Argentine war cost: more than junta bargained for

As war clouds hover ever more ominously over Argentina in its conflict with Britain for the Falklands Islands, Argentines are getting an inkling of what the struggle is costing.

It isn't going to be cheap.

''Nobody can really estimate the cost of this war,'' comments a financial specialist close to the Argentine government. ''But it will be far more, however , than anyone in government or anywhere else ever expected.''

Already, it is estimated that simply running the country on a war footing has added at least $250 million to the budget since April 2, when Argentina seized the Falkland Islands.

That tally may be as high as $500 million -- and the total is climbing daily.

These figures do not include the cost of new weaponry, airplanes, or spare parts. And those requirements are bound to increase in the weeks immediately ahead -- whether or not Britain goes through with a landing on the Falklands.

Argentina has clearly gotten more than it bargained for in its action April 2 .

The country was ill-prepared for the conflict. With the world's highest inflation (heading toward 200 percent this year), a steadily increasing unemployment rate (offically 12 percent, but closer to 20 percent), and sharply lagging industrial production, Argentina has been riding an economic roller coaster for a generation or more.

From the strictly economic standpoint, this was hardly the moment to add the burden of warfare to an inflated, deficit-ridden budget. It is as if Germany's Weimar Republic in the early 1920s had decided on war against Britain and France - rather than waiting for Hitler to go to war in the late 1930s when the German economy was better prepared for the exercise.

In the several months immediately before April 2, Economy Minister Roberto Teodoro Alemann was launching a three-pronged attack on Argentina's economic troubles: deregulation of Argentina's heavily regulated economy, a sharp attack on the inflation spiral, and return to private hands of a sizable portion of nationalized industry.

The outlines of the program had become clear. Some of its details were already in place. And the effort to curb inflation was beginning to show results.

All that is now history.

The program has been scrapped, forgotten -- and inflation is again battering the economy. This is expected to worsen the longer the conflict continues.

To cope with the escalating costs of the conflict, the government has in the past fortnight boosted taxes on cigarettes, liquor, and some imports. It has slashed some public spending, particularly in the social field, and it has begun the printing of more and more pesos, the Argentine currency. Printing more money is likely to fuel more inflation.

''But there isn't any hope of cutting the inflation rate,'' said an Economy Ministry spokesman, ''till we end the conflict.''

On top of all this, only about 50 percent of industrial capacity is being utilized. This has cut people from the employment rolls in ever-increasing numbers. Take automobile production, for example. In the first four months of 1982, Argentine automobile plants produced 55 percent fewer vehicles than in the same period of 1981.

Moreover, if United States, British, European, and other nations' economic sanctions against Argentina continue, they could begin to hurt the economy. So far, sanctions have had more symbolic than actual effect.

Indeed, most of the economic trauma spawned by the conflict has been more talked about than felt so far.

But now Argentines are becoming aware of it as their pocketbooks are hit by the renewed inflationary spiral, new taxes, and lower government spending.

So far, these have not caused any major public protest. They could with time. After all, this is a nation that lives with abundance.

The average Argentine is a middle-class individual who eats better and enjoys more luxuries than any of his Latin American contemporaries. At least he did until recently.

But as the country moves toward possible war with Britain, the Argentine is beginning to feel more of the economic pinch of war.

Argentine leaders admit the country's foreign debt, soaring now to $35 billion, is too high. This year alone, Argentina needs to come up with $11.7 billion in principal payments and debt servicing to US, European, and Japanese creditors.

The money isn't there -- and with the cost of conflict escalating, this pinch will get even tighter. Some rollover of the debt will be necessary. Mr. Alemann in New York Monday, indicated that some creditors are already telling him they will postpone some payments.

That, of course, will add to Argentina's total debt, because the rollover of payments will add new and higher interest to the tally.

Moreover, Argentina is going to have to find international financing to pay for some of the costs of the war. There is a slightly higher-than-expected surplus in Argentina's foreign reserve account at the moment, but it is not expected to last long. The nation's biggest foreign-exchange earners -- wheat, orn, and meat exports -- will not be enough this year to cover costs of the conflict.

The Soviet Union, Argentina's largest market, pays hard cash on grain purchases. But prices for grain are down. Argentina's corn production in 1982 is likely to be 20 percent lower than last year.

To help offset war costs, the government set up the Fondo Patriotico. Individuals, companies, and labor unions have contributed 214 billion pesos ($15 million). But this does not go far in war.

The fund's sponsors admit that its big value is not in the money flowing in, but its stirring of patriotism. That, however, will not pay for the war.