Argentina Again Tries Reforms

By Barbara Rudolph.

Since coming to power in 1983, Argentine President Raul Alfonsin has tried a variety of economic programs in an attempt to control inflation, now steaming ahead at an annual rate of 1,010%. While well intentioned, his efforts have generally been viewed with the same skepticism that attends an inveterate smoker's vow to quit even as he reaches for his third pack of the day.

Two weeks ago, Alfonsin announced his latest program, which features a new currency and a wage and price freeze. An opinion survey showed that more than 80% of Argentines polled support this ambitious reform. Still, some experts are doubtful that the politically difficult plan will survive.

The core of Alfonsin's program is a new national currency. The 104-year-old Argentine peso is being replaced by the austral, which at the moment is worth 1,000 old pesos or $1.25. Since the currency bears the same name as one domestic airline, whose emblem is a penguin, the austral was immediately nicknamed the "pinguino," the Spanish word for penguin. To maintain the value of the austral, the government vowed that it will no longer simply print money to cover expenses. In addition, it proclaimed a freeze on all wages and on the prices of 31 food items, ranging from beef and chicken to soft drinks and pasta.

Banks closed for three days to prepare for the changes, and when they reopened last Wednesday, many people expected chaos. But while the lines at several banks stretched over blocks, the scenes were orderly. Said one teller at Banco de la Nacion, the country's largest financial institution: "Customers were much calmer than we expected." Concluded President Alfonsin: "We are getting a magnificent response from the people."

Some Argentines even reacted to the financial crisis with humor. The owners of one Buenos Aires restaurant, La Nonna Inmaculata, papered its walls with old pesos. Manager Jose de la Iglesia thinks the new decor will attract a nostalgic crowd.

There have been scattered setbacks, of course. After the price controls were announced, but before they were instituted, many people spent their spare cash to stock up on groceries. "There was a collective psychosis," said one supermarket manager. Some merchants simply ignored the freeze and raised prices illegally. State inspectors have closed down 50 stores, and more than 3,000 phone calls were placed to a government office that is receiving reports of price violations. A few customers expressed their discontent violently. At one store in the city of Rosario, shoppers attacked clerks who tried to hike prices. Some law-abiding retailers complained that public opinion was turning against them. "We worry about the tone of the price-control operation," said Carlos de la Vega, a spokesman for the Argentine Chamber of Commerce. "People blame us."

American bankers, who have $8 billion in outstanding loans to Argentina, applauded Alfonsin's program. A syndicate of more than 300 banks might extend an additional $4.2 billion to the country. Declared Terence Canavan, an executive vice president at Chemical Bank: "This is the most daring reform I have seen in Latin America since the start of the debt crisis."

Unfortunately, not all Argentines were so enthusiastic. Several labor leaders charged that the wage freeze hurts their members, and one union official openly threatened to sabotage the economic plan. "We have no choice but to take some kind of action," said Raul Ravitti, the secretary of the railroad union. That attitude has blocked attempts to halt inflation in Argentina for years.

With reporting by Nina Lindley/Buenos Aires and Frederick Ungeheuer/New York