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Thursday, 27 December, 2001, 12:49 GMT
Argentine leader promises new jobs
Adolfo Rodriguez Saa (centre) with union leaders
Rodriguez Saa (centre) was cheered by the unions
Argentina is well on the way to creating a million new jobs within a month, the country's new President Adolfo Rodriguez Saa has said.

He promised his supporters in the trade unions that the jobs would be paid for with the new currency his government is creating.

One in five Argentine citizens of working age are jobless, and the average $600 monthly wage is well in arrears of prices often at Western levels.


Some people believe we are going to do something irresponsible with this, but they are wrong

President Adolfo Rodriguez Saa
The new tender, the argentino, would be backed with all available state property, including the presidential palace and foreign embassies, he announced.

Finance Secretary Rodolfo Frigeri said the argentino was the only way to avoid dollarisation or devaluation.

The Argentine peso is currently pegged to the dollar. Devaluing the currency would force millions of Argentines with dollar debts into bankruptcy.

And dollarisation would "benefit some to the detriment of everyone else", according to Mr Rodriguez Saa.

Splits

But even within Mr Rodriguez Saa's Peronist party, not everyone agrees.

Carlos Menem, the former president freshly released from five months of house arrest over arms trades carried out by his administration, has criticised the argentino, instead pushing for full dollarisation.

That may not cut much ice with the Argentine public, since it was during his reign in the 1990s that Argentina's $132bn in federal debt was largely accumulated.

But it does put the massive dividing lines in the ruling party into sharp relief.

And that bodes ill for the new government's efforts to bring the economy back into shape.

According to Stan Rudcenko, an emerging markets economist at Societe Generale in London, improved policy consensus at the top is one reason why other countries which might once have been "weak links" have not been infected by Argentina's troubles.

That is not the case in Argentina, where jockeying within the Peronist party for position ahead of presidential elections in March 2002 is already well under way.

The situation has been the same throughout the crisis.

The government itself has been divided, while other groups such as regional government and opposition parties have done everything they can to take advantage of the situation.

"This tendency to play to the crowd is the weak link in Argentina, and it isn't elsewhere," Mr Rudcenko said.

In practice

The risk of further fall-out means that many in Argentina are now trying to pre-empt what they see as inevitable devaluation by raising prices or scrapping discounts.

The local retailers' association, CAME, said many shops had "hiked prices in pesos up to 20% in the last 72 hours given the uncertainty of surrounding the exchange rate parity".

Banks remain closed and ATMs are all out of cash.

Mr Frigeri said the argentino is the only way out of the dollar peg, which - while stamping down on formerly rampant inflation - has priced Argentine exports out of the market and contributed to the 43-month recession.

Reactivation

The argentino will circulate alongside the dollar and the peso.

The interim administration has said it will be used to pay government salaries, pensions, debts and state supplies.

Argentina's economic woes
Public foreign debts of $132bn
Unemployment at 18%
Economy in recession for four years
Savers only allowed to withdraw $250 a month in cash
2,000 people drop below poverty line each day
Pensions to 1.4m retirees delayed

Some economists have warned it will increase fears of a devaluation, especially if it used to pay off internal debts.

They also worry that not enough goods may be priced in argentinos, or that the government could print too many and restoke inflation.

But Mr Rodriguez Saa defended his plans.

"Some people believe we are going to do something irresponsible with this, but they are wrong," he told the unions, which are affiliated to his party.

"The argentino will help us reactivate the economy."

Government pledges

Mr Rodriguez Saa replaced former President Fernando de la Rua, who resigned last Thursday after rioting and looting triggered by economic hardship left 27 dead.

Former Argentine President Carlos Menem
Mr Menem criticised his party's plan
He was sworn in on Sunday, and since then has outlined a raft of emergency measures which he says will stimulate the economy.

On Wednesday, he gave more details about his plans, including:

  • A promise to reverse salary cuts to state workers and pensioners
  • A cap on benefits for high-ranking government officials
  • A new minimum wage
  • Government posts for union leaders

Earlier in the week, Mr Rodriguez Saa said that his country would suspend payment of its $132bn foreign debt - the biggest default in history.

"I failed"

Sacked economy minister Domingo Cavallo, who resigned last week as the crisis in the country gathered pace, accepted on Wednesday that he had failed.

He said he was now retiring from politics.

"I worked with all my soul... to try to solve (Argentina's) problems," he said.

"I obviously didn't manage it. ... History will tell."

See also:

25 Dec 01 | Americas
Argentine jobs programme begins
23 Dec 01 | Business
Argentina default impact limited
23 Dec 01 | Americas
Argentina to halt debt payments
21 Dec 01 | Business
Bush backs IMF austerity measures
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