Argentines Raise Doubts About New Reform Plan
ARGENTINA struggled through two difficult periods of hyperinflation in two years, and seemed about to face another, when Domingo Cavallo became economy minister four months ago. His "Autumn Plan," begun in February, aims to set straight imbalanced government accounts, a prime cause of inflation. Already it has improved tax collection, cut federal expenditures, and put strict limits on money printing.Skip to next paragraph
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Yet skeptics abound. Mr. Cavallo's economic plan faces the same powerful political and economic pressures that have caused nine such plans to fail since 1989.
Although many economists doubt the plan can succeed in turning the economy around, a spectrum of observers that includes businessmen, government officials, and social scientists say it is nonetheless a step in the right direction. Even if Cavallo's plan ultimately flops, they contend it will have helped lay the foundation for a successful return to political and economic stability.
So far, the plan has met with some success. Inflation is falling, down from 27 percent in February to about 3 percent last month. Tax revenues have increased to levels higher than expected. And consumers, with a real jump in purchasing power, have been buying cars, appliances, and food at such an increased level that factories cannot keep up with demand.
Cavallo's plan, which also includes pressuring business to lower prices, complements moves by predecessors to shift the entire economy toward deregulation of industry, trade liberalization, and the selling off of government-run businesses to the private sector.
Confidence and capital
Two weeks ago, Cavallo announced a tax reform bill to increase revenues and encourage Argentines to bring savings back home from overseas banks.
Restoring confidence is crucial. Argentina's bountiful countryside was once thought to be an everlasting source of wealth that would bring the country to the top ranks of the world's economies. But for reasons many Argentines are still trying to discover, the country's economy began to stagnate in the 1970s.
After decades of blaming the government for their bad experiences, Argentines are beginning to look to themselves to enact change that will take their country toward prosperity.
"More people are seeing that in reality we are all guilty," says Beatriz Tountoundjian a sociologist. They see "that the state merely reflects society."
Even the biggest critics of the Cavallo plan admit that the public supports the government policy, showing that many Argentines have rejected the old notion that the economy should revolve around a federal bureaucracy that gives privileges and protection to unions and business in return for political support.
Recent protest marches that brought federal action against the provincial government of Catamarca are indicative of the switch to a more activist citizenry less loyal to political parties, says Rosendo Fraga, director of the Union for a New Majority Study Center, a think tank.
"The power of political parties, the military, unions, and businessmen, is being transferred to the individual," Mr. Fraga says. The individual is "recovering his share of autonomy, of power, that was previously given over to institutions."
That new attitude, many say, has arrived as Argentines have gained greater access to information about the world around them, and opened their eyes to conditions in their own country.