Argentina 16. 4 percent unemployment rate

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Argentines pray hard times will end 16.4% jobless as economic crisis drags on

Elizabeth Love, Chronicle Foreign Service Saturday, August 11, 2001 ©2001 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/08/11/MN214438.DTL

Buenos Aires -- Argentina's wrenching economic crisis has reached such dire proportions that it is overwhelming not only those struggling to earn a living but dead patron saints as well.

In the midst of a three-year economic crisis that has left 1 in 3 Argentines in poverty, nearly 1 million faithful flocked to a modest parish this week to pray to San Cayetano, the saint of work and bread.

The record-breaking crowd reflected a growing despair over the country's 16. 4 percent unemployment rate -- the highest in years -- and draconian austerity measures imposed by the government of President Fernando de la Rua to keep Argentina from defaulting on its $127 billion debt.

"With de la Rua, everything is going backward -- things keep getting worse instead of better," said Nestor Ferreiro, a 38-year-old unemployed pharmaceutical worker who ekes out a living doing odd jobs. "Things have never been as bad as they are today."

Hundreds of thousands waited for hours at the San Cayetano church in the working-class neighborhood of Liniers to touch or view a statue of the venerated saint, a 15th century Italian nobleman who abandoned everything to work for the poor.

"San Cayetano was a very humble man. I think he would have hidden after one look at those huge crowds crying out for work and food," said Sister Mary Francis Vanino.

Many of the disenfranchised have done more than just pray.

In the past seven months, the rising unemployment rate has sparked an epidemic of street protests. Irate picketers have barricaded highways more than 638 times to protest the austerity measures, according to a study by the New Majority, a regional economic think tank.

"We are going to kick those neoliberals right out of government," said protest leader Luis D'Elia, a councilman from the nearby municipality of Matanza, in reference to free-market advocates.

After two days of strikes and protests this week, movement leaders on Wednesday urged the jobless to block roads again for three days next week.

The unemployed "have grown into a national protest movement with thousands of militants," noted political analyst Rosendo Fraga.

Many economists say Argentina's problems are exacerbated by a decade-old policy that pegs the local peso currency to the U.S. dollar. While the approach ended chronic hyperinflation in 1991 and stabilized the economy, the scheme has made Argentina less competitive because consumers shun more expensive Argentine products for cheaper goods made in Brazil and Chile, economists say.

As the recession turned into a depression this year, some economists have suggested abandoning the dollar-convertibility scheme, arguing that the peso is overvalued. But government officials insist that the dollar-peso link is key to the nation's long-term economic health.

"Argentina will not devalue nor default on debt payments because it doesn't want to destroy the trust it deserves, however grudging that may be," said Economic Minister Domingo Cavallo.

Cavallo, a hyperkinetic, Harvard-trained economist who spearheaded the drive to impose the dollar-peso parity a decade ago, is believed to wield the real power in the government. In contrast, de la Rua is portrayed by political cartoonists as catatonic or asleep. Cavallo is the third economic minister in the past 19 months and is well aware that previous austerity plans fell short of getting the economy back on track.

Last month, rumors of a devaluation triggered a run on banks, as jittery Argentines withdrew $6.5 billion, or 24 percent of total dollar reserves. Since then, government officials have worked hard to restore confidence in the economy, both at home and abroad.

Last month, de la Rua strong-armed congressional approval of a "zero deficit" law to keep public spending within actual government revenues for the rest of the year. The president then imposed austerity measures that include wage cuts of 13 percent for public employees and state pensioners who earn more than $500 a month. This comes on top of an earlier 12 percent to 15 percent reduction in state employee salaries last year.

Critics say the new austerity package will cause even more suffering.

"This zero-deficit law only means zero education, zero health," said Marta Maffei, head of the Confederation of Education Workers, which staged a weeklong strike in July over unpaid salaries.

The new measures will also allow public employees in a handful of provinces to be paid partially in debt bonds as governors struggle to honor a five-year spending cap that they grudgingly approved last year. The bonds can be used to pay taxes, utilities and phone bills.

While international investors have welcomed the new measures, many still fear a ripple effect. The presidents of Chile, Brazil and Mexico have even written President Bush about the need to shore up Argentina's failing economy.

"We are in a danger zone," Chilean President Ricardo Lagos told reporters this week in Santiago.

On Thursday, three top Argentine officials traveled to Washington to secure $6 billion to $9 billion in emergency funds from the International Monetary Fund to guarantee dollar reserves in the event of another run on the banks.

Cavallo and other economists hope the combination of the "zero deficit" law,

new funds to shore up reserves and continued austerity measures will be enough to reassure nervous investors.

"How long will that take? I don't know," said Jaime Campos, who heads a foundation aimed at attracting investment to Argentina. "Investors like to see clearer signs of growth before taking the plunge."

Meanwhile, even though stocks appear to be rallying, most Argentines remain glum as even national icons fall prey to hard times.

The nation's beloved top soccer leagues are on strike until management pays an outstanding $46 million owed to players. Aerolineas Argentinas, the flagship airline, is on the verge of bankruptcy and is up for sale. Even the nation's famous beef industry has been hit hard by foot-and-mouth disease.

"There is a saying in Argentina that we are a country with everything, yet we have nothing," said Susana Flores, a San Cayetano pilgrim.

©2001 San Francisco Chronicle Page A - 8

-- Martin Thompson (mthom1927@aol.com), August 11, 2001


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