The Second Revolution
In blunt words, President Eduardo Lonardireported to his people last week on the state of the country's economy^Argentina, he said, is like "a man eaten up by cancer, who lookshealthy and capable of work until he suddenly falls down dead." Theshocking facts of what had happened under Juan Peron:
¶Exports—the sales abroad of meat, wool and grains that once made Argentina one ofthe world's greatest trading nations —dropped in the last five yearsto one-half of their previous volume. Reason: Peron's governmentgrabbed control of all exports and crippled farm production in anattempt to squeeze out profits to finance an ill-plannedindustrialization. ¶Industrialization, too, utterly failed tobring Argentina power, steel, fuel, even such essential equipment astrucks and farm machinery.
¶The government's internal debt, largely borrowings fromsocial-security funds, stands at 70 billion pesos .
¶Adverse foreign trade in 1955 will total nearly $200 million, and withdeficits of earlier years will force the total foreign trade debt to$757 million. Reserves of gold and dollars are barely $450 million,although at the end of the war they totaled $1.6 billion.
¶Printing-press inflation in the last decade increased money incirculation per person by 500%, while production per person rose only3½%.
Said Lonardi: "If anyone had deliberately proposed to disjoint theeconomy and wreck its finances, he could not have done it with moreperfection."
"We Shall Tear Down." To cure the economy, Lonardi proposed austerityand sacrifice, combined with economic freedom. "We shall tear down theabsurd apparatus of interfering measures," he said. "We shalldecisively encourage farm production . . . We shall busy ourselves withpower production and transport . . . We shall cut wastefulexpenditures."
The next day, having drilled home the need for fast action, GeneralLonardi took some himself. He devalued the peso to 18 per dollar . That was "decisive encouragement" for farmers, who in effectgot an incentive-creating boost in the pesos they get for the dollarstheir exports earn abroad.
Devaluation automatically raised the cost of imports; that was whereLonardi's proposed austerity came in. To smooth the transition and holddown inflation, the government for the time being planned to tax themore profitable exports, e.g., beef, and use the tax to subsidize themore vital imports, e.g., penicillin.
First Challenge. Lonardi's talk was plainly disquieting to Argentinalabor, which now feared a drive to freeze wages and raise laggingproductivity. Toward week's end, leaders of the General Confederationof Labor , once a major bulwark for Peron and currentlyembroiled in a power struggle with rival labor chiefs, threatened tocall a general strike. But Lonardi met the challenge head on. Hesuspended every union official in the country, empowered army officersto organize and run off union elections for 120 days hence. The strikethreat petered out.
"This is Lonardi's second revolution," said an admiring Buenos Airesfinancier. "And it took more courage than, his military revolt on Sept.16."
Prev:Cancer: Up or Down?Next:The Specialized Nubbin
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
