Argentines Dig Up Dirt That May Bury Reforms

Graft charges, led by ex-minister, may hurt Menem

A country's customs agency is not usually a controversial topic, but in Argentina the walls tell a different story.

Across this cosmopolitan capital, graffiti on government buildings, freeway underpasses, and walls suggest the public is taking particular interest in a service that has been caught up in a caldron of corruption stewing here.

"Customs to the People!" reads one red-spray scrawl. The graffiti reflects indignation over reports of up to $10-billion worth of goods that have been smuggled into Argentina in recent years through an "underground customs" operation, and of lucrative relationships between customs and other officials and shady business interests.

The customs scandal is just one of several corruption cases that have burst on the scene in the months since President Carlos Menem fired his reform-oriented economic minister, Domingo Cavallo, in July. "Corruption" is suddenly a word on everybody's lips. And as in other Latin American countries, as public conviction grows that something smells in government relations with private business, tolerance for the hardships that are part of economic reforms decreases.

In recent weeks Mr. Cavallo has accused members of Menem's Cabinet, including the interior and justice ministers, of alleged wrongs ranging from illicit enrichment and corrupt involvement in the privatization of government services to manipulation of justice.

And in a high-profile official probe of charges that IBM allegedly bribed the state Banco Nacin to win a $256-million contract, Cavallo has testified that Menem's chief of staff knew that wrongdoing was taking place.

"Many people now say in an attempt to discredit me that I am making these accusations because I am no longer minister," Cavallo said during a trip to Venezuela last week. "But the truth is that for the past year I have been warning that in my country exists a huge mafia seeking to control airports and customs, and which already controls part of the mails, under the cover of private mail services."

Cavallo, who plans to run for Congress next year and perhaps president in 1999, is facing libel suits and charges of political opportunism in return for his corruption crusade.

The corruption charges are taking their toll on the once high-flying Menem's popularity and are affecting public opinion of economic reforms.

People who once revered Menem for ending 5,000-percent inflation rates increasingly reject the job cuts, privatizations, and social-service curtailments that are part of the reform. While the public recedes into joblessness or tougher living conditions, officials and the wealthy are seen as using reforms to grab more power and wealth.

"People are scared of losing their jobs. Everybody has someone in the family who's out of work, and those who are working can afford less and less with what they make," says Ernesto, a hardware store owner. "But everybody talks about these officials who, a few years ago, were just regular people and who now have new cars, a better house, fancy suits. It even has some people talking about a return of the military to bring some order to the muck."

A report issued last week by the Argentine Center for Macroeconomic Studies estimates that 45 percent of the country's working-age population is either unemployed, underemployed, or doesn't earn enough to meet subsistence needs.

Social tensions are also on the rise. Public-sector employees in the city of Crdoba have rioted in response to local government plans to trim jobs, cut pay, and privatize an electric company.

In this context, Menem can no longer count on the public's broad support. Yet many analysts say that while Argentines do not hold the country's economic downturn against the president, the sentiment that corruption has run rampant is another story.

Menem "still is not seen as the cause of the recession, but as someone who could get us out of it," says Manuel Mora y Araujo, a public opinion consulting expert here. "But the corruption accusations on the other hand are a problem for him."

Menem has hinted at his desire to seek a third term in 1999. But even though he quickly moved to position himself on the high end of the corruption debate - appointing a special administrator to the customs service and calling for an all-out war on corruption - most observers now say a third term will never happen.

"A third Menem term was always difficult, but now it would be impossible," says Mr. Mora y Araujo. People expected more of the reforms than corrupt dealings by public officials, he says, so anyone associated with what is perceived as a period of growing corruption is tainted.

The irony is that Cavallo's corruption charges may help put the brakes on reforms for which he for so long was the primary advocate.

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