March 24, 2001
Speedy Start on Emergency Economic Plan in Argentina
By CLIFFORD KRAUSS
BUENOS AIRES, March 23 � The Argentine Congress moved quickly
today
to enact a part of the emergency economic package proposed by
the
new economy minister, Domingo Cavallo, in a move to thwart tax
evasion.
But legislative leaders refused to grant Mr. Cavallo the
immediate
unilateral powers to overhaul state agencies and pension and
labor
laws that he said he needed quickly to jump-start an economy
that
has been stalled for more than two years.
President Fernando de la Rúa turned to Mr. Cavallo, the third
economy minister in three weeks, to shore up a government that
has
appeared increasingly adrift. The congressional action today
gave
the government a little breathing room at a time of swirling,
apparently groundless rumors that Mr. De la Rúa would soon
resign or
devalue the Argentine peso.
Debating through marathon sessions that began Thursday night and
continued into this evening, Congress approved a new tax on
financial transactions and a measure to require all consumer and
business deals valued at more than $1,000 to be conducted by
check
rather than cash. The measures will have little immediate
economic
effect, but they are intended to show that the splintered ruling
Alianza coalition and the Justicialist opposition are ready to
join
hands in a crisis.
In response, the benchmark Merval stock index rallied strongly
today, gaining more than 6 percent.
The stock and bond markets had been plummeting for weeks as
investors feared an imminent financial collapse. Student and
labor
unrest flared earlier in the week as Mr. Cavallo's predecessor,
Ricardo López Murphy, proposed an austerity package that would
have
sharply cut education spending.
Mr. Cavallo's appointment on Tuesday brought a pause to the
social
unrest, as he retreated a bit from budget-cutting and moved
forward
with a supply-side plan to cut taxes and with regulations to
bolster
investment and consumer confidence. But the government remains
badly
divided, and labor leaders have warned that street protests
could
resume any day.
Mr. Cavallo, a conservative who served as economy minister in
the
previous government, has asked Congress to give him emergency
powers
to privatize government agencies and reorganize tax, pension and
labor laws. Mr. Cavallo hopes to shave $3 billion from a
widening
budget deficit to meet International Monetary Fund targets set
late
last year. Otherwise, economists fear Argentina could default on
payments on its $150 billion foreign debt.
Legislative leaders said that they wanted to meet with Mr.
Cavallo
first to discuss the details of what he had in mind, and said
that
they would be willing to vote through the weekend on his
proposals.
Leaders of Mr. De la Rúa's own Radical Party have grumbled over
granting Mr. Cavallo so much power. Justicialist leaders,
meanwhile,
are concerned that Mr. Cavallo would rescind decades of policies
set
by the former president and party founder, Juan Domingo Perón,
in
the 1950's to give health insurance and employment protection to
Argentine workers.
Opinion polls show that Mr. Cavallo has popular support among an
increasingly desperate and pessimistic Argentine public. The
minister, a 54-year-old Harvard graduate, showed himself to be a
problem solver in 1991 when he pegged the value of the peso to
the
United States dollar to stem hyperinflation.
In his first few days as economy minister, he has projected an
image
of confidence, publicly chuckling at the rumors of imminent
collapse
as the work of Brazilian speculators.
Despite the return to calm after a partial national strike on
Wednesday, government officials were using apocalyptic language
to
pressure congressional leaders.
Armando Caro Figueroa, the deputy cabinet chief, said today that
if
Congress did not go along with Mr. Cavallo's request, "the only
alternative is that we will continue to slide into a decadent
spiral
similar to what happened to the former Soviet Union."
Several senior opposition leaders appeared in agreement. Eduardo
Duhalde, the Justicialist Party leader in Buenos Aires province
and
a 1999 presidential candidate, called on his party's legislators
to
rally behind Mr. Cavallo. "This is no time to joke around," he
said.
Unemployment has risen to nearly 15 percent as the economy
declined
by more than 3 percent in 1999 and by about a half percent in
2000.
The cabinet, meanwhile, has been a revolving door since October,
when a Senate bribery scandal led to the resignation of Mr. De
la
Rúa's vice president.
The economic and political situation stabilized briefly after
the
I.M.F. and private banks promised as much as $39.7 billion in
assistance last December. But since then a global economic
slowdown
and fallout from Turkey's financial crisis have depressed
investment
and tax revenue.
Copyright 2001 The New York Times Company | Privacy Information
Regards
Karl Carlile
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