaster.
With no jobs anywhere and no safety net, provincial bosses have
been in no mood to commit political suicide for the IMF.
Instead, to avoid violent upheavals, the states have taken
to issuing their own "bonds" or IOUs to pay their bills,
including salaries. All over Buenos Aires, shop windows advise
potential clients that they will accept one or more of the dozen
quasi currencies that have sprung up to replace old-fashioned
money: Chaco in the north issues quebrachos; Buenos Aires Province
offers its employees patacones. At last count, there were fourteen
of these funny moneys circulating. Desperate shopkeepers accept
them, after knocking a percentage off their face value. The IMF
wants them eliminated, as one of its many conditions for restarting
the flow of emergency cash:
The retailers' desperation arises from the other predictable
result of the anti-inflationary miracle: a devastating recession,
now in its fourth year. It doesn't take an economics degree to
see that the artificially expensive peso drove Argentine products
off world markets and wrecked local industry through a flood of
cheap imports. Argentina's economy has shrunk some 20 percent
since 1998, and the free fall is just beginning.
Unemployment, now officially 22 percent, can only go higher.
Just in the first two weeks of March, 20,000 businesses failed,
each employing an average of ten people. Retail shops all over
the capital are liquidating merchandise at a loss before closing
their shutters for good. The only buyers in town are foreigners,
including hordes of Chileans crossing the Andes to scoop up bargains.
Poverty now affects 16 million Argentines, 43 percent of the population.
Twenty percent are officially destitute. When a livestock truck
overturned near the city of Rosario just before Easter, residents
rushed to the highway and slaughtered the stunned cattle on the
Another dramatic example of Argentina's accelerating creep
toward prehistory are the barter clubs that have sprung up everywhere
as a way around the fact that nobody can buy anything, while plenty
of useful and needed products are in ample supply. While Spain
sends charity food shipments-equivalent to sending donations of
corn to lowa-all over the capital long lines of people form with
packages and shopping carts waiting patiently for one of the prized
stalls in a church basement where the weekly session of frenzied
commodity exchange is about to begin. In one club in upscale Palermo
Viejo, at least 1,000 people clamored for a chance to crowd in
and use their paper "credits"-another money substitute-to
pick up food or used clothing or offer their skills as hairdressers,
fumigators or aroma therapists. There are now upward of 4,000
of these clubs, with their deceptive air of a 1960s food co-op,
generating the annual equivalent of $300 million in "commerce."
A recurrent slogan in the popular assemblies, pot-bangings
and other demonstrations is ":Que se voyan todos!"-the
local equivalent of "Throw the bums out!" Some organizations
actually promote dispensing with all leadership, a sign of the
depth of revulsion for what has led them to this sorry pass. Others
worry that the blanket rejection of "politicians" is
a dangerously reactionary sentiment-readying Argentina for a Fujimori-type
solution, a "nonpolitical" Bonaparte on a white horse.
There is certainly no shortage of motives for these sentiments.
That the political class is corrupt to the bone, the civil service
featherbedded beyond recognition and the union leadership complicit
with every imaginable scam is no longer in question. Congressional
deputies are so shameless that even during the current mass repugnance
at their felonious antics, one Elsa LoFrano from Chubut Province
could be appointed to a vacant Peronist seat, despite having received
a pension for "physical and mental disability" for the
past fifteen years. (The vote to seat her was 100 to 94.) But
when a longtime Cassandra, congressional deputy Elisa Carrio from
the center-left Movement for a Republic of Equals (ARI), and Otto
Reich, George W. Bush's deputy for Latin America at the State
Department, both put the blame for Argentina's problems on "corruption,"
they're not describing the same phenomenon.
Carrio, 43, was part of the alliance that brought de la Rua
into power in 1999. She broke with the ill-fated regime early
on and is now one of the half-dozen recognizable politicians who
can walk the streets without fear of an escrache. Carrio warned
early on that corruption and incompetence were tearing the model
apart. Wearing her signature mega-crucifix, Carrio says the ostentatious
hand-washing by the IMF and Bush officials is just cynical amnesia.
"Corruption in Argentina operates in complicity with foreigners.
I had to go to Washington to denounce money-laundering because
the US Embassy here was covering up for Citibank," she says.
"All the biggest corruption scandals here involved American
companies," she adds, noting that the laundering was enthusiastically
carried out by top foreign banks. If so, today's finger-pointers
were happy to cash in while the corruption they denounce redounded
to their allies' benefit.
More than the current government, the Argentine state faces
a vast crisis of legitimacy. Any plan with a chance of success
will require even more pain and therefore patience from a severely
battered populace-patience that can only be won by leaders they
can believe in and trust. Those are so scarce that one economist
suggested in dead seriousness importing a team of Finns to run
the central bank.
The escrache is the most graphic symbol of this prostrate
leadership. There are several varieties: Crowds may suddenly recognize
a hated figure from the political or business elite at an airport
and confront him with curses and even physical threats An escrache
can also be an old-fashioned demonstration, focusing on personal
shaming rather than political demands. One took place on March
23, organized by HIJOS, or Children for Identity and Justice and
Against Silence and Forgetting, composed of surprisingly youthful
relatives of those disappeared and assassinated in the 1 970s.
One of their two targets was the former archbishop of Buenos Aires,
known for his sympathies with the dictatorship.
Impunity is indeed the problem, says Carrio, but she worries
that the escrache hints of private revenge. "We have to know
what happened in the genocide of the 1 970s, plus who robbed us
blind and all the deals that were made."' She blames the
recent brigandage on the continuing impunity for human rights
crimes. "Those who tortured were liberated! Those who disappeared
people! That's where the system of truth and justice broke down.
When the torturers go free, then anyone who steals or makes crooked
deals can go free as well." Neither does it escape Argentines
that the liberator of the generals and
0 admirals convicted of some of the most vicious crimes in
modern history was none other than Carlos Menem himself, who granted
them an amnesty in 1990. The spin then was that Argentina needed
"stability," because, as a Swiss banker elegantly told
me at the time, "You can only stir the shit so far."
Given the total discredit of most political parties, people
eager for action and participation have flocked to ad hoc neighborhood
assemblies, now slowly institutionalizing themselves. These expressions
of popular wrath have mushroomed, and their representatives appear
with their increasingly worn banners at rallies and demonstrations
of all sorts. It's not clear what sort of long-term impact the
assemblies can have on broader policy decisions, and the weekly
pot-banging sessions have already turned slightly routine. But
their appearance is clearly breaking down the hegemony of the
traditional party structures, as the experience of Gladys Quinteros
Quinteros, a 40-year-old housewife in what was once the heavily
Peronist suburb of Merlo, decided to join the demonstrations in
December but found her own community "asleep." After
a few lonely vigils in the local plaza, she and some allies managed
to drum up 300 people for a protest march against the situation.
As they made their way through the streets, they were suddenly
set upon by a well-organized band of thugs armed with homemade
weapons. Twenty people were injured, and others were further abused
in the local hospital where employees are beholden to the local
bosses, clearly in no mood to tolerate spontaneous dissidence.
"The idea was to intimidate us, and they succeeded,"
says Quinteros. "People sympathize, but now they are afraid
to join in." Later, Quinteros's home was set afire and one
room badly damaged.
Meanwhile, Peronism, if not its current representatives, still
exercises a mystical lock on many Argentines. Portraits of Evita
pop up unexpectedly: in union halls of the left-wing Argentine
Workers Federation (CTA) or on the mantels of disgusted dissidents
and lapsed Peronist Youth. Gabriel Guga, 31, was a Peronist captain
in the La Matanza suburb until he became disaffected with Menem's
neoliberal deviation. He recognizes that Peronism uses public
coffers to buy political support and enrich the party elites,
as well as its pronounced authoritarian streak, its vote-rigging,
its links to the drug trade and organized crime. But Guga remains
in his heart loyal to Peronist principles, "what our fathers
and grandfathers stood for."
IMF teams were in Buenos Aires in March and April to dictate
the terms for new loans. These include measures that worked so
well for Herbert Hoover in the early 1930s, like more spending
cuts, which will further reduce internal demand. In addition to
seeking abolition of the provincial quasi currencies, the IMF
wants civil service ranks reduced and bankers let off the hook.
While the tiny US downturn last year was promptly treated with
oceans of cash, the Argentines are supposed to swallow more neolib
medicine. This is likely to occur, given the dearth of creative
alternatives from Argentina's current leadership. With no popular
support, they will probably turn to Washington to help prop themselves
up, for now. The clear political quid pro quos involved in the
next IMF loan, such as voting against Cuba at the UN or helping
with Plan Colombia, are already done deals.
Some observers are convinced the United States wants to make
an example of Argentina and undermine its MERCOSUR regional trade
pact with Brazil. to clear the path for a US-dominated free-trade
zone in the Americas. "We're the economic Guernica,"
says psychoanalyst Silvia Bleichman. "They have decided to
punish us, to crush all resistance." But some of the IMF
demands are in themselves reasonable. Any new government will
have to deal with corruption, padded civil service rosters, the
unsustainable provincial deficits. The question is who will take
charge of the major surgery and to what ends.
The sheer scale of the rapine committed by Argentina's leaders
over the past decades, sometimes in uniform, sometimes not, has
left the nation ripe for a sharp break with the past. People who
feel systematically tricked by their banks, the* armies, their
presidents and even their bishops will either despair or figure
out how to put their trust in one another and construct something
new. Carrio, one of the few who dare to predict anything, says
radical change is now as unstoppable as a hurricane. "A whole
class is disappearing, and after a brief period of anarchy, there
will be new leaders, and not just political ones," she assured
Although not everyone shares her optimism and fighting spirit,
Argentines are now alert to bullshit like never before. People
show up at street-corner assemblies to patiently consider the
activists' speeches or the comments of their neighbors, clearly
inexperienced in such matters but of necessity eager to understand
what's taking place. But for the most part, says Bleichman, Argentines
simply refuse to look ahead-what has already happened is so unlikely,
so implausible, that predictions or indeed logical faculties seem
useless. Only one, usually unspoken, sentiment garners universal
agreement in Buenos Aires today: The worst is yet to come.
Tim Frasca is a US journalist who has lived and worked in
South America for twenty years.