TIME: Almanac 1993/TIME Almanac 1993.iso/time/061289/06128900.009

Text File | 1992-09-23 | 5.8 KB | 111 lines

                                                                                BUSINESS, Page 47

The Fall and Fall of Argentina


Amid hyperinflation and hunger, a nation drifts into chaos


    The crowd began to gather silently last Monday afternoon on
the streets adjoining the Boerio Supermarket in Rosario,
Argentina's third-largest city. The tin-roofed grocery store
had served its middle-class neighborhood for years, so manager
Luis Nicastro recognized many of the well-dressed people outside
the store as his regular customers. Some of the others were
toothless, hungry folk in tattered clothes, who came from nearby
shantytowns. By 2 p.m., a mob of more than 500 filled the
parking lot. "I thought of closing the doors," Nicastro says.
"But what good would it do? With all this glass, there was
nothing we could do but let them in."

    The crowd held back while a group of 40 hungry women and
children rushed into the Boerio and grabbed as much milk, flour
and sugar as they could carry. As they fled, the ransacking
began in earnest. Young, strapping men armed with crowbars
knocked spaghetti, oranges and hunks of meat onto the floor as
they rushed to scoop up groceries. Others carted off boxes of
laundry detergent, frozen foods and toilet paper into their
Peugots, Volvos and even waiting taxis. Within 20 minutes they
had destroyed the bakery at the rear of the store, smashed out
the windows and broken open the cash registers. As the looters
left, one of them, laughing hilariously, asked Nicastro, "What
time do you open tomorrow?"

    After years of tottering on the brink of economic crisis,
Argentina started sliding into chaos last week. In food riots
that erupted in Rosario, Cordoba, Buenos Aires and other major
cities, more than 2,000 people were arrested and at least 15
killed. The primary trigger: hyperinflationary price increases
that have left even middle-class citizens unable to afford food
and other necessities. Inflation for the month of May reached
75%, and is accelerating at a pace that would amount to more
than 80,000% for the year. Said David Feldman, news director of
Radio Rosario: "It's not just hunger. People are crazed. There
is extreme tension here."

    The upheaval began two weeks ago, with isolated outbreaks
of looting in several provincial capitals. Widespread food riots
broke out in Rosario (pop. 957,000) early last week, after
lame-duck President Raul Alfonsin announced his fourth emergency
economic plan of the year. Roving crowds, described by police
as a mixture of the hungry, the criminal and the opportunistic,
overwhelmed poorly prepared local police. Stores not gutted by
looters closed their doors, creating widespread food shortages.
The unrest then spread to the volatile working-class suburbs of
Buenos Aires.

    Alfonsin responded by declaring a 30-day state of siege,
which entitles police to detain suspected looters without
charging them. The President, following the lead of provincial
leaders, also ordered the creation of hundreds of soup kitchens
and the free distribution of food. Some measure of order was
restored after four days, but many citizens were calling for
Alfonsin, whose Radical Civic Union party was convincingly
defeated by Peronist Carlos Saul Menem in May 14 elections, to
step down before his term ends on Dec. 10. When the two men met
last week, however, they apparently agreed that an early
transition would suit neither one. Alfonsin wants a normal,
democratic transfer of power -- Argentina's first since 1928 --
while Menem and his sharply divided party realize they have no
comprehensive plan for stitching together the shattered economy.

    The country's eruption was the second such outburst to hit
debt-stricken Latin America this year. In February and March
more than 300 people died in Venezuela during protests against
an austerity program aimed at bringing down a foreign debt of
$30 billion. Argentina, which has a $60 billion external debt,
has made no payments since April 1988.

    The economy, desultory even in the best of times, is now
virtually shut down. Automobile, tire and auto-parts production
have come to a stop. Ranchers have halted delivery of cattle
because they are being paid with uncashable checks. The
government cannot print money fast enough, so a severe cash
shortage has prompted bank closings. Because the austral has
lost 90% of its value since February, most people try to conduct
their business in U.S. dollars, although it is now illegal to
do so. According to private estimates, what is left of the
economy runs on $500 million worth of austral notes and $5
billion in U.S. currency.

    Food riots in a country considered to be one of the world's
breadbaskets amounted to a devastating indictment of the
Alfonsin government, which failed to act quickly enough to put
Argentina's fiscal house back in order in 1983, when Alfonsin
became the first civilian President in nearly eight years. The
former human-rights activist valued political stability at the
expense of wrenching but necessary economic changes to correct
the country's low productivity, over-regulation, bloated public
payroll and money-losing state-owned companies. By the time
Alfonsin began pushing for economic reforms in 1985, his
popularity had eroded, and the Peronist-controlled Congress was
able to block his moves.

    Now Argentinians have turned their eyes to Menem. But since
the President-elect has yet to define a concrete economic plan,
the situation seems bound to deteriorate further. Even
Argentina's generals, who have never been shy about staging
coups before, appear reluctant to intervene for fear of saddling
themselves with the blame for economic ruin. "We are in a
process of decline,'' says Federico Zorraquin, president of the
Banco Commercial del Norte. "No one knows where it will end."