Argentina -- a way out of the crisis. Excerpt from a plan by a group from the Economics Department, University of Buenos Aires. (Document).

Against the background of Argentina's dramatic economic crisis a meeting was held in the Faculty of Economic Sciences of the University of Buenos Aires to focus on the need to work on alternative proposals to deal with the events.

The following document aims to open the debate, pointing out initiatives that are based on the principle that the burden of the disaster should fall on those who bankrupted the country, and not on workers, unemployed, professionals and small producers, traders and investors.

This crisis surpasses earlier ones in Argentina in 1975, 1981 and 1989 due to the spiralling growth of poverty, the dismantling of industry and regional breakdown. Argentina's depression has not been caused exclusively by convertibility, but rather by the combined effect of periodic convulsions of capitalism, the country's peripheral status and a decade of neo-liberal policies.

Our initiative echoes the popular revolt that toppled a retrograde government and continues through everyday protest. We are active participants in the popular movement and reject the current political regime, based as it is on government by executive order, the legislative delegation of powers to enable harsh adjustments and the continued presence of a Supreme Court that guarantees impunity to those who rob the national treasury ... We are conscious that the alternative program we suggest may only be put into practice through a strengthening of the popular movement developed since last December. We believe that protests must change the trend of dispossession of the people, and capitalists must bear the cost of their own disaster. This movement must direct the struggle towards salary increases, unemployment relief and savings devolutions to investors that now are being confiscated. In any case we argue that the solution to the current problems will only be reached in the context of a socialist transformation.

1. The peso devaluation was introduced to make possible a new regressive incomes transfer in favor of dominant sectors, and its effect will be felt in price increases of food products, medicines and basic consumption goods. If the free dollar quotation keeps mounting an inflationary intensification will cause major sufferings to the population. The prospect is terrifying -- more than 14 million persons belong to families whose monthly income is less than 460 pesos ($US242 as of February 2002) and 4.5 million indigents are not able to afford the 70 pesos/$US37 of food necessary to avert starvation. It is now estimated that if prices rises reach 10 per cent, poverty will extend to 1.3 million people, and if they rise 30 per cent, the new pauperisation will affect 3.7 million. Price controls will be totally ineffective to counter-balance price rises in industrial and farming products, and the current lack of supply of essential products and materials. Currency speculation has openly and strongly resurged and it is financed by the same Central Bank that is subsidising sales to private foreign exchange houses. Provisions to limit unemployment through major severance payments are inadequate, given the high levels of unemployment and the current round of wage freezes.

The unemployment subsidy for `employment and training' of 150 pesos (USD 80) that the Government has promised for 1,000,000 breadwinners -- in response to a recent petition -- is a disgrace.

In our opinion, the immediate eradication of poverty is feasible, but it depends on the planned reorganisation of production and a drastic income redistribution, and not on expected uncertain reinvestment cycles. It is workers who will create the `virtuous cycle' of growth to generate recovery. Our proposal to tackle this dramatic situation is very simple: to immediately establish a 500 pesos (USD 265) unemployment insurance, reduce the labor week and redistribute existing work hours. This measure, along with a minimum $600 salary (USD 315) would create sufficient purchasing power to rapidly reach the basic family needs coverage of 1,030 pesos ($US540). Also, minimum pensions have to be increased to 450 pesos, and this amount should extend to all old people who have no access to social security.

Obviously this plan raises the problem of how these measures can be financed. We suggest three strategies to fund this proposal: the total suspension of foreign debt payment, an immediate introduction of levies on big fortunes, and social security incomes reinstatement. In the last national budget, 9 billion ($US5bn) pesos were designated for debt payment. The levy can be established as an emergency obligation -- a 10 per cent payment on assets of the 100 firms with highest sales, and 5 per cent for those companies with incomes surpassing 5 million pesos, and as a special tax on profits from rent. In special cases, and as a mean to prevent evasion, the assets tax may be replaced by an average of corporate profits or sales. These levies could make possible the collection of 20 billion pesos. A 30 per cent rate should be levied on capital placed abroad and not registered as direct investments.

The third proposal is the immediate elimination of the private pension funds scheme called AFJP, and the unification of all pensions in a single system. The restoration of previously eliminated employers' funding could facilitate the annual recovery of at least $4 billion pesos. In the same way, all tax exemptions, postponements and subsidies favoring big economic groups and privatised firms should be eliminated. The combination of the three collection sources along with the other proposed measures will provide the initial funds to extract us from the social emergency.

2. A bank deposits freeze was introduced by the deposed Government Minister of Economy Domingo Cavallo as a means to relieve bankers of the cost of small depositors, and this has been transformed into a flagrant instrument of middle classes' expropriation. To protect banks, all financial activity was suspended. President Duhalde openly lied when he promised in his inaugural public speech that all deposits were going `to be restored in the original currency'. From the banks not a single dollar can be now be recovered and a compulsory `pesification' of dollar deposits is under way (many Argentinians hold their savings in American dollars), meaning in fact an explicit confiscation. As the peso devaluation deepens the fraud of small investors grows. Depositors receive from banks in realisation of their assets either devalued pesos or depreciated certificates. A first conservative estimate indicates that the expropriation has meant a 50 per cent loss of value of actual global deposits in the local financial system, around USD 23 billion. The same multinational financial institutions that channelled over USD 20 billion into capital flight in 2001, must be compelled to restore deposits through the anticipated collection of big firms' credits (big companies' banking debts could easily cover the value of small and medium deposits) and capitalisation by their own head offices....

3. Argentina's default confirms the total futility of vast sacrifices made by the population over many years for the purpose of public debt payment. The crisis has made palpable the impossibility of coping with interest payments that treble public administration administrative costs, that are six times bigger than social assistance funds and consume twenty three times more resources than employment plans. In any case, the public debt can't be refinanced as it was in the 1990s through privatisation -- there's nothing left to sell. Inquiries have demonstrated that most of the debt has been fraudulent in origin and lacked the underpinning of real investments, as it was the result of speculative manoeuvres that made possible the enrichment of creditors and local associates. Debt payment suspension must be complemented by the total withdrawal from negotiations with the IMF, the definitive rejection of all fraudulent liabilities, the renegotiation of credit lines related to priority commercial operations and the establishment of future payment schedules for small tenants. All alternatives intended to frustrate these just solutions have carried the country to the brink of calamity.

Indeed, Mr Duhalde has appointed a direct representative of the IMF to head the Central Bank -- Mr. Mario Blejer. At this moment we must recognise that the problems arising from unilateral nonpayment would be much less than those caused by continuing them. Which scenario worse than the current one could be created by a default? Major cuts of international credits? These were suspended last year. A lack of new foreign investments? These are non-existent already.

The moment has come to initiate a new way: an emancipation from external debt creditors -- including those resident in Argentina. That, surely, will enhance solidarity with people in the world suffering the same oppression. The popular upheaval in our country has provoked major international concern: fear of a `political contagion of the Argentine example' among creditors. These conditions favor the implementation of sovereign decisions.

Luis Becerra, Alberto Bonnet, Alfonso Florido, Guillermo Gigliani, Claudio Katz, Eduardo Lucita, Jorge Marchini, Alberto Teszkiewicz

University of Buenos Aires, Argentina,