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Think of this. A master surgeon is doing an open heart procedure on a patient that has become critical after three years of being treated by blunderers. And he is performing it at Yankee Stadium in front of a world audience that is deeply concerned with its outcome but cannot help but be distracted by a never-ending parade of mountebanks that tumble around the field, constantly threatening to disrupt the life-saving operation by ensnaring the surgeon in their antics, while outside the stadium a gathering crowd is protesting about the technique employed by the surgeon.
Think of this and you will have an idea of what Argentina's economy minister and now virtual chief of state Domingo Cavallo is going through as he tries to revive the nation's failing economy, three years into a recession which successive economy ministers could not revert, and under the anxious eyes of the world financial community. At the same time, public attention is increasingly demanded by a scandal of illegal arms sales to Croatia and Ecuador in the 1990s which is being investigated by the courts and in which former president Carlos Menem and members of his cabinet, of which Cavallo was one, are involved, while public discontent is growing among the people at large with the measures taken by Cavallo.
Up to now Cavallo, drawing on the global credibility and prestige he amassed a decade ago, when he stopped Argentina's hyperinflation on its tracks and guided the economy to its recovery through wide-ranging free-market reforms, has been able to gain a breathing space from the world financial circles with measures that fended off a dreaded default on its $128 billion debt.
After Argentina missed the first quarter fiscal target of the International Monetary Fund loan package of nearly $40 billion agreed in December because of falling tax revenues and increased spending, on the strength of a range of emergency measures to rein in the burgeoning fiscal deficit he has taken, Cavallo was able to renegotiate the agreement with the IMF.
Cavallo scrapped most exemptions on valued added tax, raised the tax on financial transactions from 0.25 per cent to 0.4 per cent, and implemented spending cuts of $900 million, while cutting VAT on purchases of capital goods from 21 per cent to 10.5 per cent to encourage investment. He said the last measure in particular would form the "cornerstone" of Argentina's economic recovery, and predicted that the measures taken would be enough to meet the IMF's $6.5 billion deficit target for this year. Without those measures, the country would have overshot that target by an estimated $4 billion.
Armed now with fresh backing from the IMF, which last Friday threw its support behind his new economic program, saying it was willing to speed up disbursements on its $14 billion loan if needed, Cavallo is attempting to regain access to capital markets, restarting this week the bi-weekly domestic bill auctions by rolling over some $700 million in short-term treasury bills-after having cancelled last week's auction when the government balked at paying the astronomical interest rates the market was demanding.
But Cavallo is facing two yet unresolved issues, one external, one domestic.
Foreign financial centers are not yet clear on how the Argentine economy will regain its growth, which Cavallo predicts will reach 5 percent by the end of this year-the IMF estimates it will be only 1.5 percent. There are doubts that it could be a traditional consumer-driven growth, because the three-year recession has left the Argentine consumer in very bad shape to be a growth engine.
Furthermore, the very same measures taken by Cavallo to gain the support of the IMF and the cautious confidence of private investors have cut down even more the consumers' resources, which is precisely the domestic problem on the political front the minister faces.
Due to the additional taxation, the already besieged family budget will be hit with higher electricity and cooking gas bills, as well as with increases in the cost of cable television, movie and soccer tickets and cellular phone use-which is not so much as a luxury but a necessity in a country where regular phone service has not caught up yet with the demand and is somewhat erratic.
The protest against these increases is mounting up, and one institution that has taken the side of the people on this issue is the Catholic Church. Last Sunday, bishops all over the country devoted their homily to a strong criticism of the government's social policy.
"The worker has turned into a hostage, compelled to accept the increasing precariousness of his job conditions," said archbishop Eduardo Miras, of Rosario, the second largest city in Argentina. "The responsibility falls upon the intolerable weight of the external debt, the concentration of land among the few and the corruption in the administration. The results can be seen of a decade that has extolled speculation and depreciated work."
Minister Domingo Cavallo will not be able to isolate his policies from the political fallout, How he will deal with them remains to be seen, And, meanwhile, the arms-sales scandal that is snaking its way through the courts may turn out to be a problem that involves him too.
Claudio Campuzano (claudio-campuzano@hotmail.com) is U.S, correspondent for the Latin American newsweekly Tiempos del Mundo and editorial page editor of the New York daily Noticias del Mundo. He writes weekly for World Tribune.com