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THE DECEIVING 1990'S AND THE UNCERTAIN PRESENT

Overall, the 1990s were a good period for the Argentine economy. Carlos Menem’s presidency is considered one of the greatest economic periods by foreign economists. Cavallo, Menem’s minister of economy, developed a plan that stabilized the currency, privatized inefficient state-run companies: thereby returning confidence in the country to foreign investors. For the first time in 40 years interest rates were reasonably low, credit was available to the small entrepreneur, and federal debt was not increasing. Argentina seemed to be going in the right direction.

Unfortunately, the Argentine people were living a different reality: the stable currency and happy foreign investors came at the expense of growing poverty among the lower social classes. As the unemployment rate increased, the middle class was quickly disappearing. Menem and his government officials were linked to corruption, bribery, and illegal business, revelations that were intolerable to the people. Brazil’s devaluation of its currency in the late 1990s also presented a big problem: suddenly, it became cheaper to do business in or with Brazil than in or with Argentina.

Menem’s government could have been the beginning of a sustained period of economic improvement in Argentina. Many of his actions were on the right track at first, but he was unable to sustain the trend he started. His policies benefited big businesses and foreign investors, but to the detriment of the lower and middle classes.

A period of stagnating economy, rising unemployment (18.3 percent in December 2001), and national repudiation of corrupt politicians followed Menem's two-term presidency. The people of Argentina are tired of being robbed by inept politicians, and they are in no mood to tolerate them anymore. This is illustrated by a week of crisis in December of 2001, when the citizens showed their discontent with the president and demanded his resignation, and they did the same with the next four other presidents that were in office during that same week. It was during this period of instability that a new economic indicator came to be part of the everyday conversation between Argentine families and friends: the "country risk" is a measurement calculated by JP Morgan and other U.S. consultant groups that determines how much risk is involved in investing in a country's bonds or in doing business in a certain country. For Argentina, this indicator-in which an increase in points signals an increase in risk-was below 1,000 points in March of 2001, went up to 3,490 points in November of 2001, and has continued to climb, standing today at 5,554 points.

In 2002, the government defaulted on its foreign debt, leading to a partial freeze of all bank accounts for more than a year. Since then, the financial situation has not improved. The International Monetary Fund (IMF) is refusing to give yet another loan to Argentina unless it reduces its fiscal deficit and introduces a series of changes in its financial infrastructure. The government has responded to the IMF's demand of reducing fiscal deficit, but instead of cutting the salaries of the overpaid members of Congress or remove the "privileged" pension system that benefits retired members of the federal administration, the Argentine government decided to reduce educational and health spending.

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