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The Financial Times is a publication not given to catastrophic headlines. So people took notice when on Feb.4 a piece on Argentina written by its Buenos Aires correspondent, Thomas Catan, and Richard Lapper, its Latin American editor, was headlined "Close to Anarchy." However, the FT was not being sensationalist; just prescient. Two days later, no less than Argentina's president, Eduardo Duhalde, declared his country not only "on the verge of anarchy" but "about to fall into chaos."
It's no exaggeration. With the government's latest economic plan undermined by growing disillusionment among the middle classes, as Argentina prepares to float its currency for the first time in more than a decade, the country is on the brink of economic and social collapse. What began as a loss of confidence in the economy last year has turned into a crisis that threatens to unravel the country's social fabric.
President Duhalde, from the populist Peronist Party, moved to scrap the peso's longtime one-to-one peg with the U.S. dollar four days after he took office last month. He set an official rate of 1.4 pesos per dollar for limited export and import transactions, but allowed the peso to devalue nearly 50 percent on the open market where it now trades around 2-to-1.
Under Duhalde's economic plan, all bank deposits denominated in dollars will be converted to pesos at the government-set rate of 1.40 per dollar. Bank loans denominated in U.S. dollars will be converted into pesos at a rate of one-to-one.
But there are other problems.
To put it bluntly, banks have not enough funds on hand to return depositors their savings. The government came to their rescue by limiting withdrawals. When depositors went to court, the Supreme Court found this unconstitutional. The government then issued a decree forbidding anybody to go to court on this matter for six months. A federal judge found this unconstitutional. Rather than attempt an appeal to the Supreme Court, the administration drove its forces in Congress to initiate impeaching procedures on all nine members of the Court.
Meanwhile, middle-class demonstrators, angered by the loss of their savings, have continued their cacerolazos-mass demonstrations of protesters banging pots and pans-on the streets.
How did all this come to be in such a richly-endowed country? The basic fact: a four-year recession. In a desperate attempt to pull out of the situation that triggered debt default, devaluation and a political upheaval, last week the government launched a new economic plan. On the face of it, the plan does not look too bad. But the calamity has deeper and older roots.
Recognizing this, Duhalde has also come up with a plan to get the provincial governors to work with him on the kind of institutional reform — he speaks vaguely about launching a "second republic"— that most observers believe could only be achieved through a constitutional convention.
But, the constitutional issue aside, the idea of undertaking reform in the midst of creeping anarchy and chaos is akin to attempting to change the wheels on a car as it is going downhill at full speed.
Indeed, what is actually happening is that the wheels of government power are coming off. Events are showing that the chances of any leader who is not exceptionally charismatic holding the nation together while open heart surgery without anesthesia is performed on its people are nil. And nobody is available to audition for that role.
Few of the protesters have any idea about alternatives. And there are none other than going through tougher times before they get any better. The depth of disillusionment is so great that Duhalde appears increasingly unable to guarantee order — he himself is recognizing this when he speaks of the possibility of "anarchy" and "chaos."
"Anarchy" and "chaos" are buzz words that activate the "patriotic" juices in the military. At first glance, military rule seems an unlikely outcome. The country's armed forces saw their prestige and reputation plummet after their last period in government between 1976 and 1983, in which up to 30,000 people are estimated to have lost their lives. Some senior officers have spent time in prison for human rights abuses and there appears to be little appetite among their successors for forcing their way into the presidential Pink House.
But this time around the military may be invited in, to back up a civilian president so that he may become the authoritarian ruler that seems to be needed at this time in Argentina.
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