Forwarded from Nestor (Cavallo)

Louis Proyect lnp3 at
Wed Jun 20 08:27:55 MDT 2001

Johannes schreibt:

"The Argentinian 'pseudo-devaluation' dominates today's Americas
page: They are carrying two reports on Argentina and an additional
editorial, another report deals with the effects on Chile. There is a link
to the latest IMF Argentina report as well.

One of the reports concludes: "Finally, investors returned to the questions
about Mr Cavallo himself. Is he just distracting from Argentina's fiscal
problems with so much financial legerdemain? Or is he waiting for the right
moment to implement the politically unpalatable reforms the market wants?"

Any comments?"

Some. Cavallo is walking on a loose rope.

a) The bloc that supported him during his first term as Minister of Economy
is beginning to crack and split in two. On the one side, there lay the
financial commmunity and their foreign counterparts (including FT and
similar bunches of organized wastepaper). On the other side, the few large
corporations, such as Techint/Dalmine/Siderca of Eng. Rocca (the world´s
largest single producer of seamless [ìs this good English?] steel tubes),
which propose for Argentina a path of industrial production for export.

The financial bloc is interested in keeping the exchange rate untouched,
because all of their earnings come from the "exchange insurance" provided
by the peg. That is, they invest 100 dollars in Argentina, they reap
unbelievably high rates, then they leave the country at the same exchange
rate they entered it. The so-to-say "industrial export colony" bloc wants
some devaluation because the conditions for competition have become
intolerable even for them, and the domestic market has become a wasteland,
so that they begin to exert pressure for a devaluation.

b) Cavallo is trying to keep the struggle within reasonable limits, and to
preserve the unity of these two forces, which -he knows very well- are the
only support he can count on. Thus, he tries to devaluate without
devaluation. This slight modification in the peg system has been the
introduction of a multiple exchange rate system, in fact a devaluation,
which of course will be paid for by the Argentinean people. The financial
sector, however, is not comfortable with this policy because, under the
current conditions of national outrage and social unrest, they fear that
any step away from the trodden path may take the country back to its old
policies of economic defense.

It should be noted that the element of ideologic hegemony is very important
here. The managerial layers, which for a quarter of a century have been
nurtured in the ideology of subservience to "globalization" or "foreign
capital", have been shocked by the Aerolíneas swindle, and there is a crack
there, a crack through which the Shylocks fear -not unreasonably- that a
new form of consciousness for the upper layers of our "middle classes" may
sneak in.

c) The measures he has taken will, in the end, prove unfeasible. But this
is a different story. In the meanwhile, two more people are shot (this time
again in Mosconi, Salta), and more than 55 children die daily of hunger or
social illness in the Argentina that he built. This is something neither
the "industrial" nor the "financial" fraction of the antinational bloc are
interested in changing.

So, we shall keep fighting. This is also something the FT does not forget.
And it makes them nervous, of course.

Lic. Néstor M. Gorojovsky

Louis Proyect
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