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STRATFOR.com
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THE INTERNET SOURCE FOR GLOBAL INTELLIGENCE
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Argentina: Governors In, Reforms Out
April 24, 2002
Summary
Argentina's political establishment has again chosen to postpone dealing with the country's problems rather than face them head on. Congress's failure to even debate an emergency economic proposal, and the subsequent turnover in President Eduardo Duhalde's Cabinet, leave provincial governors as the main arbiters in Argentina's crisis. This could foreshadow a breakdown in central authority. It also will prompt an end to IMF aid negotiations and a more rapid exodus of foreign companies, deepening Argentina's economic pain and its global isolation.
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Analysis
Argentina's Congress refused April 23 to consider an emergency economic proposal put forth by the government, leading to the resignation of Economy Minister Jorge Remes Lenicov. Congress instead was set to debate an alternative plan that would re-establish firm government control over citizens' ability to withdraw savings from banks.
A lack of political will among Argentina's lawmakers and president led them to abandon the country's best chance to finally begin addressing its economic problems. Rather than face public anger by approving the Economy Ministry's unpopular "Bonex" plan -- which would change 60 percent of bank deposits into government bonds -- Argentina's leaders have opted for yet another Band-Aid that will only worsen matters. President Eduardo Duhalde's acquiescence has severely weakened his government domestically and nailed the coffin closed on International Monetary Fund aid. Argentina's provincial governors now will begin to exert more control over policy, leading to greater decentralization and a lack of overall policy cohesion.
A constitutional crisis could emerge over a proposed law, set for debate April 24, that would restrict the power of the courts over banks. Meanwhile, foreign companies -- particularly banks -- increasingly will cut their losses and pull out of Argentina altogether as the hope for a resolution to the crisis evaporates along with the value of their assets. This will sink Argentina even deeper into isolation and weigh on neighboring countries' currencies and their ability to attract foreign investment.
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(c) 2001 Stratfor, Inc.
Dan
Argentina: Governors In, Reforms Out . . .