Argentina

WE HAVE had a year of peace.” This sums up the opinion of most Argentines on the administration of President Arturo Illía, who took office in October, 1963, after several years of government by decree and constant skirmishes between rival military groups.

While it may not look so peaceful to an outside observer factories occupied and management held prisoner, student riots, and Peronists greeting De Gaulle as rowdily as though he were Perón himself– at least the tanks have not rolled, or the government tottered. The military faction, the “blues, who won the last internecine showdown in September, 1962, evidently meant it when they promised that henceforth the armed forces would stay out of politics; for good measure, President Illía has been prudent in his dealings with them.

Parliamentary procedures are back in use; and though Illía rashly proposed the enlargement and reorganization of the Supreme Court to make it more amenable to his politics, the proposal is languishing in congressional committees rather than being implemented by force. The state of siege, with its attendant arbitrary arrests, under which Argentina had lived for years, has not once been invoked.

These are, however, negative credits, the mere absence of evil, and many Argentines tax the government with inertia. In one respect nevertheless, it is becoming increasingly evident that the inertia has been useful. Ever since Perón was overthrown in 1955, his faithful followers, still estimated to be some 30 percent of the electorate, have been an undigested lump in the body politic. Various military governments tried to outlaw them; President Arturo Frondizi tried unsuccessfully to capture them. President Illía has simply given them a long leash.

In the spring of 1964 the Peronist unions, with the reluctant support of “independents” and Communists, announced a “plan of battle,” which was to culminate, hopefully, with such revolutionary effervescence that either the military would take fright and seize the government or the old dictator could return on a wave of bubbling triumph. Illía, however, did not even send in the police, let alone the armed forces, to liberate the occupied factories. The matter was simply thrown into the courts, and the plan fizzled out: it takes two to make a fight. Peronists for the first time since 1955 were allowed to march through the streets and demonstrate in the squares under their old banners, singing their old songs. But the squares, once filled to overflowing, are now too big for them.

Now that Peron’s attempt to return has collapsed not only because of the government’s smart diplomacy among Argentina’s neighbors, which deprived him of a staging ground, but because the old cry Our Lives for Perón found no echo in the prevailing emptiness – the various tendencies, and personalities, within the movement will doubtless pull apart in ever more diverging directions. For Peronism was never held together by a central doctrine but only by a central charismatic leader. Although proclaimedly the party of the underdog, it never defined a position on agrarian reform, workers’ rights, or fiscal policy. Its main achievements were some much touted workers’ conquests, some expropriations of foreign companies, so hit-or-miss that they are still playing havoc with the economy.

The void on the left

With the fading of the “leader,” the central problem of Argentine politics will become much clearer: where stands the left? Until now, Argentina, because of the Peronist ambiguity, has never had a significant one. The socialists are a splintered group of protesting intellectuals; the Communists, an insignificant minority in spite of their control of a few unions and much noise about a handful of Castroite guerrillas in the north. The Christian Democrats, heartened by the victory in Chile, have greatly tarnished their image by blatantly opportunistic deals.

The void on the left has also involved the traditional parties of the center and right in muddled demagogic politics, trying both to capture the rudderless Peronist votes and to keep faith with their normal clientele. For years Perón has been the touchstone by which Argentine politics defined itself. Now there may emerge a more meaningful alignment.

Bumper wheat crops

The economy, which has been battered by one of the deepest depressions in the post-war Western world, is also improving. This is due chiefly to two factors, neither of which has long-range possibilities.

In a year of crop failures elsewhere. ideal growing conditions in Argentina, on a larger acreage due to a prematurely announced support price which turned out to be about $9 a ton above the world price – produced the largest wheat crop in recent times. This not only provided much-needed foreign exchange; it also spread money into the interior, depressed by two years of drought. The 1964-1965 crop is reported to be equally promising, although world conditions for its sale are not likely to be so propitious. Agricultural experts warn, however, that these bonanzas are not due to any important technical improvements. Argentine yields, hardly better than in pre-war times, still depend more on nature’s bounty than on modern husbandry.

New money also flowed into the economy from a more dubious source – the government printing presses. Uha had inherited a huge internal debt: to government suppliers, to pensioners, even to government employees. The previous government had kept only half its engagement with the International Monetary Fund; it had not increased the money supply, but it had spent, on paper, about twice as much as it collected in taxes. The result was a vast crisis of illiquidity. Factories worked part time, shops were empty, and beggars appeared on the streets of Buenos Aires for the first time in a generation.

Illía‘s solution was to allow the agreement with the IMF to lapse, to authorize the Central Bank to increase its emission by 25 percent, and to pay all arrears. He has not, however, tackled the tremendous government deficit, which again promises to be in the neighborhood of 50 percent – although Argentine finances are generally so untidy that no one is prepared to advance exact figures.

Nevertheless, after the deflation of 1962-1963, this new injection of means of payment has produced a certain sense of prosperity. Prices in November had not risen as fast as wages; it was hoped the increase would be held to about 25 percent for 1964. The growth rate of the national product was expected to top 9 percent, a seemingly heady rise except for the fact that even this would barely regain the ground lost since 1961, with no allowance for the population increase since then.

Surplus in trade

A third element in the present sense of economic well-being — and perhaps a more permanent one in view of present policy — is the surplus in the balance of trade. While this is not likely to reach the $500 million of earlier government estimates, it is still considerable. It has resulted from the large wheat harvest, favorable prices for beef which have more than compensated for smaller shipments, and a significant increase in the export of a wide variety of nontraditional products. Also encouraging is the diversification of Argentina’s markets, not only within the Latin-American Free Trade Area, but in Europe, too, where Italy has now replaced Great Britain as Argentina’s chief trading partner.

Curtailing imports

While exports are thus showing a favorable trend, imports have been greatly contracted. The huge expansion in capita] equipment which accompanied the 1961 boom has not yet been fully employed — in some cases not yet paid for; prohibitive restrictions have discouraged all but the most essential imports. Argentina is living off its fat. This surplus has enabled the government to meet its obligations on its huge foreign debt without resort to further borrowing or to refinancing, a source of pride to this nationalistic adminis-

tration but an expensive and unnecessary piece of bravura to some economists.

The short-term prospect is thus a pleasant one, particularly in contrast to the desolation of two years ago. For the longer term, opinion is much less sanguine. The beginnings of inflation are always pleasant; the enormous budgetary deficit makes it doubtful that inflation can be held within acceptable limits.

Furthermore, this renewed prosperity is not the result of new enterprise, and the climate for investment, particularly from foreign sources, is hardly auspicious. Two episodes in particular have perturbed international financial circles: the annulment of the oil contracts signed by President Frondizi in 1958, and the cancellation of an agreement with the World Bank whereby some $95 million would be made available for much-needed expansion of electric power production in greater Buenos Aires on condition that the government-controlled company be reorganized along more rational lines. Much of the money had already been spent before the government decided that this condition was incompatible with its sovereignty. The World Bank has been very forbearing in the face of outright insult. However, other bankers may consider it a discouraging precedent.

The vexed question of the oil contracts has been dragging along for over a year. They were annulled as unconstitutional: they were not the result of public tenders, nor were they approved by Congress. Wild accusations of graft have also been bandied about by Frondizi’s political enemies. The real issue in Argentina, however, is not so much legal as emotional and economic. On the one hand are stridently nationalistic feelings about “our” oil; on the other, the country’s incapacity – financial, certainly, and probably technical – to extract, transport, refine, and market the oil. The foreign companies have continued to pump and deliver oil to the state monopoly on a hand-to-mouth basis. Almost all of them have stopped drilling, and the country is once again importing oil in increasing quantities.

While the question of compensation for investments already made thus hangs fire, a recent deal with Russia for 400,000 cubic meters of crude, in exchange for wool, hides, linseed oil, and some nontraditional exports, has not improved the atmosphere as far as the repudiated Western oil companies are concerned. In any case, this nullification of a president‘s signature sets an ominous precedent for future investors.

A further blow to Argentina‘s credit abroad has been the reinstitution of exchange controls, and the snail’s pace at which they function. In theory, foreign currency is made available by the Central Bank for properly documented remittances abroad. Actually, the formalities take so long that many companies have suffered through succcessive devaluations while their pesos are on deposit with the authorities.

How much planning?

In this atmosphere of hostility to foreign investors and of domestic fiscal disorder, the publication in October of a development plan was something of a wager. A development plan has been specified as a prerequisite for Alliance for Progress aid, but Argentina is the last major country to present one. The recent periods of “laissez-faire” preaching which marked Alvaro Alsogaray’s various terms as Minister of the Economy were hardly conducive to economic planning; the concepts and techniques involved are unfamiliar and to some extent distasteful to most Argentines.

In any case, the country is hardly an example of coherent development, with a high percentage of its production devoted to an automoi tive industry whose market is limited to 22 million Argentines, along with an antediluvian communications and transport system, chronic power shortages, and technological and fiscal neglect of Argentina’s one great natural resource, the land. The much-heralded development plan, elaborated in camera by government officials, turned out to be more of an analysis of present distortions than an articulated plan for the future. In this respect, it is at least a useful tool, since Argentine statistics have been inadequate.

As a projection of future growth, however, it is not only extremely modest, aiming hopefully for a growth rate of about 5 percent per annum, but also very reticent in the matter of priorities and financing. The expansion it envisages will be mainly in the construction industry, which does not require great injections of foreign credit. Critics point out, however, that in the present state of local finances, even pesos are scarce. Various projects with international financing are stymied for lack of local counterpart funds.

Its reticence on the question of priorities (hydroelectric or thermoelectric plants, and in which region? agriculture or industry? roads or railroads?) is doubtless a reflection of the persistent colorlessness of Illía’s government. Beyond a strong chauvinistic stance, which alienates no voters, it has, so far with some success, tried to be all things to all people. Priorities, however, are the very essence of planning, the expression of a consensus on national goals. In this, as sociologists have long been pointing out, and as their own history demonstrates, the Argentines are notably lacking. The streets of Buenos Aires have been echoing lately to students marching with the cry “Books, yes; boots, no!”–a protest against a budget which grants three times as much to the armed forces as to education.

Argentina has long been one of the most literate countries in Latin America, but the illiteracy rate is growing. Worse still is the “brain drain,” the migration of gifted Argentines to greener pastures abroad. The housing problem of the middle and upper classes is well on the way to a solution, thanks to impressive private building ventures; but almost no progress has been made in lowcost housing, where the need is greatest. Social priorities as well as economic ones will have to be agreed upon before Argentina can move ahead as a coordinated nation.

The development plan is now to be submitted to private sectors for discussion and comment. Decision on its implementation can thus be usefully postponed. “The politics of the siesta,” say some critics; to which the government appears to reply: “Peace and quiet are the best cure after a long illness.”