The fire this time

The resignation of Argentina's new president after barely nine days in office suggests Argentines are in no mood to be taken for granted by politicians, writes Hisham El-Naggar from Buenos Aires
Argentina, struggling to overcome its ongoing economic, political and social crisis, greeted the New Year in the midst of uncertainty. At 11 pm on Sunday 30 December, Adolfo Rodriguez Saa, the country's third president in ten days, announced his resignation to the nation.
Rodriguez Saa was elected unanimously by the Peronist Party, which holds a majority in Parliament, to take over from Ramon Puerta, the caretaker president who held power for two days after ex-President Fernando de la Rua presented his resignation.
Though it was clearly understood that Rodriguez Saa would be an "interim president" until elections on 3 March, he quickly started to act as if he had longer-term plans, proposing sweeping changes which delighted some and drove others to consternation.
Many of Rodriguez Saa's measures were populist, as befits a politician reluctant to relinquish power in a couple of months. That, in fact, was the problem: however well- intentioned, his programme appeared to be promising too much at a time when resources are unusually strained.
Rodriguez Saa's first decision, to default on the country's debt, was seen as straightforward enough because there was unanimous agreement that such a move had become inevitable. His other promises -- to create a million new jobs, to more than double the minimum wage and to cut expenditures considered profligate -- were applauded rather more cautiously. Argentines have been turned into sober- minded amateur economists by the economic troubles, and many strongly suspected that a massive issue of bank notes was in the offing. Rodriguez Saa's aides kept referring to a cryptic "third currency" which would exist side by side with the peso and the dollar. Rumours soon spread of imminent devaluation and, worse, inflation.
The president's admirable war against corruption would have been more convincing had he not been seen to be flirting openly with the shadiest and most despised wing of the Peronist union movement. To make matters worse, he committed the mistake of naming a number of figures from the era of ex-President Carlos Menem to important posts, unmindful of the fact that some of them were associated in the popular mind with the systematic raiding of the public treasury.
Rodriguez Saa's worst problem, however, was his inability to lift the freeze on most bank savings and parts of salaries paid through the banking system. He inherited the problem from Domingo Cavallo, the notorious ex-minister of the economy, who imposed the freeze in a belated attempt to stop a major capital flight from bleeding Central Bank reserves dry a few days before he was booted out.
The loss of reserves would be severely trying for any economy, but for Argentina's it was catastrophic. Argentina's convertibility plan, which kept the peso at a par with the dollar for 10 years, depended on total backing of the entire monetary base with dollar reserves. When these reserves were depleted by capital flight, two things became inevitable: the exchange rate became unsustainable and the Central Bank's ability to give dollar bills to depositors who wanted to withdraw them was strained to the limit.
Argentines' loss of confidence in their financial institutions quickly turned into an uncontainable crisis. Argentines began to have serious doubts about their ability to convert their bank deposits -- 70 per cent of which are denominated in dollars -- into actual dollar bills. Cavallo's deposit freeze, upheld by Rodriguez Saa, has magnified those doubts hundred-fold. If the freeze was lifted now, there is little doubt that Argentines would take their money out of the banks en masse -- something that would deal a fatal blow to the banking system.
If Rodriguez Saa had been willing to confront people with the painful truth -- that it will be years before they get their money out of the banks, and even then it will probably not be at its face value in dollars -- he may have scored points for sincerity and gained time to remedy a situation for which he was not, after all, responsible. But, ever determined to be all things to all people, he could not bring himself to do so. As a result, people's patience grew rapidly thin.
Only one week after Rodriguez Saa was named president, Argentines took to the capital's streets once more. The immediate motive appears to have been two-fold: to express disgust at the naming of a particularly notorious former mayor of Buenos Aires to the position of "head of presidential advisers," and the decision by the Supreme Court to uphold the deposit freeze. Since the Supreme Court is in ill-repute, the common theme of the protest was that people were sick and tired of corruption.
It was a severe blow to Rodriguez Saa after a mere seven days in power. It contradicted his claim to be a new kind of politician. Worse, it suggested to other Peronists who had installed him that he may not be the ideal man to maintain a semblance of stability during a brief transitional period.
Although the physical violence abated quickly -- mercifully, the police avoided the savage repression which had discredited ex-President de la Rua's handling of street protests -- political tension soon rose to boiling point. Within a couple of days, the new cabinet had resigned, and Peronist bigwigs rapidly withdrew support from Rodriguez Saa's presidency.
The president's resignation soon followed. In his resignation speech Rodriguez Saa insisted that he had initiated a process of change which could only result in a better life for most Argentines. In a calculated snub at the capital which lost patience with him, he delivered the speech from San Luis, his home province. The move backfired: the transmission was so poor that the speech is not likely to be remembered as a "historic" one. Meanwhile, Argentines have shown that they will no longer forgive the slightest error on the part of their would- be rulers.
Nevertheless, it is much too early to dismiss Rodriguez Saa as a political has-been. What is certain is that the struggle for power among the Peronists will intensify in the coming days.
In the meantime, Ramon Puerta, head of the Senate, is acting as president again until his Peronist peers make up their minds how to handle the transition until the March election. That election now looks as if it cannot be postponed.
Present developments in Argentina may not be too gratifying to the powers that be, notably the countries with investments in Argentina and the International Monetary Fund which is overseeing -- somewhat amateurishly, as recent experience suggests -- the interests of foreign creditors. They would have preferred a president who would concentrate on coming up with a viable plan to reassure world markets that the country's disappearance from the international financial system is not permanent.
As it turns out, the concerns of "the outside world" -- especially the financial part of it -- are not likely to be uppermost on Argentines' minds. For 10 years, Argentina paid heed to little else. The results have been, to say the least, disappointing.
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