MercoPress. South Atlantic News Agency

“Uruguayan government in deep crisis”, admits Mujica with a split cabinet and two economic teams

A sombre Mujica called for unity and anticipated no change of course or fantastic measures

“The Uruguayan government is in deep crisis” admitted President Jose Mujica following an open clash between ministers that called for an urgent meeting of the cabinet and half way had to be adjourned on fears that recriminations could get out of control. A recess was ordered but the squabbling through the press continued and the exposed deep rift remains more than a challenge.

The clash which erupted this week and had long been forecasted refers to the so called “two economic teams”, one of them nested in the Executive and includes Mujica’s economics advisors and the Budget and Planning Office, and the other the formal Ministry of Economy and Finance, plus the Central Bank which respond to Vice-president Danilo Astori, a former Communist turned orthodox economist and who has been responsible for the running of the Uruguayan economy since the ruling coalition, --now in its second period--, took office in 2005.

In the first mandate under former president Tabare Vazquez, Astori was a kind of ‘super’ Minister of Economy, steering the country through one of its greatest boom in years but unsuccessfully challenged Mujica to the presidency in 2009.

The crisis was triggered by a ruling from the Supreme Court which declared unconstitutional an additional tax on landholdings (‘rural concentration’) which had a double purpose: collect an estimated 60 million dollars for maintenance of highways and ideological for rank and file, because when President Mujica took off as an urban guerrilla in the sixties one of the targets of the Tupamaros was the big landowners and breaking up the big farms to distribute among small farmers.

The bill originally born in the Executive and sponsored by Mujica’s advisors had from the very start the rejection of the orthodox Astori team arguing that more taxes were unnecessary and would mean breaking the rules of the game, which are essential to keep ensuring foreign investment and the sustained growth of the Uruguayan economy.

A watered down version was finally passed by the Legislative but with the Astori boys dragging their feet. And now came the opportunity for their boasting ‘I told you’ vindication.

But hell broke lose because not only Mujica’s political party, MPP, (Popular Participation Movement) but other groupings from the coalition reacted by demanding more flexibility from the economic team of Minister Fernando Lorenzo and insisting it was time to begin with the ‘distribution and real inclusion’ policy long promised by the different groups from the coalition that numbers not only former guerrillas but Communists, Socialists, Social democrats, Christian democrats among others.

“I’m used to attacks and low blows but not from my fellow ministers and heads of government companies; this could be the last time you hear me addressing the ministerial cabinet”, thundered Lorenzo during the urgent meeting, but far from silence or calling for calm, he was repeatedly interrupted and recriminations got out of hand, according to reports in the Montevideo media.

In other words the Astori strategy failed: there was no vote of confidence, and the attacks on the management of the economy by other ministers increased until President Mujica said: ‘that’s it; I’m the president, I ran the show because the people voted for me, so the meeting is suspended until when we meet again”.

In a brief statement to the press when he took no questions he admitted the ‘deep crisis’, recalled all families have problems, called for unity, and praised the achievements of his government so far. “I’ve told my comrades to meditate with the pillow and think of unity before coming back”.

He added “I can assure you there is no change of course: we don’t have any fantastic change of economic, fiscal or taxing landholdings policy. We must get all of us to again function as a team and that is the job of the Executive at this moment”.

However this did not impede spokespersons from the MPP to further attack Lorenzo in media statements saying that “you don’t threaten with resignations, you resign or you shut up”

From the other side the counterattack was swift, ‘if there are two economic teams, as the media says, it’s not good news, and if Mujica is the president, he will have to make the choice of one of them”.

It also surfaced that Lorenzo and his team had decided to attend the emergency cabinet meeting and make a formal presentation of their resignations in protest over the repeated ‘repulsive’ attacks from the Budget and Planning Office.

However at last minute Astori managed to convince them otherwise because he warned it would definitively split the government and imperil the chances of Tabare Vazquez winning the October 2014 elections and succeeding Mujica in 2015.

In effect over the weekend Vazquez had meetings with Mujica and Astori in an attempt to cool tempers.

The Mujica ‘boys’ and his party MPP, plus others from the coalition believe its time “to tax the rich and those who have benefited from the windfall” of the these last years in which the Uruguayan economy has grown sustainedly favoured by strong international prices for commodities, the tail wind and bottom rock interest rates.

The orthodoxs insist rules of the game must be respected; other forms of increasing taxes could make up the lost revenue and want more fiscal discipline. Nevertheless they have failed dismally in the last eight years of abundance in making savings for bad times and have participated in the bloating of the budget and the deficit which now stands at 2.8% of GDP with inflation running at almost 8%, plus an international environment not so promising as in past years.

Furthermore as election time approaches restricting expenditure and increasing taxes is not a good signal, rather the contrary should be implemented.

And on the strictly political side the ruling coalition is facing a fierce battle among the different groupings to see who will accompany Vazquez in the presidential ticket. Names are being floated but probably it is too early, and the exposure greater.

After all given the paucity of the rickety opposition and its possible candidates, all things remaining unchanged, it all looks as a one man race next year.

And Mujica and Astori are involved in a dog fight to see who seats as co-pilot of a possible third Broad Front five-year mandate. Wait for the next chapter.