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Breaking News from South America

Duahlde ready to resign / Armed Forces support democracy / “We can manage” / Census in Chile / Big brother Mexico / IMF again in May / Tierra del Fuego free of FAM

Duahlde ready to resign
With barely a hundred days in office and a meager 14% public opinion support, while 49% of Argentines presumably want new elections, according to private polls, Argentine president Eduardo Duhalde said he was willing to move aside if Congress requested him. Mr. Duhalde reached power last January after having been chosen by a Legislative Assembly following street rioting that deposed two governments in December and left 30 people dead. When Mr. Duhalde took office he had a 29% support, but unable to solve mounting economic and financial problems, with Argentina in its fourth straight year of recession, rocketing unemployment, and 45% of Argentines below the poverty line, his time seems to be rapidly running out. "I have a mandate from a parliamentary government. If Congress is not satisfied, it will have to elect a new president. I was not elected by the Argentine people", said president Duhalde, who actually lost to former president De la Rúa in December 1999 general elections. However Mr. Duhalde underlined he was not sure a potential successor would be willing to take over in current circumstances. There are growing pressures for Mr. Duhalde to leave government before December 2003, --as he promised on taking office--, and call early elections. "If the majority believes this is the solution, I don't think it's the solution. It would be very irresponsible if I left Argentina in the middle of all this turbulence, you can't leave a country adrift while waiting for new elections", argued Mr. Duhalde. But if the situation improved, if Argentina faced calmer waters, "out of the turbulence, maybe towards the end of the year or the beginning of next year we can have an early election so what is needed can be done".

Armed Forces support democracy
Argentine Army Commander in Chief General Ricardo Brinzoni said that a military intervention to reestablish order in the face of a social outburst can't be discarded, but it will be done in the "framework of the Constitution and the rule of the law". General Brinzoni said Argentina faced the risk of potential rioting and violent popular discontent, and in that scenario the Army could then move in to replace the Police and the Gendarmerie (border and highways patrolling) in some of their more institutional duties, leaving these forces with more men and resources to "reestablish order". "I believe the President knows how he can employ the Army, to contribute in case of extreme necessity, to social peace without the need of sending tanks to the streets", indicated General Brinzoni. Argentina is undergoing one of its direst moments in recent history and there are growing rumors of a possible military intervention in a country with a long tradition of military meddling in politics, the last of which only ended in 1983. However the military have consistently and openly rejected any such intention. "There's no chance of an authoritarian adventure, as some are pledging or agitating looking back into the past. I must insist in discouraging any such expectations", added General Brinzoni. In similar terms Admiral Joaquín Stella, Commander in Chief of the Navy said that there will be no military coup in spite of the difficult situation and this because any such action "would simply mean the final destruction of the Argentine Armed Forces". "Since democracy returned to Argentina the Armed Forces have learnt very much about democratic institutions and any adventure ignoring the Constitution would mean the destruction of the Armed Forces", underlined Admiral Stella. The Argentine Navy is very much concerned about the current social and economic situation, "as are all Argentines, but the best way to contribute is supporting democracy", added the Admiral in an interview with one of Buenos Aires leading morning newspapers.

"We can manage"
In spite of a strong reaction in Santiago's currency markets to Argentina's decision to close banks and ban financial activities for the rest of the week, Chile "can live with the situation, if things don't get worse", according to Mr. Carlos Massad, president of Chile's Central Bank. "We don't expect any insurmountable effect of the Argentine situation", said Mr. Massad during a conference before the Council of the Americas in New York. "Investors are looking at countries individually and not at the neighborhood, which is very important and significant", added Mr. Massad. Argentina closed all banking activities while Congress considers several bills mainly one that will convert savings and deposits into long term bonds in a desperate attempt to prevent further financial losses. The measure has had an impact in Santiago, Montevideo and Brazilian currency markets where there were mounting pressure and demand for US dollars. However Mr. Massad also recalled that only a week ago Chile was able to sell sovereign bonds at very reasonable interest rates. "Our economy is expected to grow 3,3% this year and 5,3% in 2003", indicated an optimistic Mr. Massad adding that "IMF forecasts were actually more encouraging than our own". Regarding oil prices, Mr. Massad said that for oil dependent Chile, if the barrel averages 27/28 US dollars for the rest of the year, it could mean annual inflation would be between 2 and 4%, just above target. Mr. Massad admitted that the consistent official policy of decreasing interest rates had not yet had full impact in the economy and for consumers. "Monetary decisions take between six months and two years to filter to the whole economy and it was only last year that we began with this policy. However we expect a greater impact beginning the third quarter", indicated Chile's Central Bank president.

Census in Chile
Chile is holding this week a population and housing census for which 400,000 people have been mobilized. The census will cover the estimated four and a half million houses in the country with an average 15 units per trained pollster. All military and police personnel plus provincial and municipal staff must be on duty to support the operation which takes place every ten years according to Chilean legislation. "The census is universal and will help supply essential information in the social and economic fields", indicated this week in Santiago, Mr. Máximo Aguilera head of the National Statistics Office and responsible for the two days operation. Collaboration is compulsory and those who refuse to be polled can be fined up to 120 US dollars. Shops and retailers have been requested to open their businesses after 15:00 hours. People will be polled according to where they spent the night before, be it at home, in a public transport, in school, hospital or the public square for the homeless.

Big brother Mexico
Mexico has definitively become Latinamerica's largest economy ahead of Brazil according to the latest "World Economic Outlook" released last week by the International Monetary Fund, IMF. Mexico's GDP reached 618 billion US dollars in 2001, and is expected to reach 658 billion this year and 691 billion in 2003. Brazil's GDP on the other hand barely managed 504 billion last year, a considerable decline from the 593 billion of 2000. The country's GDP is expected to reach 539 billion this year and 575 billion next year, according to IMF forecasts. Concerning per capita income Mexico is also leading with 6,030 US dollars compared to Brazil's 2,986 US dollars. Mexico population is estimated in 120 million and Brazil's 170 million. All figures are in current prices US dollars. However it must be taken into account that while the Brazilian currency has been loosing ground consistently to the US dollar since January 1999, Mexico's peso has strengthened, even revalued considerably, particularly after the solid recovery following the "tequila" downfall of 1995.

IMF again in May
Argentine Economy Minister Jorge Remes Lenicov said he expects to reach a deal regarding the reduction of provincial deficits in "a couple of weeks", one of IMF pre conditions to extend financial aid to ailing Argentina. Mr. Remes Lenicov also said that there was no fixed time for the reopening of bank activities and foreign exchange markets, "it all depends on Congress approving legislation enabling us to convert the frozen bank assets into long term bonds". Last Friday Argentine monetary authorities declared a indefinite banking holiday to stop the constant loss of frozen bank deposits following favorable rulings to appeals in local courts. Over 18 billions US dollars at current prices are involved in the operation. Regarding talks with the IMF in Washington Mr. Remes Lenicov indicated that discussions had now been reduced to "three, four main points", a 60% reduction of the provincial governments deficits, and the re drafting of "bankruptcy and economic subversion" legislation. "We're trying to reach a deal with the provinces as soon as possible, maybe a couple of weeks", admitted Argentina's Economy Minister. Over the weekend the IMF requested Argentina to move faster regarding impending reforms and promised another delegation for next May to reach a final agreement, but only "if the reforms are in effect". "We trust we can address and modify those pending issues so the IMF mission can effectively arrive next May", said Mr. Remes Lenicov. However Mr. Remes Lenicov admitted that both the IMF and the G 7 group of the world's richest countries agreed that no aid will be forthcoming until Argentina complies with the agreed reforms and deficit reduction. Meanwhile unpaid state workers from Argentina's bankrupt provinces are occupying public buildings around the country and going on strike, raising fears of renewed nationwide rioting. Apparently in most provinces only police forces, doctors and teachers have received their salaries.

Tierra del Fuego free of FAM
Chile recognized Argentine Tierra del Fuego as free of foot and mouth disease without vaccination, following a recommendation from the Paris based International Organization of Epizooties, OIE and its own research. Last January Argentine officials officially requested OIE that Argentine territory south of parallel 42 be declared free of FAM without vaccination. According to procedures the OIE, FAM Committee had sixty days to receive objections from any of its country members, and since this did not occur, last April 10th., it considered the area free of FAM without vaccination. A decision that will become formal during next month's annual assembly in Paris. Chilean authorities had also demanded Argentina to comply with certain rules, and after having checked to satisfaction in situ on several occasions, finally agreed to recognize the island of Tierra del Fuego free of foot and mouth disease without vaccination. The news came as an encouraging relief both for Chilean and Argentine Patagonian farmers.