NotiSur - 6/22/01 - Argentina, Chile, Ecuador Via NY Transfer News * All the News That Doesn't Fit [This is a private reading copy for members only. No redistribution is permitted -- NYTransfer] ------------------------------------------------------------ L A T I N A M E R I C A D A T A B A S E NotiSur - South American Political & Economic Affairs ISSN 1060-4189 Volume 11, Number 23 June 22, 2001 ------------------------------------------------------------ Copyright 2001, Latin America Data Base (LADB), Latin American Institute, University of New Mexico Director: Rebecca Reynolds Bannister Editor: Patricia Hynds Staff writers: Carlos Navarro, Robert Sandels LADB ARCHIVES: Back issues are referenced to provide historical background relevant to the articles in this newsletter. These can be accessed with a subscription to the LADB searchable on-line archives at http://ladb.unm.edu/ by clicking on Search Archive. For subscription information, e-mail info@ladb.unm.edu or call 1-800-472-0888. In This Issue: ARGENTINA: SOCIAL UNREST TURNS VIOLENT * Workers say cures for economic crisis not succeeding * Aerolineas Argentinas on verge of bankruptcy * Protests in Salta turn violent * Neoliberal reforms blamed for economic woes CHILE: NAVY CHIEF'S UNEXPECTED RESIGNATION SETS OFF POLITICAL STORM * Resignation tied to Senate race * Lawmakers threaten legal action * Episode could promote constitutional changes ECUADOR: CREDITORS TO RELEASE MORE FUNDS * IMF sees improvement in economy * IMF approval opens door to Paris Club ____________________________________________________________ ********************* ARGENTINA ********************* ARGENTINA: SOCIAL UNREST TURNS VIOLENT While the financial world focuses on Argentina's debt swaps and International Monetary Fund (IMF) loans, protests against the government's economic policies are increasingly a powder keg. As unemployment remains high and the economy shows little sign of recovery, the people's frustration has focused on a crisis with Aerolineas Argentinas. The economic recession is in its third straight year, with unemployment at 14.7% and more than 25% of the population living below the poverty line. The public's support for the unions fighting the closure of the airline has surprised analysts, some of whom say that the population has made Aerolineas Argentinas a symbol of the nation's wider problems. Workers say cures for economic crisis not succeeding Protests heated up throughout May. On May 29, more than 1,000 jobless people blocked traffic on highways leading to the capital and the neighboring city of La Plata. The same day, airline workers peacefully occupied the Buenos Aires headquarters of Aerolineas Argentinas demanding settlement of the bitter labor dispute that threatens to permanently shut down the airline. In Cordoba, hundreds of striking workers marched to commemorate the 32nd anniversary of a three-day labor uprising called the Cordobaza in which 14 people died and to call attention to the effects of today's economic slump. Union leaders complained that the methods local and national leaders are using to revive the economy are harming workers. In Buenos Aires, Hugo Moyano, leader of the Movimiento de Trabajadores (MTA) sector of the Confederacion General del Trabajo (CGT), called a 24-hour strike to protest the economic model and problems at Aerolineas Argentinas. "Through the organized struggle of the people it is possible to change this model of exclusion and hunger," said Moyano. He said the government had failed to provide enough jobs and good wages for workers. The June 8 strike was the largest in months and the fourth general strike since President Fernando de la Rua took office in December 1999. Tens of thousands of workers stayed off the job and shut down public transport, paralyzing much of the country. Students stayed home, while union workers blocked key highways around the country. President de la Rua called the strike "unjustified," and Labor Minister Patricia Bullrich condemned the union's actions as "destructive and absurd." The strike ended the 10-week truce called by the unions after de la Rua invited them to take part in a "social dialogue" soon after naming Domingo Cavallo as his economy minister March 29. The dialogue led to a number of agreements by unions, business leaders, and the government, but Cavallo's April 27 announcement of new tax increases and public spending cuts infuriated the unions. In the June strike, workers demanded a resolution to the crisis at Aerolineas Argentinas, which was privatized under the administration of President Carlos Saul Menem (1989-1999). The firm is now controlled by the Spanish state holding company Sociedad Espanola de Participaciones Industriales (SEPI). Spain, through SEPI, controls 92% of the airline and its domestic subsidiary Austral. Argentina controls 5.4% and the employees another 2.6%. Many protesters gathered outside offices of other Spanish-owned companies that have invested heavily in Argentina, including Telefonica, Repsol, the pension-administrating firm Consolidar, Endesa energy company, Iberia airlines, and various banks taken over by Spain's Bilbao Vizcaya and Santander Central Hispano. Union leaders called for a boycott of Spanish-based companies. Aerolineas Argentinas on verge of bankruptcy When Iberia bought Aerolineas in 1990, it was without debt and had a fleet of 30 planes. As part of its own privatization, Iberia sold Aerolineas to the Spanish government in 2000. The airline now owns only one plane, leases the rest, and has lost important international routes, flight simulators, offices in Argentina and in other countries, and other assets. It has cut its personnel by 30%. Now on the brink of bankruptcy, the airline owes US$1.2 billion and is losing an additional US$20 million to US$30 million a month. Aerolineas Argentinas workers have directed much of their anger at Iberia for its mismanagement of the company. Its management performance is now under investigation by Argentine justice authorities. On June 18, Aerolineas Argentinas canceled most of its domestic flights after canceling most international flights the week before. Airline workers delayed some international flights from Buenos Aires and threatened to disrupt more flights unless the airline renewed the suspended flights. If flights were not renewed, the government could auction off the routes to another company, Infrastructure Minister Carlos Bastos said. De la Rua said he was confident the airline, which employs about 7,000 workers, could be saved. "We should not turn this into a conflict, a boycott, or an anti-Spain issue," he said. "I am certain Aerolineas will continue to exist." At a May 29 meeting in Madrid, SEPI and members of the Asociacion de Personal Tecnico Aeronautico failed to reach an agreement to save the airline. The union refused to accept the layoffs, labor flexibilization, and salary cuts proposed by SEPI, which said it was the only way to avoid bankruptcy. Argentina's Labor Minister Bullrich said that SEPI would not provide Aerolineas with needed capital unless all key unions signed off on the deal. "Without this capital injection, Argentina is not in a position to take on the company, and it would be headed down a very painful road of either starving to death or going broke," Bullrich said. Spain clearly no longer wants to keep the company. "SEPI doesn't want to operate Aerolineas any more," said Argentine Infrastructure Minister Carlos Bastos, after returning from Madrid. The Argentine government and SEPI are seeking possible buyers, which include Lan Chile, Continental, Peru's AeroContinente, and Eduardo Eurnekian, who operates most of Argentina's airports. In a June 15 editorial, The Financial Times of London said, "In many respects, Aerolineas has become a symbol of the failure of the last decade's market reforms to raise the living standards for most Argentines. The reason, a growing chorus of critics say, is a cocktail of official corruption, executive mismanagement, and regulatory incompetence, which often succeeded only in transforming inefficient public monopolies into expensive private ones." Protests in Salta turn violent On June 17-18, two people were killed in violent clashes between protesters and police in northeastern Salta province. About 100 demonstrators in the town of General Mosconi had been blocking a national highway since late May. They were demanding a raise from US$1.14 to US$2.50 an hour for their work renovating an old hospital in a public-works program aimed at alleviating unemployment. The hospital remodeling was part of a response to the loss of jobs caused by the privatization of the oil company Yacimientos Petroliferos Fiscales (YPF) in 1993, after which the YPF payroll went from 4,000 to 300. Unemployment in that part of Salta, which had had relatively high wages compared to the rest of the province, jumped to 40%. Judge Abel Cornejo said on June 18 that he ordered the Gendarmeria Nacional (border police) to clear the highway after he received reports that protesters were occupying a refinery holding 5 million liters of crude. The judge said protesters and snipers shot at the police, but demonstrators accused the police of opening fire. Witnesses said the police had repressed the workers "with brutal, premeditated, and bloody violence." Salta Gov. Juan Carlos Romero said on June 19 he would not dialogue with protesters until "order is restored." Neoliberal reforms blamed for economic woes Through their protests and support for the airline workers, the Argentine public is venting its frustration with neoliberal reforms and botched privatizations. The weekly Argentine newspaper Veintitres reported that privatizing train service has meant that the railroad network has all but disappeared. Once-accessible fares have doubled. The government subsidy for train fares today is three times the deficit the government reported 10 years ago to justify privatizing the railroad system. A similar case is the privatization of the social security system, which brought significant profits to the private firms that administer the funds, but hurt workers who must pay commissions of up to 30%. Worse, the government has a huge fiscal deficit in part because money that used to enter the treasury as retirement contributions is now going to the private fund administrators, although the government still has to pay thousands of pensions. [Sources: CNN, 06/06/01, 06/15/01; The Financial Times (London), 06/15/01, 06/16/01; Reuters, 05/29/01, 06/12/01, 06/13/01, 06/18/01; Inter Press Service, 06/08/01, 06/15/01, 06/18/01; Spanish news service EFE, 06/08/01, 06/17/01, 06/18/01; Associated Press, 05/29/01, 06/08/01, 06/17/01, 06/19/01; El Nuevo Herald (Miami), 06/09/01, 06/19/01; Notimex, 05/31/01, 06/15/01, 06/16/01, 06/18-20/01; La Opinion (Los Angeles), 06/18/01, 06/20/01] ********************* CHILE ********************* CHILE: NAVY CHIEF'S UNEXPECTED RESIGNATION SETS OFF POLITICAL STORM Adm. Jorge Arancibia Reyes, commander in chief of the Chilean Navy, resigned unexpectedly June 13, five months before his term would have expired. The controversy surrounding the resignation's political roots renewed calls for changes to the Constitution. Arancibia was the first military chief to acknowledge that the military had committed human rights violations during the dictatorship of Gen. Augusto Pinochet (1973-1990). He was also instrumental in creating the Mesa de Dialogo, which brought together military leaders and human rights lawyers for the first time since the 1973 coup that toppled the government of former President Salvador Allende (1970-1973). The meetings led to information that determined the fate of more than 200 people who were disappeared during the dictatorship (see NotiSur, 2000-06-30, 20001-01-12). Resignation tied to Senate race The first announcements regarding Arancibia's resignation gave no reason for the admiral's decision but said it would become effective July 6. However, Radio Cooperativa reported that the admiral planned to run for the Senate for the rightist Union Democrata Independiente (UDI) in legislative elections in December. That was confirmed by Deputy Gonzalo Ibanez, a UDI candidate for senator in Valparaiso, who said UDI president Deputy Pablo Longueira had asked him the week before to step aside to allow Arancibia to run. The report that the resignation was politically motivated set off a political storm. President Ricardo Lagos called Arancibia to his office the following day. When the admiral reportedly balked at leaving his post immediately, the president reminded him he could face constitutional charges in the Chamber of Deputies, which apparently convinced him. After the meeting, the president's office issued a terse announcement that Arancibia's resignation would be effective immediately. Lagos named Vice Adm. Miguel Angel Vergara Villalobos to replace Arancibia. While laws left over from the Pinochet era prevent the president from firing military commanders, the president has the authority to designate the chiefs of the military branches from among the top five officials in each branch, determined by seniority. Observers said Lagos' prompt and forceful handling of the incident reinforced the nation's constitutional order and delivered a blow to the political right-wing. Lawmakers threaten legal action Leaders of the governing Concertacion por la Democracia coalition and the opposition Partido Comunista de Chile (PCCh) accused the admiral of political deliberations, or advisement, which the Constitution expressly bans for members of the armed forces. They also said Longueira committed the crime of sedition by making political contacts with the head of a branch of the military. Longueira's invitation to Arancibia was seen as an attempt to reinforce the UDI's political position for the December elections and a move to ensure UDI dominance over the Renovacion Nacional (RN) in the right's Alianza por Chile coalition. UDI Deputy Julio Dittborn denied that meetings with Arancibia had taken place "behind the country's back," and he said that the admiral's resignation only indicated his desire to continue participating in public life "from Congress." Defense Minister Mario Fernandez called the situation "very serious" and "delicate," and he condemned the alleged actions of Longueira, though he avoided accusations of sedition. Deputy Isabel Allende, vice president of the Partido Socialista (PS), said it was still possible that lawmakers will charge Arancibia with violating the Constitution. RN president Sebastian Pinera said this was a step in the wrong direction, both for the military and for the country's efforts "to re-establish a healthy coexistence between the civilian and military worlds." On June 15, administration spokesperson Claudio Huepe called the situation "a detour" in Chile's democracy and said the UDI should formally explain whether it had offered the admiral a candidacy and under what circumstances. On June 20, the lower house of Congress voted to set up a committee to investigate the meetings between the UDI and Arancibia and whether the Constitution was violated. The RN voted in favor of the committee. Episode could promote constitutional changes The episode has boosted administration efforts to complete Chile's democratic transition and ensure that the armed forces are subordinate to civilian authority. Interior Minister Jose Miguel Insulza said the crisis demonstrated the need for legal reforms to end the president's inability to remove armed forces commanders from their posts. The administration is meeting with party leaders about those changes. To be approved, the coalition would need some backing from within the right-wing opposition, particularly the RN, which is now more likely. On June 19, Insulza presented a proposed constitutional amendment to the Senate constitution committee to change Article 54 so that high-ranking officers in the armed forces and Carabineros police as well as Defense Ministry officials would have to resign two years before running for national office. A similar measure introduced by the Partido Democrata Cristiano (PDC) would require resignation one year before running for office. A broader bill to change the Constitution has been in Congress since July 2000 and its passage is one of the major goals of President Lagos. The Concertacion coalition and the opposition agree on many proposed changes including eliminating designated and lifetime senate seats, modifying the makeup of the Tribunal Constitucional, and changing certain duties of the lower house. However, disagreement on other points, especially regarding the armed forces, has kept the bill from passage. The problem issues include changes to the electoral system and to the functions of the Consejo de Seguridad Nacional (CSN). [Sources: Notimex, 06/13/01, 06/15/01; Inter Press Service, 06/15/01; Spanish news service EFE, 06/13-15/01, 06/18/01, 06/20/01; La Tercera, 06/21/01] ********************* ECUADOR ********************* ECUADOR: CREDITORS TO RELEASE MORE FUNDS The International Monetary Fund (IMF) agreed to extend its loan agreement with Ecuador until year-end, Finance Minister Jorge Gallardo said on May 29. Thus, Ecuador will receive a US$48 million loan disbursement from the IMF, part of a larger US$300 million accord. On May 31, the Ecuadoran government implemented the controversial increase to the value-added tax (impuesto al valor agregado, IVA) from 12% to 14%, despite the lack of congressional approval for the measure. The increase was an IMF requirement for approving Ecuador's economic plan and thus allowing further loan disbursements. The government acted despite three lawsuits in the Tribunal Constitucional against the measure. Legislators struck down a bill to increase the IVA from 12% to 15% in March, but President Gustavo Noboa intervened and reintroduced the bill, this time raising the rate to 14% (see NotiSur, 2001-04-06, 2001-05-18). Regardless of how the court rules, the IVA increase is bitterly opposed by nongovernmental and civic organizations in Ecuador. They are angry that the government, despite promises to consult civil groups before making any change in taxes, acted to appease the international financial institutions in the face of widespread opposition. President Noboa says the tax will benefit the country by paving the way for additional disbursements of credits from the World Bank and the Inter-American Development Bank (IDB). IMF sees improvement in economy On June 4, the IMF announced its approval of Ecuador's economic plan and gave the green light for the US$48 million disbursement. Stanley Fischer, first deputy managing director of the IMF, said Ecuador's economic prospects have improved for the medium term. Measures of economic activity have grown, unemployment has gone down, and inflation has dropped markedly, giving the country a stronger than expected financial position, he said. Fischer warned, however, that much remains to be done to reinforce the financial sector as well as to implement the necessary structural reforms. On June 4, the World Bank announced a US$70 million disbursement from its US$150 million loan to Ecuador. Critics of the World Bank said they were dismayed by the approval for release of the funds. "The policies being pushed by the bank will only make the economic situation worse for the majority of the population," says Steve Hellinger of Development GAP, a Washington-based nongovernmental organization. "The release of the loan was conditioned on the government passing and implementing what amounts to a regressive IVA policy that had been opposed by a wide section of society." Hellinger criticized the bank for withholding the loan until Ecuador's government agreed to deepen its structural adjustment program and raise the IVA. IMF spokesperson Thomas Dawson said the IVA "is an important part of the package." He acknowledged that the increase remains unpopular and could be overturned in court. "While there could be legal challenges, they will take some time to be heard, and the authorities do believe that their legal position is sound," he said. IMF approval opens door to Paris Club The IMF approval will allow the Paris Club of creditor nations to extend its debt agreement to December from May. Last year, Ecuador renegotiated about US$800 million of its US$1.3 billion debt with the Paris Club. The extended debt repayment period would cover about US$40 million in principal payments and about US$25 million in interest, Gallardo told reporters. "The program is definitely in motion," Gallardo said, adding that he hopes to meet with the Paris Club in August or September to solidify the program. Gallardo said he would also seek a second year-long accord with the IMF to run through December 2002, to the end of the current administration's term, which expires in January 2003. On May 28, sources with the Paris Club said that representatives of the club would meet with the Ecuadoran government soon to renegotiate the debt. Ecuador has three loans with the Paris Club negotiated in January 1992, June 1994, and September 2000. Last March 21, Franco Danielli, Italy's vice minister of foreign relations, said in Paris during a meeting with Noboa that Italy would forgive US$25 million of Ecuador's debt with Italy. In return, the Italian government asked Noboa to direct that money toward social programs for the poor. The debt forgiveness from Italy was significant in that, although it is a member of the Paris Club, it acted outside that forum to forgive the debt. The Ecuadoran government said other European governments, among them Switzerland, could follow suit and forgive a part of Ecuador's debt in exchange for directing the money to social programs. The Paris Club includes Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Holland, Ireland, Italy, Japan, Norway, Russia, Spain, Sweden, Switzerland, United Kingdom, and United States. [Sources: Reuters, 05/29/01; Notimex, 05/23/01, 05/25/01, 05/28/01, 05/31/01, 06/04/01; Inter Press Service, 06/04/01] ================================================================= NY Transfer News Collective * A Service of Blythe Systems Since 1985 - Information for the Rest of Us 339 Lafayette St., New York, NY 10012 http://www.blythe.org e-mail: nyt@blythe.org ================================================================= pvtsa-06.22.01-18:06:30-31355