Argentina: Public Fed Up with Austerity

Makeshift roadblocks, picket signs and the acrid smoke of burning tires are
replacing vistas of grazing cows as the angry and jobless in Argentina's
provinces desperately try to focus attention on their plight.

Two men have already been killed at crude roadblocks. The victims, both
unemployed and fathers of young children, joined the protests in hopes of
forcing officials to expand a jobs program that would allow them to take home
a meager $120 a month.

"We have entire families here that can't feed or dress their children --
like me," said picketer Ana Macias, 42, as she sat on a dusty truck tire near
a roadblock in the northern province of Salta. A single mother of three,
Macias said the protests are the only way to pressure the government to create
work in an area where she earns just $160 a month as a street sweeper.

Argentina's provinces are boiling over in frustration at what is seen as a
lack of concern for a soaring unemployment rate, which now tops 15 percent and
is expected to rise as the nation enters its third year of an economic slump.
Economic growth is estimated at 1 percent for this year and a lackluster 2.5
percent in 2001.

President Fernando de la Rua's most pressing problem is a cash crunch, in
large part a result of interest payments coming due on $144 billion in foreign debt. Investors are
concerned that the $280 billion economy cannot grow enough to stay solvent.

As a result, de la Rua has enacted several unpopular austerity measures,
including more taxes, lower salaries and labor reforms that irk unions. On the
December anniversary of his first year in office, a poll showed 65 percent of
the public had a negative opinion of de la Rua.

The government desperately needs an emergency loan from the International
Monetary Fund. The possibility of a loan for at least $20 billion was enhanced
this week when Congress backed de la Rua's budget for next year, which
eliminates $750 million in social spending in spite of protests by opposition
Peronist party legislators. The government hopes the credit line will restore
investor confidence.

But the IMF is demanding stiff terms as a condition for an emergency loan,
including a five-year spending freeze for all 23 of Argentina's provinces,
which are already reeling from the recession. Only three provinces can
currently balance their budgets with tax revenues from local industries, while
the remainder operate in the red and depend on federal funds to make ends meet.

The economic downturn is being exacerbated by a widely reported national
loss of confidence. There has been a wave of emigration this year,
particularly by young people, and consumers are spooked -- not a good thing in
a country where foreign trade accounts for only 8.5 percent of the economy.

The problems of the provinces have traditionally taken a back seat in
Argentina, because almost one-third of the country's 37 million people live in
the capital, Buenos Aires, or the surrounding province bearing the same name.

"Half of our children live below the poverty line," said Artemio Lopez of
Equis Consultants, which recently issued a report on the crisis that showed
800,000 children live in homes that earn an average of $1 a day. "The only
place without a population of have-nots is Buenos Aires."

Officials underestimated public reaction to the proposed spending freeze,
which took the form of a successful two-day national strike last month.

The strike centered on opposition to the IMF and focused on Anibal Veron, a
jobless truck driver fatally shot in the head during earlier protests and
roadblocks in Salta. The 37-year-old father of five had been owed nine months
back pay from his last job when he was killed in a melee after police forced
picketers off a highway.

The other victim of the unrest was Ramon Molina, who was shot to death by a
motorcyclist trying to break through a blockade in the northern city of
Resistencia.

Molina, 23, a dirt-poor cardboard recycler who earned $2 to $3 a day, had
been enticed to the roadblock by a rumor that protesters would be paid $25 by
unions for joining the barricade.

"Nobody cares about the unemployed. We are orphans," said an angry Veronica
Francia, who witnessed the shooting.

But provincial problems are not limited to unemployment.

In Tierra del Fuego, the government owes $650 million to banks, day-to-day
service operators and state retirement funds that were "looted" by a previous
administration, according to Julio del Val, the province's economic secretary.
In fact, Tierra del Fuego's economic situation is so serious that in June the
Telefonos de Argentina phone company threatened to cut service to provincial
government offices if the utility did not receive $1 million it was owed by
the state. The debt has since been renegotiated, company officials say.

Even the weather is punishing Argentines. In the three provinces
surrounding Buenos Aires, heavy rains this fall have flooded 3.8 million acres
of crops and pastures, causing an estimated $70 million in losses.

For farmers, this has added insult to injury.

In October, farmers staged their own street blockades in a half dozen
provinces to urge the government to allot at least 1 percent of the federal
budget for their needs. A drop in commodity prices together with the decision
to keep the value of the peso pegged to that of the dollar has made it hard
for Argentina to compete in global markets against countries with cheaper
currencies.

"The world situation is complicated because we have to compete with
European and American subsidies while we get taxed at home," said Ricardo
Grether, secretary of the Rural Confederations of Argentina.

What irks Grether most is that under equitable conditions, Argentine
commodities would be competitive in world markets. But interest rates as high
as 15 percent and import quotas by other countries have stifled exports
considerably.

"It's distressing," Grether said.

Also distressing to many is the growing gulf between the wealthy and the
poor.

Argentina has the highest per capita income in Latin America -- $9,000 a
year. But income distribution is more unbalanced than at any time in the past
25 years, according to another Equis study. The richest 10 percent of the
population earns a salary almost 25 times higher than the poorest 10 percent.

"The kids in these homes live a turbulent life, dropping out of school and
repeating the cycle of poverty of their parents," Lopez said.

Argentina has always boasted of its highly educated population, but it is
an increasingly hollow claim.

A report by the government's National Youth Directorate shows that 66
percent of 20- to 24-year-olds in the province of Buenos Aires do not attend
college, trade or secretarial school, condemning them to low-paying jobs. In
Tierra del Fuego, the figure is 71.5 percent, and in the southern province of
Santa Cruz it is 76.4 percent.

In the northern province of Santiago del Estero, 23 percent of youths left
high school before graduating. In neighboring Tucuman province, the figure is
20 percent, and in the southern province of Chubut, 18 percent.

"The greater priority is simply surviving and getting enough food," said
sociologist Viviana Norman of the National Youth Directorate.

"As much as they wish or want to continue studying, they can't because they
have to work -- and that assumes that they can find jobs."

• 194 World Financial Institutions