Tuesday 21 January 2020


Argentina's new president vows not to devalue

ADOLFO RODRIGUEZ SAA, elected Argentina's interim president yesterday, sought to allay panic among investors by promising that he would not devalue the peso before presidential elections on March 3.

Congress appointed Mr Rodriguez Saa, a Peronist and charismatic provincial governor, to act as president until the elections after two days of riots had forced Fernando de la Rua to resign on Thursday.

The Peronist party was last in power under the flamboyant Carlos Menem, who ruled Argentina for 10 years until 1999 and turned it into a pragmatic market-friendly country, eventually corrupted by graft and arms scandals.

Buenos Aires was calm yesterday after street battles left 27 people dead, 500 arrested and burnt-out shops looted of their goods. Mr Rodriguez Saa must grapple with a country threatened by further unrest, in the middle of a 43-month recession and choking on a £90 billion foreign debt.

"This provisional government must count on the support of everyone, the most humble, those who suffer, those who are unemployed - I will govern for them," said Mr Rodriguez Saa.

He said that he favoured declaring a default on Argentina's foreign debt but significantly pledged to retain the one-to-one peg with the dollar until at least the election. His promise was crucial in the short-term for the middle classes, four million of whom face the prospect of losing their homes because they chose to mortgage them in dollars to take advantage of lower interest rates. A devaluation of the peso would wipe out the savings of tens of thousands of people.

Linking the peso to the dollar brought a halt to hyper-inflation in 1991 but caused the rise in export prices that has contributed to the destruction of the economy. Fear of financial ruin now stalks the middle classes, living with an 18.3 per cent unemployment rate and with one third of the country's 36 million inhabitants below the poverty threshold.

Mr Rodriguez Saa, 54, has ruled the arid Andean region of San Luis, Argentina's only province with a successful economy, for 18 years. A lawyer and father of five, he gained national notoriety in October 1993 when his lover had him abducted from a hotel where he had gone with another woman. The lover was sent to prison for 12 years.

He takes on a mammoth task in having to keep the lid on social unrest while guiding the economy towards some form of equilibrium over the next 10 weeks.

People terrified by the looting and the prospect of losing all their savings rushed to buy hard currency, mostly dollars, on the newly-returned black market yesterday. With banks closed since the rioting broke out and the provisional government stopped exchange trading, people have been prepared to pay up to 1.5 pesos per dollar to street dealers to protect their savings. "I would pay more if I could find dollars, but it is hard to get them," said a woman queuing at a money changer's shop on Corrientes Avenue, a street of theatres and exchange operators.

Many people, some of them in tears, telephoned radio stations demanding information on what would happen to their savings which have been blocked in their banks since December 2.

There is widespread outrage against politicians. "They are corrupt, all of them, not one single person is worth a good word," a woman in a queue said. Angry chants were directed against the corrupt political classes during the rioting because the wages of government employees were all cut by 13 per cent, while the senators, who took their seats after mid-term elections on October 14, voted themselves a $2,000 a month pay rise.

Everyone is concerned about their debts if, as seems inevitable despite the new president's assurances, the peso is devalued. There are fears that it could float down to around 2.5 to the dollar. Mortgages range from $10,000 (£6,800), on humble homes, to $300,000 on luxury flats while salaries are paid in pesos.

An English manager in one of the privatised utilities said yesterday: "Argentina was proud of its football stars, its beef, polo and its beautiful women. All that is still somewhere. But Argentina is in ruins, it produces hardly anything and exports very little. It is hard to know how we get out of this."

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