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 Lessons Learned
The government of Argentina struggles to survive a crisis that the nation’s bishops predicted long ago.

By Alejandro Bermudez

“Mr. President, if you don’t act quickly, the country will blow apart.”

“I don’t think so, Excellency. I have other information.”

“We insist, Mr. President. If there is not an effort to support small businesses, to create jobs, the country will blow apart.”

“Things are not like that, I am afraid you are misinformed.”

The steadfast refusal of former Argentinean President Fernando de la Rúa to listen to the message brought to him by top members of the Argentinean episcopate, during a special noon meeting on December 12, 2000, fatally damaged the relationship between the De la Rúa government and the Argentinean bishops’ conference. But that was not all. One year later, the president’s reluctance to listen to advice had cost him his political life.

The fateful conversation held at the Presidential Palace (known as Casa Rosada—which might now be translated, with an ironic twist, as “Rose-Colored House”) had as the main characters President de la Rúa; the president of the Argentinean bishops’ conference, Archbishop Estanislao Karlic of Paraná; and the two conference vice-presidents, Bishop Eduardo Mirás of Rosario and Cardinal Jorge Bergoglio of Buenos Aires. The dialogue above is a fragment of their conversation, as recounted by one of the participants.

After that meeting, the Argentinean bishops never visited De la Rúa again. Their efforts to influence the course of government policy were reflected only in the increasing insistence of their tone, and the urgency of their warnings, as they issued public statements on various social issues.

• By May 12, 2001, the Argentinean bishops were ready to make public the sort of alarm they had conveyed to the President in a private conversation. In a statement released that day, the bishops’ conference insisted that the government must act swiftly to avert “the disintegration of our nation, due to the crisis in the valuation” of the Argentine currency.
 

• On August 11, the Permanent Commission of the Episcopate issued a statement warning of “the threat of social anarchy, with unpredictable consequences.” The bishops also offered their services as mediators, in the hope of establishing “a calm, spiritual environment for a national dialogue.” The offer to help set up such negotiations was ignored by the government—as they had expected it would be.
 

• On November 17, at a time when the final crisis in Argentina seemed inevitable to the bishops (although the breakdown that was to ensue apparently still seemed impossible in the eyes of President de la Rúa), Bishop Mirás, speaking on behalf of the episcopal conference, described the nation’s economic and social situation as “walking over a thin sheet of ice, which might break up at any time.”
 

• On December 14—just five days before the eruption of riots that forced President de la Rúa to resign—the bishops sent out a final warning. “Argentina is becoming unruly because of the heavy social debt imposed on our people,” they said. The bishops once again issued a call for representatives of all sectors of society—government leaders, union officials, corporate executives, and academics—to meet for talks aimed to establishing “national reconciliation.” They proposed that such talks could be hosted by the Catholic relief organization, Caritas.

On December 18, the De la Rúa administration finally responded positively, saying that a government representative would attend a Caritas-sponsored meeting the next day. But it was too late. The next day, there was no government to represent.

A fall from economic grace
As of 1913, Argentina was the world’s 10th richest country. But after decades of economic and political turmoil, the once-proud Argentinean economy had been reduced to almost Third World status, and the nation was finally forced to submit itself to the discipline imposed by the International Monetary Fund (IMF) in order to satisfy the demands of a growing list of international creditors. The IMF provided necessary funds to sustain a shaky public economy, but in turn required a commitment that the government would open the nation’s markets to outside investment, severely reduce the size of the public sector, control inflation, and cut government spending.

For a decade, Argentina was a model student for its international mentors, carefully sticking to the IMF requirements. But instead of prosperity, an economic crisis loomed ever larger. Although Argentina managed to halt inflation by linking the peso, its national currency, to the US dollar, the worldwide economic slowdown of 2001 made it impossible for the government to balance the budget.

As a consequence, the national debt spiraled out of control, and in order to prevent default on its $130 billion foreign debt, Argentina last year accepted a new IMF austerity program, aimed to reduce the public deficit dramatically. As usual, the IMF deal was virtually impossible to reject; the government desperately needed a new loan from the IMF in order to avoid default.

There was only one way to reduce the deficit as quickly and deeply as the IMF demanded. The government cut state salaries, delayed payments to employees, stopped issuing social-security and retirement checks, and suspended almost all purchases. The government essentially slammed the brakes on all public spending, breaking contracts with the private sector.

The economic consequences of these drastic actions were logically unavoidable. Government spending was cut by $8 billion; all state salaries and pension payments of more than $500 were reduced by 13 percent; unemployment soared by 18 percent; and wages all across the private sector dropped by 20 percent. The nation’s economy was spiraling into the collapse which the Catholic bishops had predicted and the government had refused to acknowledge.

Finally, on December 18, massive street protests started—almost spontaneously—in several different Argentinean cities. By the next day those protests had spread and escalated into an unstoppable national movement. When many thousands of boisterous but mostly peaceful protestors effectively took control of the streets in Buenos Aires, President de la Rúa finally recognized the gravity of the situation and announced his resignation.

Under pressure because of a continuing wave of social unrest, the nation’s legislators elected Adolfo Rodriguez Saá to serve as interim president, for a period of 60 days. The country’s new leader was a politician who had earned widespread recognition for expanding business during his tenure as governor in the desert province of San Luis. But he could not reproduce the same success—on short order and under extreme duress—on the national scale.

President Rodriguez Saá tried a series of energetic economic measures. His most important move—albeit one that had been anticipated by the international economic markets—was the December 24 announcement that Argentina would default on its payments of $130 billion in international debts.

It was the largest such default in history, but the decision that had made the new President a pariah in the opinion of international bankers did not solve his problems with the ordinary people of his own country. He did not suspend the tight banking restrictions that had been imposed by De la Rúa in one of his last desperate efforts to stave off the crisis. The opposition to those banking restrictions was strong, and on December 29 the new Argentine president faced his own first wave of noisy public protests. The next day, he too announced his resignation—explaining that he could not govern effectively without the support of his own party’s leaders, which was not forthcoming.

The departure of Rodriguez Saá left Argentina without a president once again on New Year’s Eve. On January 1, Argentina’s Congress finally appointed Eduardo Duhalde, a senator from the populist wing of the Partido Justicialista, as the new president, and handed him the task of saving the nation from economic and social chaos. The new president—who had been a harsh critic of the free-market reforms attempted by previous leaders, and who proclaimed himself an exponent of the social teachings of the Catholic Church—will, barring new crises, serve until December 2003—the end of the four-year presidential term to which De la Rúa had originally been elected before the crisis arose. His election closed an electoral circle, since De la Rúa had won the office in 1999 by defeating Duhalde in that year’s national elections.

Problems with the system
In a statement issued on the same day that Duhalde was elected president, the Argentinean bishops’ conference issued an appeal for calm. Referring to the country’s situation as one “of extreme gravity and close to anarchy,” the bishops made “an urgent call upon the sense of responsibility of our people, and in particular of our political leaders.”

The bishops said:

We need—now more than ever—leaders who are capable of greatness and self-sacrifice. It is now absolutely necessary for our politicians to look only to serve the common good —that is to say, the welfare of each and every member of our community.

The statement from the bishops’ conference went on to call upon “all our people, to become the protagonists in the building of a new Argentina, rejecting the temptations toward hatred and violence, which only hurt and kill.”

In separate statements that they released individually, several Argentinean bishops expressed a keen interest in looking more carefully at the international economic systems that had played such a pivotal role in the final demise of Argentina’s economy.

For example, Archbishop Carmelo Giaquinta of Resistencia questioned the extent of Argentina’s moral obligation to repay international loans. “We certainly have an obligation, as a nation, to pay the debt,” he acknowledged. But he added the proviso that Argentina was not obligated to repay “the international vultures.” The world’s economic leaders must understand that the problem is not peculiar to Argentina, the archbishop said:

International organizations like the IMF have to understand that if a rich country full of hard working people collapses like this, it is not only for internal reasons. There is something gravely wrong with this kind of globalization.

Cardinal Jorge Bergoglio of Buenos Aires expressed a similar opinion. In a short statement issued after Duhalde’s election, the cardinal asked his people to help usher in “a revolution of moral principles” that could bring stability to the society. But at the same time he also expressed concern about the implications of “a kind of globalization that needs thorough revision.”

Although the topic has not yet been broached in public forums, one source in the Argentine episcopal conference told Catholic World Report that the bishops were hoping for clear indications of commitment on the part of the US government. To date, the American involvement in the crisis has been limited to a series of get-well-soon messages. Most analysts agree that a decisive American intervention—along the lines of the previous efforts to bail out Mexico in 1996, or Brazil in 1998—could bring an end to the crisis in the short term, and maybe even in the long term as well. But no word of such an intervention has yet been heard from Washington.

The IMF role
The economic implosion in Argentina—which is widely seen as connected to the much larger problem of international debt—has become the catalyst for a series of sharp criticisms of the IMF.

In Argentina itself, many bishops have been openly critical of international lending policies. Bishop Juan Carlos Maccarone of Santiago del Estero—a diocese located in one of Argentina’s most impoverished regions—said that “the country imploded under the pressures imposed by international usury and the insatiable voracity of local corruption.” Other Argentinean bishops joined Bishop Maccarone in denouncing “the stubbornness and stupidity of international organizations that are supposed to help us regain stability.”

And it is not only the Argentinean bishops who advance these criticisms of the international monetary system in general, and the IMF in particular. Frida Ghitis, author of the book The End of Revolution, has also blamed the IMF for the crisis, writing:

Clearly, fiscal discipline is a necessity, but IMF bureaucrats in Washington, and the governments that back them, should allow for some flexibility. Conventional wisdom has again proved wrong in Argentina. Stubbornly following its dictates will no doubt trigger a more painful crisis during the sweltering summer now just starting here.

In Colombia, the Asociación Nacional de Instituciones Financieras (National Association of Financial Institutions, or ANIF)—one of the most prestigious financial institutions in Latin America, and one that has generally been friendly to the IMF—issued its own analysis of the Argentinean crisis. ANIF called for consideration of the possibility that “maybe there is a problem at the very roots of the IMF’s structure.” The ANIF analysis went on to say that IMF “must be restructured to ensure that countries and their administrations take sound steps aimed to strengthen their economies.”

In the US, the New Jersey Record offered an editorial comment that over the last two decades:

. . . IMF strictures have led to a great deal of suffering and hardship in the daily life of ordinary people in many countries around the world. Of course there are many sound economic arguments for IMF principle. Unfortunately, people can’t eat theories, or warm their houses with economic principles, while waiting for the benefits of the IMF system to kick in. The recent food riots in Argentina show all too clearly that when the larder is empty, the future is now.

Alejandro Bermudez, from his base in Lima, Peru, writes on Latin America for the Catholic news agency ACI-Prensa.

Back to Catholic World Report February 2002 Table of Contents