ARGENTINE ECONOMY
When the ruling Peronists were confronted with the new situation of the spring of 1974, they had to try to avert economic stagnation by orienting toward greater price flexibility in order to promote the import of raw materials indispensable to expansion. This implied allowing the prices of manufactured products to reflect the increase in the prices of raw materials, increasing investment, and vigorously promoting exports. All this presupposed that "social peace" would be respected and that real wages would not be permitted to go beyond the level of June 1973. The greater price flexibility and the fall in the interest rate, combined with the freeze on wages, was supposed to permit the reestablishment of the rate of profit while nevertheless involving on increase in the rate of inflation. Simultaneously, the terms of trade once again began to shift to the detriment of the semicolonial countries. This guaranteed that the growth rate in 1974 would be no higher than average and that the rate of inflation would be on the order of 40% instead of the 25% predicted by the government. That is generally the way things happened. Growth in industrial production reached 5.6% in 1974 and not the 9,3% planned by the government (the estimate of the three-year plan) and the employers' associations. It was even lower than the level attained in 1973, which was 5.9%. Failure of the Perón Gelbart policy Gross domestic product (GDP) grew 7.1%, well below the predicted rate, despite the favorable influence of the excellent harvest of 1973-74, which was sold at very good prices because of the temporary disappearance of grain stocks on the world market. The increase of the gross domestic product in the agricultural sector was 8.2%. The overall GDP 40
IN 197 73 by SERGIO MARTINEZ increase of 7.1% concealed the mediocre performance of the industrial sector relative to the government's predictions. And the rate of inflation was practically twice that foreseen by the government. One of the consequences of this failure to attain the projected rapid industrial growth rate, which was supposed to be combined with a relatively low rate of inflation within the framework of the Bonapartist policy inaugurated by Peronism's return to the government, was the fall of Minister of Economics Gelbart and his replacement by Gómez Morales. Gelbart's administration had been based on opening nontraditional morkets (the bureaucratized workers states, for example) for nontraditional exports (particularly industrial products) and on attracting a considerable influx of European and Japanese capital in order to modernize industrial equipment and the infrastructure. This was achieved only in small part; the positive results attained by the Argentine economy during the first year of Peronism derived above all from the success of traditional agricultural exports (although there were openings in industrial exports to the bursducratized workers states). Argentine industry continued to suffer from a lack of investment and a low rate of profit, and it struggled continuously for an increase in prices. For their part, the workers sought to maintain the real wages they had achieved previously, and they fought for this both directly and indirectly which is reflected, in a deformed manner, by the maneuvers of the trade-union bureaucracy. Aware that an explosion of wildcat strikes and protest movements against the fall in real wages would threaten to deprive it of any role within the fromework of the present regime, the trade-union bureaucracy was compelled to add its voice to the demand for wage increases, even though that voice was weak. Since it considers the trade-union bureaucracy to be one of the pillars of the Peronist regime and did not want to see it lose its base, the government was in turn compelled to
grant several increases in nominal wages. Such a policy, in conjunction with a high rate of employment, has up to now averted generalized confrontations between the regime and the majority of the working class. The twofold pressure of the bourgeoisie demanding price increases and the workers demanding wage increases compelled the Peronist government to abandon in reality its policy of "controlled" inflation. There was a return to galloping inflation of the type that marked the end of the Lanusse dictatorship, which resulted in the exacerbation of the class strug gle in the wake of the decline in real wages, the crisis of industry, the transfer of surplus-value to the agricultural sector, etc. Concurrently, the contradiction between the bourgeoisie and the proletarlat and the contradictions among the various sectors of the bourgeoisie were sharpened. The rate of inflation, which was still only 1.2% in March 1974, rose to 4.9% in February 1975, to 8% in March 1975, and probably will exceed 10% in April. Even if the government takes some measures to slow down this price explosion somewhat, it is doubtful that the rate of inflation for 1975 as a whole can be kept below 60%. The counterpart of this rate of inflation has been a rapid fall in real wages. The 40,000 peso monthly increase (old pesos) that was granted recently was almost instantly wiped out by price increases. The limitations on public investment will soon begin to produce an increase in unemployment. The fact that broad sections of the working class that had been unemployed or worked only occasionally under the miliary dictatorship had again found jobs under the Cámpora and Perón regimes had contributed significantly to keeping the working class in a state of tranquility during the first year of Peronism. Even though there were no significant wage increases per employed person, the increase in employment definitely raised real income per working-class household. If the trade-union bureaucracy wants to avoid losing control over a broader section of the working class, especially after the explosion at Villa Constitución (see INPRECOR, No. 26, May 22, 1975), it will be compelled to demand and obtain new wage increases - otherwise broad workers struggles could break out. Argentine industry thus once again finds itself in a critical situation. The terms of trade are evolving to the detriment of Argentino. Any row materials imports and any renovation of the stock of machinery would result in the loss of a portion of previously accumulated surplus-value. This process is unfolding in the context of a significant evaporation of Currency reserves, which is leading to new restrictions on imports, aggravated by the effects of the recent devaluation. Juan Perón's economic policy failed. The big European and Japanese investments that had been hoped for so intensely were not made (international capital decidedly preferring to invest in Brazill). The basic products exported by Argentina were unable to stand up against falling prices in a period of world recession, as has just become the case even for oil. Exports of grain and beef products have lost the strategic role they had played during and after the second world war, both because capitalist Europe has attained a higher level of self-supply in foodstuffs by virtue of a big push to expand agricultural production and because the competitive productive capacity of the major producers (the United States, the USSR, Canada) has grown strongly. Perón's sociopolitical program was to achieve accelerated economic growth in Argentina without lowering the standard of living of the workers -by increasing relative surplus-value through the modernization of industry and by increasing the productivity of labor and relying on the support of foreign capital. The failure of the economic policy Implied the failure of the sociopolitical project. The change in the atmosphere is symbolically expressed in the two following formulas: Juan Domingo Perón still proclaimed, "Each must produce what he consumes. " Today his widow asserts, "Each must produce at least what two persons consume." The new project of Gómez Morales The new economic plan of Minister of Economics Gómez Morales is still not known as of this writing. But it is possible to outline the objective conditions that any economic plan of the Argentine bourgeoisie will have to confront today. After the failure of Perón's policy, there is no alternative but industrial stagnation or an attempt to start industrial production climbing again by means of superexploitation of the working class. The Bonapartist government, which continues to base itself on the trade-union bureaucracy, cannot fully implement such superexploitation of the working class, which would require a dictatorship of the Onganía variety. This government will combine a very severe repression of the vanguard and most combative sectors of the proletariat with some concessions on wages. It is thus probable that the Morales plan will be located midway between the Perón-Gelbart project and the Krieger- Vasena-Onganía policy. It will be a question of on the one hand trying to control and limit nominal wage increases without being able to freeze them effectively and on the
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ARGENTINA other hand of seeking to control price increases without being able to halt them in any effective way. It will be a question of stimulating the growth of industrial production, but a growth slow enough to limit imports, which in any case have already been cut down by devaluations. Morales began by emphasizing the "overheated" state of the Argentine economy, caused, according to him, by full employment. While preaching a policy of credit restrictions, he insisted on the need to limit domestic consumption, which falls within the employers' general conception of how to increase profits. The struggle against inflation will be given priority, which clearly means that growth will have to be slowed down and not stepped up. One can see the difference in tone between this project and the Perón-Gelbart project. It is, moreover, not accidental that since his accession to the Ministry of Economics, Morales has not yet presented an overall economic plan to replace the plan of his predecessor. He can only resort to empirical measures, making price policy more flexible (in a pronounced manner in some branches, like automobiles), ordering new devaluations that especiolly favor the agrarian sector, granting the 40,000 peso increase to the workers but later seeking to ward off any new increase during the meetings of the parity commissions (or at least trying to hold any new increases to a minimum), and talking about freezing prices at their March 1, 1975, levels. From the standpoint of the Argentine capitalist economy os a whole, it is proctically impossible to arrive at a comprehensive project, substituting Morales's for Perón-Gelbart's, especially since the Bonapartist regime will enter crisis under the blows of workers mobilizations, which could be on the rise and will intensify conflicts between the trade unions and the government as well os internal conflicts within the trade-union bureaucracy. That is the reason for the incoherent and empirical aspect of Morales's policy. Prospects for this year In its April 17, 1975, issue, the journal Mercado asserted that the 9.3% growth of industrial production initially predicted should be corsidered "conditional": "It seems difficult for the activity level of past years to be surpassed without resolving the problems of supply, or at least without improving the supply situation substantially, and without re-establishing the productivity of the work force, which has deteriorated in past months due to absenteeism and labor conflicts. Likewise, the Flexibility of official price policy appears to be a third condifion indispensable for realizing the rate of expansion planned for 1975. " And it continued: "The factors that prevented the achievement of the 1974 plans are coming up again this year: lack of raw materials 42 supplies; fall of productivity of the work force; bad relationships between industrial costs and the sales prices authorized by the government. The shortage of raw materials and of inputs in general seems to be the most widespread, and consequently the most acute, difficulty in industry." It follows that the 9.3% growth rate will be difficult to achieve. Some sectors are already saying that their growth will not exceed 6%, but it is still hoped that an average rate of 9% can be reached by virtue of a higher than average growth in steel and by virtue of the starting up of the national aluminum factory. The major bottleneck remains raw materials imports, which have become much more expensive consequent to devaluation. In addition, the imperialist metropolises are trying in every way to reduce their imports in view of the crisis of overproduction that is racking them and in view of the serious balance of payments problems with which they are confronted with the exception of West Germany and Japan). The terms of trade are continuing to develop unfavorably for Argentina, which means that the country will have to export a greater quantity of agricultural products in order to be able to import the same quantity of raw materials and machinery. And the markets for this increased quantity of exports are scarcely assured. Two of the difficulties that the employers are trying to overcome will involve increased exploitation of the work force: On the one hand they are seeking to intensify production and exploitation in the factories; on the other hand, they are seeking to raise prices and thus to reduce the real wages of the workers. Only a strong government, much stronger than the Isabe lita-López Rega regime, could effectively achieve some of these obiectives. But it would be necessary first of all to inflict a grave defeat on the working class. As for agriculture, according to a report of the Ministry for Economic Affairs published in the March 13, 1975, Cronista Comercial, production is expected to go up only 4.3% this year, as compared with the 8.2% achieved in 1974 and the three-year plan's "prediction" of 6,5% growth in 1975. Consequences of the devaluations On March 3, 1975, Argentina strongly devalued the peso. The so-called commercial exchange rate fell to 10 pesos per US dollar. (The previous rate had been 5 pesos=US$1.) The so-called financial exchange rate for the peso was set at 15 pesos per US dollar (10 pesos previously). (All these figures refer to "heavy" pesos.) This was a second devaluation, following the one of August 1972. It resulted notably in the deterioration of the terms of trade, to which we have already referred. By the
end of 1972, the terms of trade had improved some 30% compared with the 1970 level as a result of the strong price increases for exported agricultural products. But beginning then, the ground that had been gained was rapidly lost. By the end of 1974 the terms of trade had deteriorated some 40% compared with the end of 1972, that is, they had fallen to a lower level than that of 1970. The index of export prices (especially for leather, beef, wheat, corn, wool, and oils) increased 38% in 1973 and 42% in 1974; import prices had increased 106% in 1973 and 45% in 1974. Consequently, the surplus in the trade balance was reduced from $1,000 million in 1973 to 5670 million in 1974, which involved a balance of payments deficit of more than $300 million. Exchange reserves had dropped from $2, million million in June to to $1, mi million in December 1974. In January 1975 there was another strong increase in prices for imports, which hit $304 million (compared with $104 million in January 1974). The deterioration in the trade balance was intensified because of the stagnation and decline of Argenfine oil production, which resulted in oil imports going up just when prices exploded, as is indicated by the following figures:
1974 1973 1972 Argentine crude-oil production (in millions of cubic meters) 24.0 24.4 25.2 Argentine imports of crude oil (in millions of cubic meters) 3.42 3.39 1.8 The devaluation was also intended to reduce the high charges for refunding taxes to exporters; without the devaluation these charges would have reached an equivalent of $4, 000 million in 1975. The successive devaluations did not merely create problems for industry with respect to the price it has to pay for imported raw materials and capital goods. They also had repercussions on the quantity of surplus-value in the agricultural sector (grain and beef products), which is the major export sector; the products are paid for in foreign currencies on the world market, and after each devaluation the foreign currency corresponded to more Argentine pesos. At the same time, no seller of agricultural products reduced prices on the domestic market to correspond to the price increases of exports as expressed in pesos. This thus led to constant price increases in the products that constitute the basic diet of the workers and other popular sectors. Hence, there was an increase in popular household expenses for food, a consequent reduction in purchases of industrial goods, and thus a contraction of the market for durable consumer goods produced in Argentina. Industry thus found itself hit from two sides: by the price increases for its raw materials and by the contraction of its markets. Overall, this was expressed in a transfer of surplus value from the industrial sector to the agricultural sector of the Argentine bourgeoisie. It is certain that before devaluation there was a strong increase in imports of raw materials and spare parts, which reduced the immediate effects of the current price increases somewhat. The devaluation will not lead to an expansion of exports of nontraditional products, although that seems to be the aim of the present government team. The reason for this is the considerable increase in the costs of production and the narrow possibilities of raising the quantities produced. There is already talk of exporting only products of a high value added. Public financing On the basis only of the first few months of the year, things seem to be moving toward a budget deficit of 36,000 million pesos, that is, twice the deficit originally foreseen. To this will be added the cost of increasing the salaries of state personnel. The foreign debt will be raised by the effects of the devaluation. More Argentine pesos will be needed to pay the interest on this debt and to repay loans in foreign currencies. This will also tend to increase the budget deficit. The effects of the international recession on Argentina have been a fall in agricultural and industrial exports and a growth in the costs of imports. There is thus an increased balance of payments deficit, an outflow of currency, and serious threats against future import capacity. There is even a rumor making the rounds that Argenting will have to resort to a new stand-by credit from the International Monetary Fund. April 20, 1975
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of the