Spectre of the Perons still haunts Argentina's economy. By Hannah Baldock

AS Argentina's ruling Peronist party pays tribute to its founder on the 30th anniversary of his death, his brand of populist policies - to which President Nestor Kirchner shows signs of reverting - remain the cause of Argentina's long decline from wealth to poverty. Last Friday's anniversary of the death of the authoritarian Juan Peron (president in 1946-1955 and 1973-1974), highlighted the divided opinions over his legacy.

The powerful trade union the CGT, with whom Peron made a historic pact that makes the country virtually ungovernable by any other party, pasted fly posters of the general all over Buenos Aires, and marched on congress to demand an increase in the minimum wage.

But the liberal opposition has dismissed Peron, and his wife Eva, for his disastrous policies and lamented that Kirchner has put populist measures such as increasing public spending before settling the nation's gargantuan debts or making structural reforms needed to restore credit and confidence. Argentines still hold $106.4bn (£57.5bn, $86bn) outside the country, according to government statistics.

Argentina is now in its second year adrift from the international financial system since its December 2001 default on $185bn of public debt and drastic currency devaluation. The savings of the middle classes have been hit hard, there is 14.5% unemployment and 47.8% live in poverty.

The economy grew 10.5% in the first period of 2004 due to a boom in exports, high international prices for key commodities such as oil and soya, subsidies to outprice imports, and thriving tourism. But growth is likely to peter out by mid-2005 if the government continues to default on its debt. Growth could slow to 3% in the second half of 2004 as energy and credit shortages hit hard.

The left-leaning Kirchner has turned his back on free market reforms made in the 1990s. This week he announced plans to create state jobs by building 100,000 houses. He also surprised Brazil, Argentina's principal trading partner, by imposing a special import licence for white goods, whose production Argentina says is subsidised with cheap credit, and slapping a temporary 21% import tariff on TV sets from the Brazilian free trade zone of Manaus.

The government also wants small cars im-ported from Brazil to be manufactured at home to cater for the "recovering middle class". Argentina produces mainly luxury cars, vans and trucks.

The measures, announced on the eve of a Mercosur trade integration pact summit, provoked complaints from Brazilian manufacturers that they would cost jobs. The protectionist tariffs on Brazil follow earlier measures that affected Chile. In May, Argentina broke a 1995 energy protocol to supply gas to Chile, in favour of guaranteeing supply to domestic industry instead. That move came after investment cutbacks by privatised energy companies in Argentina caused by a tariff freeze that hit their profits.

The move has forced Kirchner to spend $2.1bn importing more expensive gas and gas oil from Venezuela and Bolivia to ensure supply in the winter.

Other measures include the renationalisation of the Argentine postal service and creation of a new state airline - Lineas Aereas Federales (Lafe) - to absorb the employees and business of two private airlines that went bankrupt last year.

Kirchner, who became president with just 22% of the vote, has popular support for his measures. He is spending 500m pesos ($171m) a month on the poor, after being held to ransom by unemployed picketers mobilised by powerful unions who routinely cut off access to the major cities, bringing them to a standstill.

Opponents say that this Peron government flouted the 1853 Argentine constitution, modelled on that of the United States, rode roughshod over private property rights, governed by decree, forced redistribution of wealth and failed to guarantee the rule of law. Peron expropriated private assets and profits, for 70% wage increases of state workers in1945-1949.

Liberal economist and opposition leader Ricardo Lopez Murphy said: "There is nothing more reactionary than punishing savers, destroying the private capital of a country. We have to return to rationality."

Liberal political philosopher, author and broadcaster Armando Ribas said: "From 1880 to 1930 we were a brilliant country, with a healthy economy and an Anglo-Saxon democratic political model based on individual rights. Then came the nationalism and socialism of Peronism. This current crisis is an improvement on our project of self-destruction. We still believe that wealth is in things, not in what societies produce.

French historian Alain Rouquie, author of the book Military Power and Political Society in Argentina says: "Today it is very hard to find a meaning, a content in the Peronist movement, a programme or orientation that looks to the future, which proposes an ideal to the younger generations. You cannot adapt to the world in the 21st century with political references to the first half of the 20th century. It is difficult to create new parties but here, I think, it is necessary."

But Argentine non-Peronists give warning that it will take many years for opposition leaders to develop alternative electable political parties capable of governing the vast country of 39m people.

Neo-Liberal economist Lopez Murphy, head of fledgling movement Recrear, polled 16.4% of the vote in the 2003 presidential elections. Centre-left anti-corruption crusader Elisa Carrio took 14.5%


Fuente: The Business Online