Cambridge Review of International Affairs, Volume 15, Number 3, 2002
Argentina, a ‘Parasite State’ on the Verge of Disintegration Carlos Escude´ Universidad Torcuato Di Tella, Buenos Aires Abstract Argentina has more than twice the total debt of India whilst the latter has 28 times more population in roughly equivalent territories. According to Poder Ciudadano, a local NGO, in 1999 Argentine political parties spent 440 times more than those of Chile. These gross asymmetries help to show that Argentina’s nancial troubles must be attributed to her own political practices rather than to adverse circumstances or foreign scapegoats. By December 2001, overspending had manifestly destroyed the Argentine nancial system. Across-the-board violations of property rights followed, through bank withdrawal restrictions and a debt default that was the biggest in world economic history. This paper analyses the breakdown of federal institutions, the atomisation of power and the erosion of governability that ensued as a consequence of the nancial crisis. Maa-style political practices, an endemic evil in the background of Argentine politics, jumped to the forefront as a consequence of this institutional breakdown.
Cynics wonder why Argentina is a land of a chronically unfullled future of welfare and prosperity. Her successful insertion in the world economy towards the end of the 19th century, her natural resources per capita, the relatively high (albeit decreasing) education of her citizens, have sparked sarcastic remarks from wits ever since her decline began.1 Such academic banter has gone on long before the present, seemingly terminal crisis of a failed state on the verge of nancial collapse and political disintegration. The present crisis is associated with an unprecedented and nancially unsustainable level of indebtedness. Argentina today has the developing world’s highest debt per capita, equivalent to $4,420 per inhabitant, far larger than that of any other Latin American country. It compares with Chile’s $2,393, Uruguay’s $2,266, Mexico’s $1,780, Venezuela’s $1,595, Brazil’s $1,445 and Colombia’s $811. If we look at major developing countries outside the Latin American region, we nd that South Korea’s debt per capita is $2,654, Turkey’s is $1,514, South Africa’s is $574, Egypt’s is $389, Nigeria’s is $230, and Pakistan’s is $186. Generally speaking, countries that have been guided by ‘neoliberal’ policies like South Korea and Chile have larger debts per capita, but all of these are well below the $3,000 mark, whilst Argentina sits well above the $4,000 threshold.2 Under the present circumstances the appointment of Anoop Singh as the IMF 1 2
For example, ‘the miracle of Argentine underdevelopment’, already a cliche´. World Bank 1999 gures; http://www.worldbank.org/html/extdr/regions.htm
ISSN 0955-7571 print/ISSN 1474-449 X online/02/030453–15 Ó 2002 Centre of International Studies DOI: 10.1080/095575702200001098 0
454 Carlos Escude´ ofcial in charge of solving the Argentine problem seems an act of Solomonic justice. Singh comes from India, a country whose size is comparable to Argentina (3.3 million km2 versus Argentina’s 2.8 million), but whose suffering is more the product of demography than corruption and bad administration, inasmuch as its population approximates one billion souls versus Argentina’s measly 36 million. Argentina’s overwhelming state indebtedness is the result of years of political mismanagement, scal irresponsibility and corruption. Though analysts anticipate some level of indebtedness among developing countries, Argentina’s balance of payments cannot be explained by development needs alone. In principle, we can safely assume that the development-related borrowing needs of a developing country will be a function of its population and territory among other variables, because a lesser density is usually associated with a greater endowment of natural resources per capita. Notwithstanding, India’s 1999 debt was of some $70 billion, versus Argentina’s $154 billion. Against any conceivable common sense, Argentina’s per capita debt of $4,420 compares with India’s $71, whilst Argentina’s population density is 13 inhabitants per km2, versus India’s 336. 3 In other words, India, whose population is about 28 times greater than Argentina’s, has a per capita debt almost 60 times smaller. These two polar cases are useful for the construction of concepts, because such asymmetry can only be attributed to corruption in both its broad and narrow senses, including demagoguery and other pathological political practices. Over and beyond the differences in their respective ‘models’ of economic development, which can account for important differences in indebtedness per capita, there can be no doubt that such gross asymmetry is in itself incriminating against Argentina. It is enough to imply that the latter is a ‘parasite state’: one that lives off the rest of the world economy despite its tremendous natural resources per capita.4 3 It is odd that per capita debt is not one of the standard indicators included by the World Bank in its small tables with ‘country proles’. Although debt per capita may not be a bank’s prime parameter for loan-making decisions, it is nonetheless a crucial, albeit gross, measure of corruption and/or mismanagemen t in developing countries, though one which must always be evaluated in conjunction with other variables. It is obviously not valid as an indication of corruption for developed countries, because investors seeking the least possible risk run to such havens, sometimes (as in the case of the United States) generating a high level of indebtedness per capita that is not related to corrupt political practices (which is not to say that such practices do not exist therein). 4 As already stated, leaving aside gross asymmetries, if we expect to read anything related to corrupt political practices from this simple indicator we must limit our comparisons to countries with similar models of development. Using 1999 data, Argentina and Chile can both be described as countries with ‘neoliberal’ policies and are thus comparable. However, as was also stated above, population density is another factor that ought to be considered because, other things being equal, the lesser the density the lesser the need for development-related borrowing. Since both debt per capita and population density are continuous, quantitative variables, it is possible to construct an index for developing countries with similar development models, which I will call the ‘ordinal corruption coefcient’, dividing debt per capita by population density. Argentina’s density is 13 inhabitants per km2 versus 20 for Chile. The quotient for Argentina is 325 points, versus only 120 for Chile. If there is a distortion it is in Argentina’s favour, because the percentage of desert territory in Chile is greater than in Argentina, rendering the differences between the ‘true’ population densities of both countries greater still.
Argentina, a ‘Parasite State’ 455 One may conclude that Argentina’s exaggerated per capita indebtedness is the product not so much of corrupt political practices but of Argentina’s unique Convertibility policy, which pegged the peso to the dollar and subjected the country’s monetary policy to a straitjacket that made borrowing necessary when revenue was insufcient. According to this line of argument, Argentina’s unique debt situation is the product of a unique policy among comparable countries. Yet this alternative explanation ignores the fact that this policy was the forced product of skyrocketing hyperination in 1989 and 1990. Thus, even before Convertibility, Argentina’s hyperination clearly indicated uniquely corrupt and/or demagogic political practices. Convertibility did not cause eventual collapse; rather, both were the twin products of a tainted political legacy. It may also be argued that owing to its large size, fertile lands, energy potential and low population density, Argentina is one of the countries with the greatest endowment of natural resources per capita in the world, and that the greater the natural resources per capita, the greater the level of indebtedness per capita a country can withstand without losing viability. This is true, and in theory Argentina may still be a viable country, but in actual practice foreign nancial assistance only feeds corruption and demagoguery instead of generating sustainable development. The present economic crisis has both its start- and end-points in the erosion of the rule of law. Indeed, the main thrust of this paper will be to show that political practices that seem endemic to Argentine governance are at the root of the present nancial collapse, which, in turn, has engendered a crisis of the federal union betwixt the provinces and of the rule of law itself. This article begins by surveying the recent violations of property rights that have been the government’s response to crisis. Then it will take a brief look at Argentina’s nancial crises of the past, especially that of 1890, which bears surprising analogies to the present one. Following that, it will delve into the potential consequences of the present crisis for federal institutions, analysing the atomisation of power and the maa-style politics that are both a cause and a consequence of a situation that threatens to generate a Hobbesian state of nature. The epitome of this political meltdown is the so-called golpe bonaerense, the maa-led manoeuvres that contributed to ensuring the resignations of two presidents.
A Financial Black Hole Among the endemic practices that haunt Argentina are chronic scal decits. The political leadership has used such decits in order to win votes through the creation, for example, of myriads of articial public jobs. According to the IMF the scal adjustment needed to make the country’s economy viable again would require, among other things, the elimination of at least 400,000 jobs in the three levels of public administration: national, provincial and municipal.5 Such measures, which would cause widespread social rebellion, are tantamount to political suicide for any politician willing to undertake them. 5
For an interpretation of the economic aspects of the Argentine crisis critical of the IMF, see Michael Mussa, ‘Argentina and the Fund: From Triumph to Tragedy’, Parts I and II, Institute of International Economics, 2002, available at www.iie.com
456 Carlos Escude´ During the administration of Fernando de la Ru´a, with foreign credit no longer available, unwillingness to cut spending led to the destruction of the nancial system. Both federal and provincial governments used political leverage to force banks to grant them billionaire credits that could never be repaid. The banks’ portfolios suffered further as the more solvent Argentine rms got cheaper credits from offshore banks, whilst the less solvent ones nanced their operations with local banks of foreign and/or Argentine ownership. The fact that the more solvent rms nanced their operations offshore made more high-interest credit available to the national and provincial administrations. An incipient capital ight was compounded when Economy Minister Domingo Cavallo meddled with the one-to-one peg of the peso to the dollar. He introduced a slight ‘correction’ in the exchange rate applicable only to foreign trade, converting every export and import peso into 50 dollar cents plus the value in dollars of 50 euro cents. This made depositors and investors fear an eventual devaluation. The ensuing nancial crisis made it increasingly difcult for many banks (especially state-owned ones) to maintain the cash ow necessary for everyday operations. In turn, the perception by ever-growing numbers of depositors that their money was not safe prompted a massive capital ight that aggravated the crisis of liquidity.6 Eventually, to avoid closing down most banks, this vicious cycle led to an across-the-board violation of property rights. The drama unfolded in several successive stages. First, there was the massive violation by the state of the property rights of its citizens by impositions of withdrawal limitations on bank deposits during the Cavallo/de la Ru´a administration in early December 2001. Adding foreign creditors to the offended list, this violation continued with debt default, which was decided by the brief Rodrõ´guez Saa´ administration in late December, the biggest in world economic history. Next, with a sharp devaluation in the making, and in the process of giving birth to the Duhalde administration, the enactment of a Law of Economic Emergency that established an asymmetric criterion for the ‘pesication’ of deposits on the one hand and certain credits and loans on the other, violated the property rights of banks, as well as abrogated an entire array of contracts with privatised utility companies. During the Duhalde presidency there were further extensions of the violation of property rights of banks, Argentine depositors and creditors, all which undermined the rights of the poor and the average Argentine citizen. The violation of the property rights of banks by enacting the extension of a one-toone pesication to all credits, including multi-million dollar ones, led to the following scenario. Since the banks negotiate compensation for their losses from the state, the poor eventually pay for this multi-million dollar expropriation. Notwithstanding, the banks were crippled as the asymmetry of pesication led to huge immediate losses, which were added to their previous portfolio and liquidity problems. The extension of the violation of the property rights of Argentine depositors, through the extension of the previously established withdrawal limitations, to severe new constraints on the availability of term deposits,
6 Steve H. Hanke, ‘Argentina’s Blunders’, published by the Cato Institute and the Buenos Aires Herald, 7 January 2002.
Argentina, a ‘Parasite State’ 457 also created problems. 7 So did the enactment of a bankruptcy law, which further violated the property rights of all creditors, and made the Argentine state the only agent empowered to embargo a debtor for at least six months. The law aims at protecting the formerly more solvent Argentine rms, those that had obtained cheaper credits abroad and were practically bankrupt as a consequence of devaluation. Finally, the threat to further violate the property rights of ordinary Argentine citizens through the attempt, still underway at the time of writing, to forcefully pesify dollar-denominated holdings of Argentine pension funds. The precedent for this violation can be found through a decree obligating banks to turn over their dollar bills to the Central Bank at the (then ofcial) rate of 1.40 pesos. The decree has been suspended, but not derogated. If this is deemed legal vis-a`-vis private banks, theoretically it could serve as precedent to be applied to individuals. 8 In sum, it is not incorrect to state that Argentina is no longer under the rule of law. It may be that some contracts with privatised utility companies were unfair9 but it cannot be questioned that they were legal. The vast majority of these violations of property rights, especially those that did severe damage to Argentina’s own population, were not only illegal but blatantly unjust. They were the inevitable consequence of demagogic practices that led to chronic overspending.
Old Vices Argentina’s current position is not the result of market failure or policy misjudgement. In fact, the political practices that have led to nancial collapse and erosion of the rule of law seem endemic to Argentine governance. This is not the rst time in Argentine history that deposits were at least partially conscated: it has happened as recently as 1982 and 1989. Furthermore, severe nancial crises, often due more to local mismanagement and corruption than to external shocks, can be traced far into the history of modern Argentina. The most notorious example is the crisis of 1890, when a gigantic bubble of speculation and corruption burst in the face of foreign creditors, threatening the stability of the Bank of England itself. President Julio Argentino Roca (1880–86) had attempted to create a strong Argentine currency with backing in bullion, strikingly similarly to Carlos Menem’s Convertibility policy that pegged the peso to the dollar. Rural interests that wanted easy credits boycotted his policy, and his successor, Miguel Jua´rez Celman (1886–90), gave in to them. The nances of the Province of Buenos Aires were desperate, as today. Strikes broke out. Finance Minister Jose´ E. Uriburu attempted to conciliate European bankers and Argentine interests. This would 7 Decrees 1579/01 and 1606/01 established the corralito. These measures, decided by Cavallo, immobilised current and savings accounts and placed limits to cash withdrawals ($250 per week). Under Duhalde, Minister Jorge Remes Lenicov reprogrammed the payment of all term deposits (Resolutions 6/02, 9/02 and 18/02). This gave birth to the so-called second corralito or corralo´n. 8 Decree 214/2002 published in Boletõ´n Ocial on 4 February 2002. See also ‘Argentina: no ma´s do´ lares’, 4 February 2002, found at BBC Mundo.com; and ‘Obligaron a los bancos a vender sus do´ lares al Banco Central’, Clarõ´n, 4 February 2002. 9 For example, dollar denominated telephone fees were among the highest in the world.
458 Carlos Escude´ have implied an end to easy credit and irresponsible minting, but Jua´rez Celman could not accept it because of his political commitments, and Uriburu resigned. The president seemed inclined to repudiate the debt, as was Adolfo Rodrõ´guez Saa´, the successor of de la Ru´a who lasted a week as president in late December 2001. In 1890, this meant that the implicit compact between the investing classes of Europe and the rural class that dominated Argentina seemed about to be broken, a denouement that would have been catastrophic for Argentina’s further development, as it probably will be in 2002.10 In 1890 Jua´rez Celman was forced to resign, in some ways resembling and in others differing from the resignation of Fernando de la Ru´a in December 2001. Both did so after giving their supporters easy credits that led to national bankruptcy. As stated above, in the case of de la Ru´a this implied at least $18 billion in credits given by the state-owned banks (and some private banks in need of government favour) to the national and provincial governments.11 In the case of Jua´rez Celman, there was not only easy credit but also an endorsement of the construction of railways leading to insignicant cities in unproductive lands, in order to increase the value of the lands of his political clients. The measure is analogous to the billons in credits given to the almost bankrupt Banco de Galicia (the last big private bank remaining in the hands of Argentine capital) by the de la Ru´a administration. The big difference, however, lies in the fact that in 1890 the president inclined to repudiate the foreign debt resigned before he had the chance to do further damage to Argentina and its creditors, whilst in 2001 the resigning president was not inclined to default, and was forced to give way to a successor who proclaimed it a nationalistic triumph. An element that aggravated the 1890 crisis was the issue of the ce´dulas hipotecarias, which were the principal instruments for agricultural expansion during the 1880s. These were credit instruments issued by the Argentine government in exchange for mortgages over land. The trick was that they could be paid back in depreciated paper money, and although the more important European rms were wise enough not to invest in this instrument, many individual investors lost their monies to the Argentine landowners. As H. S. Ferns points out, these debts were paid in paper money whose management was under the control of the very landed class that owed the money.12 Large numbers of English pensioners were thus deprived of their hard-earned money, which was often used for the construction of palatial estates in the pampas, costly Parisian sojourns and pieds-a`-terre of Argentine landowners. The case bears some analogy to the worldwide, free-spending tourism of the Argentine middle classes during the 1990s, millions of whom lled resorts, shopping centres and museums from Brazil and Miami to Europe and Thailand. Now, as then, the provinces issued huge debts of their own, and one of the government’s 10 See H. S. Ferns, Britain and Argentina in the 19th Century, Oxford, Clarendon Press, 1960. Chapters 13–15 cover the ground summarised here. 11 According to the president of Banco Ciudad de Buenos Aires, the banks gave $10 billion in unrecoverable credits to the national government and another $8 billion to the provincial governments. ‘Los banqueros temen que se concrete su pesadilla ma´s temida’, La Nacio´n, 3 February 2002. 12 H. S. Ferns, p. 424 of the Spanish-language edition, Gran Bretan˜a y Argentina en el Siglo XIX, Buenos Aires, Solar Hachette, 1968.
Argentina, a ‘Parasite State’ 459 greatest challenges was and is controlling provincial spending and indebtedness. The important difference remains that in late 2001 and early 2002 the succeeding administrations have had little understanding of the situation and even less political power to implement painful solutions. Political disintegration, reversible in 1890, may be irreversible in 2002. The consequences of political vice have accumulated to the point where the technical solutions available for the decit problem may now be politically unfeasible.
The Crisis of the Federal Union between the Provinces Policy paralysis or more populism can lead to hyperination and widespread rebellion, whilst active policies of scal adjustment can also ignite social violence. Both can lead to rebellions of individual provinces against the central state. It seems clear that a tainted historical legacy that has been reinforced time and again has generated a self-destructive dynamics. As stated, in 2002, just like in 1890, one of the more serious problems is provincial overspending. But in 1890 the country had recently achieved its national organisation and the central state maintained relatively tight control over the provinces. The national army was a recent creation but it was disciplined and would obey presidential orders to control breakaway provinces. Contrariwise, in 2002, after the collapse of the 1976–83 dictatorship, the traumatic Falkland/Malvinas war of 1982, the loss of prestige stemming from massive human rights abuses made public during the 1980s, and permanent budget cuts during the 1990s, the army is hopefully too weak to undertake a coup d’e´tat, but neither is it likely able to control social unrest or repress a breakaway province under legal orders. Since the rst days of 2002 there has been much speculation about the possibility that some Argentine provinces might break away from the national union. Actually, the federal compact that binds them together is all but broken already. The Argentine tax system makes the central government responsible for the collection of most taxes, an important part of which must be redistributed among the provinces, which have the sovereign faculty of establishing their own budget laws. Thus, the provinces can spend more money than they would be able to collect in their own territories. In actual fact, this means that richer provinces must subsidise poorer ones, this being explicitly acknowledged by the principle of ‘solidarity’ established in the Constitution. This may be viable in times of economic growth, but not so in scal crises like the present one. In 2002 the central government owes the provinces billions of dollars. Some of the richer provinces are beginning to feel that being part of the union is a bad deal. An example, at least partial, is the government of petrol-rich Santa Cruz, which with commendable foresight deposited its provincial reserves in Luxembourg, saving itself from the freezing of deposits. Former Economy Minister Domingo Cavallo quarrelled repeatedly with Governor Ne´stor Kirchner in an attempt to get the money back into the Argentine nancial system, to no avail.13 The Province of San Luis is not so lucky: it also has sizeable reserves, but they 13
‘Duro cruce verbal entre Cavallo y Kirchner’, La Nacio´n, 25 October 2001; and ‘Argentina: Revenue Sharing Talks between Federal and Provincial Governments Fail’, BBC Monitoring, 27 October 2001.
460 Carlos Escude´ were deposited in the Argentine banking system and got trapped in the corralito, the withdrawal restrictions that have bedevilled nances since December 2001. Revenue sharing is only a dimension of the crisis of the compact between the provinces of the Argentine union. Other federal institutions are also collapsing. Never before have meetings and agreements between Governors convened by the president been necessary to generate consensus before the enactment of laws. Evidently, the Legislature has lost a great deal of its power and independence, and although compacts among Governors are not established by the Constitution as a mechanism for government, they are an ad hoc institution that attempts to control the deep crisis of governability. Even the IMF has repeatedly resorted to direct negotiations with the Governors.14 The situation resembles what prevailed in the rst half of the 19th century, before national organisation, when true power lay with the Governors. There was a primus-inter-pares who was the Governor of the Province of Buenos Aires, but federal power could not reach a remote province unless its Governor (who had his own army and minted his own money) came to an agreement with Buenos Aires. Presently, with the proliferation of provincial quasi-money, 14 different currencies are being used in Argentina, this being a major obstacle in negotiations with the IMF.15 As for armed force, provincial police forces are more reliable than federal institutions. All this adds up to the acute erosion of presidential power at the national level. And it explains why, despite the likewise acute erosion of the power of the National Congress, the IMF also had independent meetings with the Justicialist senators.16 Power is increasingly fragmented. A Governor’s jurisdiction is, of course, territorial. While the central government can procrastinate revenue sharing or the payment of mining and oil royalties, relatively rich provinces have a leverage of their own. The example of Santa Cruz and other Patagonian provinces is again useful, because it is within their power to starve Buenos Aires and other provinces out of petrol and natural gas. Such extreme measures are appealing because the taxes on oil exports, which the central government has resorted to in order to meet scal needs, threaten to produce layoffs in the petrol industry that would be felt mostly by workers of the oil- and natural gas-producing provinces. As a consequence, Governors have supported strikes that at times generated coalitions of politicians, business people and union leaders in Patagonia, threatening to interrupt the ow of petrol and gas.17 Provincial rebellion, actual or potential, goes beyond these threats. On 20 March 2002 it was announced that the Province of San Luis would issue a new 14 See, for example, ‘El dõ´a que el FMI presiono´ a gobernadores y legisladores’, Clarõ´n, 11 April 2002; ‘Argentina: Need to Shave Spending Puts Provinces’ Capital at Odds’, Stratfor, 15 February 2002; Juan Jose´ Llach, ‘Provincias, Gobierno y FMI: una solucio´n posible’, Clarõ´n, 8 March 2002; ‘Singh se reu´ne con los gobernadores’, La Nacio´n, 9 March 2002. 15 Tim Loughran ‘Argentina’s “Funny Money” Takes Center Stage with IMF’, Dow Jones Newswires, 8 March 2002. 16 ‘Singh insistio´ en el ajuste ante los senadores’, La Nacio´n, 14 April 2002. 17 ‘Preve´n desabastecimiento de nafta’, La Nacio´n, 17 February 2002; ‘Empieza una huelga que cortara´ el suministro de gas y petro´leo’, La Nacio´n, 18 February 2002; ‘Los petroleros podrõ´an cortar el ujo de combustible en el Sur’, La Nacio´n, 8 March 2002; ‘Paralizan en el Sur la produccio´n de petro´leo’, La Nacio´n, 25 March 2002.
Argentina, a ‘Parasite State’ 461 bond, and that it had independently negotiated a currency basket with Chile’s Casa de la Moneda that would include the Argentine peso, the Chilean peso and the local quasi-currency.18 Also on 20 March it was announced that the province would enact a provincial law making it mandatory for banks established in its territory to return deposits in the currency in which they were originally placed, a major rebellion against the ‘pesication’ policy of the central government.19 This was partly a sequel to the previous rebellion of the Argentine Supreme Court, which declared that withdrawal restrictions were unconstitutional. The verdict was unanimously considered a reaction to the threat of impeachment against Supreme Court Justices. Throughout early January, the Court had repeatedly declared that the restrictions were lawful.20 On 2 February 2002, however, it delivered a verdict declaring the bank withdrawal restrictions unconstitutional. 21 No one doubted that the restrictions were indeed unconstitutional; notwithstanding, no one doubted they were nancially necessary after the abuses committed by the state-owned banks awarding credits to the national and provincial governments in late 2001; further, no one doubted that although the Court’s decision was juridically impeccable, it had acted only to threaten the government and defend itself from impeachment. President Duhalde said the verdict was blackmail. In actual fact, the otherwise obsequious Court had exercised its independence as a power of the state only because it was itself under threat. As such, it demonstrated not its independence but its extreme dependence. But it also put the Executive Power (and the nancial administration of the country) in dire straits. All things considered, the episode served to underline the breakdown of governability in Argentina.22
The Atomisation of Power and the Rise of Maa Politics As governance through institutions has been eroded because abuse in overspending has made the federal compact non-viable, the power wielded in today’s Argentina is increasingly territorially based. With the army deactivated and the federal institutions in crisis, real power of enforcement is not panArgentine but limited instead to each province’s territory. Governability is fragile on a national basis but not necessarily in each individual jurisdiction; Duhalde is weak as president, but not as a sort of super-governor. Indeed, seen from a narrow point of view, Duhalde is a much more powerful president than his immediate predecessors because he is a super-governor, which his predecessors were not. The rebellions of provincial governments are not solely the product of provincial power to, for example, cut Buenos Aires away from petrol supplies. 18
‘En San Luis obligara´n a devolver los depo´sitos’, La Nacio´n, 20 March 2002. Buenos Aires Econo´mico (BAE), 2 May 2002. The law was enacted in May. ‘San Luis: oposicio´n a la ley que obliga a devolver los ahorros’, La Nacio´n, 3 May 2002. 20 For example, ‘Por pedido de los bancos, la Corte respaldo´ el corralito’, La Nacio´n, 21 April 2002. 21 ‘La Corte Suprema decreto´ la inconstitucionalidad del corralito’, La Nacio´n, 2 February 2002. 22 Carlos Escude´, ‘Hacia la Fundacio´n de la Segunda Repu´blica’, Buenos Aires Econo´mico (BAE), 5 February 2002. 19
462 Carlos Escude´ They are also the consequence of the impotence of provincial politicians vis-a`-vis the apparent fact that only Duhalde has the power to govern from Buenos Aires. On 27 January 2002, long before the Governor of San Luis negotiated a currency basket with Chile and threatened to expel from her province any bank that did not pay dollar deposits back in dollars, close associates of Rodrõ´guez Saa´ declared to the press that San Luis should plan a future as an independent republic. It was reported that this was the desire of the senior San Luis caudillo. They said there was no reason why their province should foot the bill for an inefcient central government, and that it was perfectly capable, on its own, of generating scal surplus and achieving World Bank investment grade status.23 Although he later downplayed it, Rodrõ´guez Saa´’s hint that Argentina’s territorial integrity might be at stake implies the violation of a taboo which has seldom been pronounced by a mainstream politician since the 19th century. His words were not simply the product of his frustration with his short-lived presidency. According to statements to this author on condition of anonymity by a former Justicialist cabinet minister who is very close to many Peronist leaders, Rodrõ´guez Saa´’s resignation as president in late December 2001, after only one week in ofce, was not mainly the product of the loss of support of the Justicialist Governors, as was alleged. It was a consequence of the fact that he felt unsafe because, as soon as it became apparent that he planned to remain in the presidency until 2003 instead of calling for early elections (a choice that legally was his to make), he felt his life was threatened by subtle blackmail. The rallies that virtually laid siege on the government palace were organised by Duhalde cronies. On 29 December, the eve of Rodrõ´guez Saa´’s resignation, young protesters broke into and vandalised the National Congress building. Clarõ´n aptly titled the news item ‘Noche de terror en el Congreso’.24 Insiders of Peronist politics knew that the huge and heavy gate, which was not damaged, had been opened from inside. When the president called a meeting of Governors in the presidential country house of Chapadmalal (a small town in southern Buenos Aires Province) he was deprived of his bodyguards and found that running water and electric power had been cut off. The same happened to Ramo´n Puerta, the provisional president of the Senate who, constitutionally, was rst in the order of succession. He too was deprived of bodyguards, and ed Chapadmalal hidden in the car of a friend while they crossed the barrier of rioters that had the presidential mansion under siege, also organised by Justicialist chieftains of the Province of Buenos Aires. The not-sosubtle message was that it was dangerous to be a president residing in the territorial jurisdiction of the caudillos of the Province of Buenos Aires if one did not bow to their interest and designs. Rodrõ´guez Saa´ ew to his native Province of San Luis and resigned to the presidency in the safety of his feud, where his friends control the local police force. Judge Marõ´a Romilda Servini de Cubrõ´a gave him a deadline of four hours to return to Buenos Aires to take charge of his presidential duties until his 23
‘Rodrõ´guez Saa´ piensa en independizar a San Luis’, Clarõ´n, 27 January 2002. ‘Noche de terror en el Congreso’, Clarõ´n, 30 December 2002; ‘La sociedad civil pierde la paciencia contra los polõ´ticos al descubrir la realidad de un paõ´s en quiebra’, El Paõ´s (Sunday Supplement), Madrid, 6 January 2002; ‘Una pacõ´ca protesta de clase media que termino´ con el asalto al Congreso argentino’, El Mundo, Madrid, 30 December 2002. 24
Argentina, a ‘Parasite State’ 463 resignation was accepted by the Legislative Assembly, adding that otherwise he would be accused of violating the duties of a public ofcial under Article 252 of the Criminal Code. To play it safe, Rodrõ´guez Saa´ signed a decree declaring himself in leave of absence due to health reasons and sent it to his Justice Minister, who presented it to the Judge.25 Concomitantly, feeling that even 24 hours as provisional president of Argentina would be an unnecessary danger, Puerta resigned the provisional Presidency of the Senate. Judge Servini de Cubrõ´a also ordered him to take possession of his ofce until the resignation was properly accepted, and he too presented a request for a leave of absence founded on personal reasons.26 Thus, the president of the Chamber of Deputies, a friend of Duhalde who followed Puerta in the line of succession, was the provisional president who anointed the former president. The entire story was told to me in the presence of two bankers and a Duhaldist judge who knew the details well. I veried it with other top Peronists and then published its contents in two op-eds in Buenos Aires Econo´mico, a nancial daily, which were never challenged.27 Several weeks later Rodrõ´guez Saa´ himself conrmed the story in the locally well-known television show of Mariano Grondona, and his imputations were picked up by La Nacio´n.28 On 30 April he reiterated the imputations in Court under oath, as a witness to the conspiracy charges for the ousting of de la Ru´a, referring explicitly to the politically led violent gangs that contributed to his own resignation.29 On the following day, Duhalde retorted in statements to the press that Rodrõ´guez Saa´ had ‘ed like a rat’ from his responsibilities as president.30 Simultaneously, accusations were widely circulated that President de la Ru´a’s resignation was also partly motivated by unrepressed looting of retail business in the Greater Buenos Aires area and the federal capital. Fire was ignited inside the Economy Ministry by forces loyal to Duhalde on 20 December 2001, 31 the day the former resigned. De la Ru´a himself declared repeatedly in Court and out of it that there had been a ‘conspiracy’ against him.32 Members of the Radical Party of the Province of Buenos Aires were included in the alleged conspiracy, together with the hoodlums who responded to Duhalde’s allies and carried out looting in ‘liberated’ territory that police forces had been instructed not to disrupt. Other politicians, among them ARI leader, national deputy and presidential hopeful Elisa Carrio´; former Labour Minister and presidential 25 ‘Asamblea Legislativa: fue convocada para man˜ana a las 14’, Clarõ´n, 31 December 2001 (in this article, see subtitle ‘Servini de Cubrõ´a intimo´ a Rodrõ´guez Saa´ y Puerta’). ‘Intiman a Rodrõ´guez Saa´ y a Puerta para que continu´en’, Terra.com, Actualidad Argentina, 31 December 2001. 26 ‘Investigan a Rodrõ´guez Saa´ por abandono del cargo. Juez lo intimo´ a gobernar y el puntano pidio´ licencia hasta hoy’. The text says that on 31 December, Puerta sent his request for a leave of absence through Rodrõ´guez Saa´’s Justice Minister, Albert Zuppi, who gave the Judge the document. Fu´tbolArgentino.com, Toda la Actualidad Argentina, 1 January 2002. Also, ‘Investigan a Gabrielli y a Rodrõ´guez Saa´’, Los Andes (Mendoza), 2 January 2002. 27 C. Escude´, ‘Hacia la Dictadura de Duhalde’, Buenos Aires Econo´mico (BAE), 12 February 2002; ‘Hacia la fundacio´n de la Segunda Repu´blica’, Buenos Aires Econo´mico (BAE), 5 February 2002. 28 ‘Las sen˜ales maosas de Rodrõ´guez Saa´’, La Nacio´n, 30 March 2002. 29 Buenos Aires Econo´mico (BAE), 2 May 2002. 30 Buenos Aires Econo´mico (BAE), 2 May 2002. 31 ‘Incendio en el Ministerio de Economõ´a’, Clarõ´n,19 December 2001. 32 ‘De la Ru´a declaro´ en Tribunales sobre complot’, Clarõ´n, 15 April 2002.
464 Carlos Escude´ hopeful Patricia Bullrich; former presidential spokesman Juan Pablo Baylac; and former Economy Minister Domingo Cavallo, corroborated de la Ru´a’s statements with respect to what came to be known as the ‘Buenos Aires coup’, which entailed an alliance between the Radical and Justicialist caudillos of Buenos Aires.33 Furthermore, during the editing of this paper Clarin published an authoritative investigation revealing the organisation and logistics of politically motivated looting leading to de la Ru´a’s resignation, under the suggestive title ‘La Trama Polõ´tica de los Saqueos’.34 Maa-led government is not surprising in the Argentine context, even if it had never surfaced before. It is a fact known not only to local insiders but also to academic researchers that the grassroots organisation of the Justicialist Party, especially in the Greater Buenos Aires area, is linked to criminal organisations. In the words of Steven Levitsky: There is a dark underside to this social embeddedness. Because urban slum zones are frequently centers of illicit activity such as drug-trafcking, prostitution, and gambling, Peronist networks are inevitably linked to these forms of organisation as well.
Although veriable data on illicit Peronist activity is difcult to obtain, it is widely believed that Peronist factions in La Matanza are linked to drug running, gambling, prostitution and extortion networks. For example, networks of temporary workers in La Matanza’s Central Market, which are regularly mobilised by Peronist factions to paint grafti and attend Justicialist Party mobilisations, are also rumoured to be involved in drug trafcking and thug work, including the beating of a journalist who was writing a book on (former) Buenos Aires Governor Eduardo Duhalde.35 The journalist in question, Herna´n Lo´pez Echagu¨e, published a book documenting Duhalde’s links with drug trafcking and thug networks, as well as his important real estate holdings concealed by front men. Duhalde was never able to sue Lo´pez Echagu¨e, who for safety’s sake now lives in the United States.36 Among the English-language media these alleged links have been reported by Time Magazine (22 April 1996), the Inter-Press Service (10 June 1996), Canada’s Globe and Mail (30 January 1997) and National Post (3 January 2002), and New Zealand’s network Independent Newspapers Ltd (8 January 2002). This ‘dark underside’ to Justicialist Party politics, especially in the Province of Buenos Aires, is linked to the inuence of small-time neighbourhood party leaders, the so called punteros. Not only do they fund their activities through the means mentioned by Levitsky, but they retain the loyalty of local people, even after many years of Peronist proscription, because of their insertion in corrupt or inefcient state bureaucracies. As shown by Javier Auyero, for the inhabitant of a slum or poor neighbourhood in the Greater Buenos Aires area the punteros are the facilitators who make it possible for a humble person to bury a deceased 33 ‘Bullrich arma que hubo un complot contra de la Ru´a’, Clarõ´n, 18 April 2002; ‘Bullrich y Carrio´ avalaron a de la Ru´a’, La Nacio´n, 19 April 2002; ‘Cavallo dijo que hubo un golpe institucional’, La Nacio´n, 19 April 2002; ‘Cavallo responsabilizo´ a la UCR por la caõ´da de de la Ru´a’, La Nacio´n, 20 April 2002; ‘Presunto complot contra de la Ru´a’, La Nacio´n, 7 May 2002. 34 Clarõ´n, 18 May 2002. 35 Steven Levitsky, ‘An “Organised Disorganisation ”: Informal Organisation and the Persistence of Local Party Structures in Argentine Peronism’, Journal of Latin American Studies, vol. 33, February 2001, p. 41. 36 Herna´n Lo´pez Echagu¨e, El Otro, Buenos Aires, Planeta, 1996.
Argentina, a ‘Parasite State’ 465 parent, intern an ill sibling in a hospital, obtain legal authorisation for the establishment of a new barber shop or bakery, and so on. They make Peronism strong, thanks to the failings of a state apparatus that lends itself to these practices. To a lesser extent, the Radical Party has a similar organisation. Because the common citizen’s loyalty is obtained through these mechanisms, the inefciency and corruption of the state bureaucracy is politically functional to Peronism: without them the puntero would wield little power and long-term loyalty to the party might dissipate.37 Furthermore, the combination of longlasting grassroots loyalties with the maa practices and organisation mentioned above gives the Justicialist leaders of the Greater Buenos Aires area access to parapolice forces. These are made up of mercenary thugs who are recruited among political clients who benet from proletarian employment at places like the La Matanza Market. When lootings in well-patrolled urban areas go unrepressed by the police, as happened immediately before de la Ru´a’s resignation, or when the gates of Congress are opened from the inside to allow vandals in, as occurred before Rodrõ´guez Saa´ quit, these thugs are almost certainly the perpetrators. As in the days of Ciriaco Cuitin˜o38 and Leandro Ale´n39 during the 19th-century Rosas dictatorship, the Duhalde regime relied partly on hooligans for its rise to power, and later for its fragile stability. Thus, a variety of pathological political practices has contributed to depositing the feeble remnants of governability squarely on the shoulders of politically connected organised crime. Conclusions The signicance of the so-called golpe bonaerense lies mainly in the apparent fact that, with the breakdown of federal institutions and the deactivation of the armed forces as a factor in domestic politics, it is impossible to be president in Buenos Aires without the allegiance of the maas that respond mainly to the caudillos of the Greater Buenos Aires area. Presidential hopefuls from other provinces now know that they will be the potential victims of blackmail if they ever get to the top. Likewise, with their experience contributing to push de la Ru´a and Rodrõ´guez Saa´ off the brink, the chieftains of the Province of Buenos Aires are now aware of the true extent of their power. On the other hand, because the territorial power of these groups does not reach beyond the Province of Buenos Aires, the political bosses of other provinces have some power to blackmail the man in charge in Buenos Aires. If the policies adopted by the Executive Power are sharply at odds with the interests of important bosses from other provinces, there is little to force them to obey, and they have power instruments of their own, like the control of petrol and natural gas, the artful use of which could leave Buenos Aires in dire straits. The consequence is that the man in charge in Buenos Aires is caught between the pressures applied by the international nancial community and by the 37 Javier Auyero, Poor People’s Politics: Peronist Survival Networks and the Legacy of Evita, Durham, Duke University Press, 2000. See also his PhD dissertation, ‘The Politics of Survival: Problem-solving Networks and Political Culture among the Urban Poor in Contemporary Buenos Aires’, New School for Social Research, New York, 1997. 38 Chief of police during the 19th-century dictatorship of Juan Manuel de Rosas. 39 The head of the ‘Mazorca’ parapolice forces, whose embarrassed son changed his surname to Alem and became the founder of the Radical Party.
466 Carlos Escude´ Governors of the interior provinces. He cannot re 400,000 state employees, as the IMF would like, without producing a three-fold rebellion of the people, the legislators and the Governors. He cannot break relations with the IMF, as apparently he would want to, because the Governors of the most important interior provinces, Co´rdoba and Santa Fe, do not want to bear this burden, in case they ever get a shot at the presidency themselves. Notwithstanding, they will not actively support policies of adjustment because they want the man in Casa Rosada to pay the political costs. For the same reason, the president is not willing to impose adjustment policies on Congress with decrees of necesidad y urgencia, as Menem and de la Ru´a so often did: he demands that Congress share the political costs. The man in Casa Rosada, the legislators and the Governors are all caught in a clientelist trap. Over decades, Argentine political elites have built an unsustainable state, winning elections through the generation of articial public employment leading to chronic scal decits and indebtedness. With credit no longer available, they have now reached the end of the road in the midst of the worst recession the country has ever known. But not all provinces are unviable, and those that are better off might not want to share the burden of collapse, especially given a concomitant crisis of federal institutions that gives them room for manoeuvre. Territorial dismemberment, though not yet likely, is not to be discounted. The end-of-the-road situation describes the predicament of the country as a whole, but not of several of the wealthier provinces, which might prefer not to continue subsidising the non-viable ones. If one looks at the Argentine crisis from beyond the conict of interests between the Buenos Aires political apparatus, the richer interior provinces and the poorer ones, it is clear that Argentines as a whole, including the people who let themselves be manipulated by their political leadership, have brought disaster and disgrace upon themselves. Understandably, the world will no longer foot the bill for this state. It is parasitic, it is corrupt, and it has become non-viable under the weight of its present scal and political distortions. This is so despite the fact that a country with 2.8 million km2 and only 36 million inhabitants can never be intrinsically non-viable. Intrinsic and circumstantial non-viability are not the same thing. This manufactured Argentine mess would only be aggravated with further nancial assistance, unless it came with a direct foreign intervention in the administration of its nances, a possibility suggested by Ricardo Caballero and Rudiger Dornbusch that is still not politically fathomable. 40 Indeed, Argentina may be the most corrupt country in its development category in the world,41 if we measure corruption through indirect indicators 40 Ricardo Caballero and Rudiger Dornbusch, ‘Argentina Cannot be Trusted’, Financial Times, 7 March 2002. 41 Although the consequences of widespread political corruption greatly irritate the average Argentine today inasmuch as s/he has seen his/her property rights grossly violated, it is surprising to see how a popular culture has emerged in which corruption is taken lightly and even with complicity. This is manifest in the colloquial language of Argentines through maa-style slang and expressions that permeate all levels of Argentine society. For more on this see C. Escude´, ‘Yo, Argentino’, Buenos Aires Econo´mico (BAE), 14 May 2002.
Argentina, a ‘Parasite State’ 467 such as debt per capita in combination with size, population density, fertile hectares per capita, etc. The Province of Buenos Aires may turn out to be one of the most corrupt territories in the world if we were to build an index using indicators such as fertile hectares per capita and lack of investment in canals for water drainage. The issue such comparisons suggest is: how can a country almost the size of India, with abundant fertile land but only one-twenty-eighth its population, be not only half developed, but also in such dire nancial straits? How can the Province of Buenos Aires have had a signicant part of its territory ooded with rainwater during the last quarter of 2001 due to lack of drainage canals? Such questions may lead to more abstract reasoning and to the generation of a more general socio-anthropological hypothesis, not related to the economic viability of a country but to the factors concurring to generate its debt. If the size of two developing countries is similar, and we assume that they hence have a similar resource endowment, then the need to incur development-related debt will be a function of the size of the population. The greater the population, the greater the need for development-related debt. If, contrariwise, the debt per capita is greater in the less populated country, then the relative excess of debt is not development related, but is probably associated with widespread graft, corruption, political favours and demagoguery. Even allowing for differences in the indebtedness policies recommended by different models or policies of economic development, an important asymmetry between debt per capita and population will probably be associated with corrupt political practices, including demagoguery. It seems like a morbid jest: Argentina compensates for what it lacks in population with a debt per capita that is 60 times greater than India’s. Humanity does not deserve a corrupt and inept political leadership of 36 million inhabitants that wastes away almost three million km2 of the planet’s surface. Corrupt interests have made non-viable the most viable of countries and now expect the rest of the world to foot the bill for endless overspending. With the starving billions that barely survive in lands bereft of sufcient natural resources, Argentina and its basic parameters are in themselves a crime against humanity.
