In Argentina, Peronism Vs. Pragmatism
Populist Leader Alters Plans to Meet Reality of Economic Crisis
By Anthony Faiola
Washington Post Foreign Service
Saturday, January 26, 2002; Page A01
BUENOS AIRES -- President Eduardo Duhalde came to power this month with the populist flourish many have come to expect from a man who is proud of his Peronist roots. He assailed foreign banks, blasted the International Monetary Fund and called for a shift away from the free-market economics promoted by Washington.
But his first month in office has shown Duhalde to be like his political hero, the former nationalist leader Juan Peron, in only one key respect: Duhalde's real politics lie in the gray area between his words and his deeds.
Duhalde has turned out to be more pragmatic than populist. He seems willing to shift his positions to meet the realities of modern Argentina, which will have to seek fresh support from the IMF and, in the long run, the return of foreign investors as part of an effort to recover from financial collapse.
Duhalde's closest aides say that, behind the rhetoric, he is trying to strike a balance: On the one hand are his views that Argentina mismanaged its free-market opening in the 1990s. On the other is the inescapable fact that Argentina -- like other countries around the world in 2002 -- cannot ignore global trends toward economic integration.
Even as Duhalde borrowed from one of Peron's most famous speeches last week, declaring "Argentina has arrived at the end of the century dominated" by foreigners, he appointed a leading free-market economist as his chief for international trade and installed a former IMF official to lead the central bank. This week, Duhalde also backtracked on his most popular promise to the people -- that foreign banks, which now own most of Argentina's financial system, would be forced to bear the brunt of the pain from the recent peso devaluation.
Duhalde, while publicly berating the IMF for policies widely seen as contributing to Argentina's economic hardships, is also attempting, behind the scenes, to hash out a compromise by agreeing to fiscal austerity measures he previously opposed, including an unpopular 13 percent reduction in government salaries and pensions.
It was disclosed this week that the crisis has left Argentina more deficit-ridden than either the IMF or the new government realized, with a $12 billion shortfall expected for 2001, almost double the original IMF estimate. But demands for more austerity are being met with anger here.
[Yesterday, thousands of Argentines blocked highways and crowded into plazas in a nationwide outburst of discontent, marking the first major demonstrations against Duhalde's government, news services reported. In Buenos Aires, riot police firing tear gas clashed with dozens of protesters.
[Protesters also gathered outside the presidential palace to demand an end to the tight banking curbs and other government moves intended to end four years of recession.]
The Peron Legacy
Critics at home and abroad are concerned not only about Duhalde's populist declarations but also his track record. During the 1990s, he ran up a huge deficit as governor of the sprawling province of Buenos Aires, which stretches from the capital's city limits to the edge of Patagonia and holds more than one-third of Argentina's population of 36 million. But his advisers contend pragmatism will be his watchword as president.
"Yes, he is interested in defending our national interests but he is not a man who is looking to send Argentina back to the past," said Martin Redrado, Duhalde's new head of international trade and the author of a best-selling book on the benefits of globalization. "Duhalde is aware of the new world order and knows that the future involves further global integration."
In the elegant presidential residence on the edge of this vast city, Duhalde, 60, his eyes puffy from lack of sleep, insisted in an interview this week that he would attempt to emulate the United States, Europe and developing nations such as neighboring Chile, which have built competitive industries and successful trade policies. But in Argentina's case, he said, that could take some time.
"Look, Fidel Castro said only a crazy man would be president of Argentina right now, and a top adviser [to President Bush] said he would never want to be in my shoes," Duhalde said. "But . . . it is my job to turn this country back into a normal nation. . . . Normal countries defend the interests of their workers and industries. Take the United States. At a recent conference of Latin American leaders, the U.S. Congress was called the most protectionist of all. I had to laugh, because I have always said that the United States is only doing what all countries should."
Duhalde launched his political career in the 1960s as a city councilman in Lomas de Zamora, a working-class Buenos Aires suburb, and rose through the years to become a top official in the massive political machine created by Gen. Juan Peron as a Cold War alternative to U.S.-style capitalism and Soviet communism.
Peron's "Third Way" -- which his critics said was designed largely to keep its founder in power -- was inspired by Peron's admiration of Benito Mussolini's Italian Fascists and by left-wing labor movements. At Peronism's core were big state-owned industries. It also sought to weaken the grip of wealthy oligarchs and landowners, while using state-funded programs and politicized labor unions to protect living standards.
Those ideals inspired Duhalde, the son of a working-class family, while studying law at his local university.
Duhalde's wife, Hilda "Chiche" Duhalde, who is perhaps inevitably compared to the strong-willed and iconoclastic Evita Peron, said her husband "suckled on the ideas of [Peron] since he was a child. He was able to go to the university precisely because of Peron's policies that gave working-class families access to them. Peron made the universities free, changing them from something that had always belonged to groups of the elite."
Duhalde arrived in national politics in the shadow of Carlos Menem, a charismatic Peronist leader from the small rural province of La Rioja who became Argentina's most important leader since Peron. Menem picked Duhalde as his running mate, and they took office in 1989, just as runaway hyperinflation was savaging the economy.
In 1990, in a major departure from Peronism's big-state and pro-labor policies, they embraced the then-novel theories of privatizing state-run industry and lowering trade barriers to foreign imports. It turned Argentina into a darling of the IMF and a model of globalization. Though Duhalde left the vice presidency in 1991 to become the governor of Buenos Aires, he wholeheartedly backed the market reforms.
"The new model is the only way now possible to combat poverty," Duhalde said in a 1991 speech. Later, he had a falling-out with Menem, and the distance between them grew as Menem's administration became enveloped in corruption. In late 1995, Duhalde announced his opposition to Menem's "economic model."
Duhalde's wife, who is his closest adviser, said they still believed in the initial reforms but felt Menem took them too far, too fast. "We began seeing how they were destroying the regional economies one by one," she said, "how they were destroying small businesses. . . . We were suddenly selling cotton to countries that made clothes and then sent them back to us, when before we had an important textile industry. You didn't have to be brilliant to see things were going wrong."
While Menem was rubbing elbows with world leaders, Duhalde went back to his Peronist roots. As governor, Duhalde tripled the province's deficit to $1.7 billion over eight years and launched programs that gave subsidies to poor families and built hundreds of schools. "Duhalde was a ribbon cutter, he loved inaugurating things," recalled Olga Wornat, a journalist and author of several books on Peronism. "He is the type of leader who is out there trying to show the people that he is providing them with progress, no matter what is really happening behind the scenes."
Words and Deeds
Duhalde won popularity among the poor through his wife's "manzaneras" project, in which designated representatives in working-class districts served as direct envoys to the president. Critics said the wildly successful program, which doled out food baskets and other goods to the needy, fed into Duhalde's growing political machine, wooing the support of thousands of poor workers who were bused to Peronist rallies and campaign events.
While Duhalde was governor, he faced accusations of corruption, misuse of tax dollars, and even connections to organized crime, though none of the allegations were proven. Critics say Duhalde's big-spending ways were first and foremost a political gambit. "It was obvious that Duhalde was overspending for political points," said Miles Christi Pelly, a former opposition senator from Buenos Aires province. "You have to say that his history in the province raises doubts about his ability to manage conservatively."
Duhalde was handily defeated in a presidential bid in 1999 by the centrist politician Fernando de la Rua. But the new president was unable to cope with Argentina's economic woes. He clung for too long to an overvalued peso, which hurt many industries at a time of deepening recession. De la Rua resigned on Dec. 20 following a popular uprising against his economic policies. Duhalde -- who staged a comeback of his own in October, winning a Senate seat from Buenos Aires province -- was named president on Jan. 2 by a legislative assembly.
After a rapid succession of appointed leaders, Duhalde became Argentina's fourth president since de la Rua's resignation and is now viewed by his peers as the best hope to restore order at a time of great instability. With poverty and unemployment rates still rising after this month's default on the national debt and devaluation of the currency, Argentina is confronting large protests every day and violent attacks on both foreign banks and politicians.
A 62-year-old retiree walked into a bank this week with a grenade, demanding his $22,000 life savings. The money has been off-limits in a nationwide freeze on bank deposits imposed in an effort to prop up the financial system. And a few days ago, a group of 300 demonstrators in the town of Junin south of Buenos Aires set fire to the home of their member of the national legislature.
Duhalde was trying this week to sell himself as a "modern and flexible leader." Some of his actions, if not his words, suggest he is a pragmatic leader. He took an enormous political risk in going back on his promise to force foreign banks operating here to absorb the bulk of the peso's devaluation. The move hurt him among an angry population but averted a worse outcome: The banks were threatening to leave.
To win desperately needed IMF support, Duhalde must also make good on his promises to pass a realistic budget that controls runaway spending. The overspending is blamed in part for Argentina's $142 billion national debt, now partially in default. He is trying to offset new social spending, such as emergency subsidies of $150 a month to unemployed workers, by eliminating the jobs of government bureaucrats. He is also toning down his promises to the public, saying that his goal for the foreseeable future is simply "to stop things from getting worse."
Duhalde agreed with IMF and U.S. economists who called Argentina's overvalued peso one of its biggest problems. His economic advisers have said the peso's two exchange rates -- with a lower rate for foreign transactions and a free-floating rate on the local market -- will eventually be combined, as the IMF has suggested.
Privately, his aides have expressed fear that Duhalde's blanket condemnations of free-market economics have lumped him into the same category as Venezuela's president, Hugo Chavez, a left-leaning firebrand and friend of Cuban leader Fidel Castro. They insist Duhalde's policies are more like those of President Fernando Henrique Cardoso, who has modernized Brazil's economy while taking a highly critical position against U.S. and European trade practices, such as farm subsidies and strict limits on agricultural imports.
Duhalde insisted that his planned "defense" of local industry would involve what he called long overdue anti-dumping and other "modern" trade policies. But Duhalde also appears to be a politician struggling to survive conflicting pressures, and it is not clear which direction he will take.
"Like all normal nations, we have to protect what is ours," said Duhalde, "but we will play by the rules."