Calling for a cross-party government, populist Eduardo Duhalde took office on Wednesday as Argentina's fifth president in two weeks in Buenos Aires and began plotting a possible devaluation to pull the economy out of a recession that sparked bloody riots.
After Congress chose Duhalde on Tuesday to lead Argentina until 2003, the Peronist Party powerbroker vowed to scrap "an economic model that has brought desperation to a vast majority" -- the currency system created by his own party a decade ago.
A Duhalde adviser said that could mean a 30 to 40 percent devaluation of the peso from the one-to-one peg to the dollar, which has turned Argentina into a virtual dollar zone where most home loans and major contracts are in greenbacks.
Devaluation could bankrupt millions since they would need more pesos, in which wages are paid, to cancel dollar debts. But it is also seen as possibly the only way to end a four-year slump which has impoverished a country with the highest incomes in Latin America and pushed up unemployment to 18.3 percent.
"I'm spending my savings while they're still worth something," said Alberto, a lawyer, as he bought a video camera in a department store.
To win support for likely painful measures, Duhalde was close to appointing a "national unity" cabinet that would include opposition parties. But a Peronist, the respected orthodox economist Jorge Remes Lenicov, is expected to fill the powerful economy ministry post.
Economic instability, plus a freeze on bank savings for the past month which infuriated ordinary Argentines, set off looting and rioting which forced out President Fernando de la Rua -- who was due to rule until 2003 -- and killed 27 people.
Duhalde made no policy comments at a brief ceremony at which he took office. But he told one paper-- "Flotation is one of the five alternatives economists have put forth, but even those that defended it are not so convinced." Devaluation would make Argentine exports cheaper and more competitive abroad.
The Buenos Aires Stock Exchange's Merval Index <.MERV> gained 9.58 percent on Wednesday as investors snapped up blue-chip stocks with pesos that may soon buy a lot less.
The 60-year-old former vice president and former governor of Buenos Aires province is expected to present on Friday his economic plan, which will also have to deal with the moratorium declared on part of the $132 billion public debt by Adolfo Rodriguez Saa, who was president for a week before quitting.
DUHALDE SEEN AS THROWBACK
Undermined by public anger at his choice of aides suspected of corruption, and attacked by Peronist colleagues who accused him of being power-hungry, Rodriguez Saa quit nine days after De la Rua resigned on Dec. 21. Two Congress leaders served as provisional presidents between the appointments.
With Rodriguez Saa went a plan to revive the economy by printing a new currency, the Argentino, a quick fix that confused many Argentines and raised fears of a return to inflation.
Duhalde, who lost to De la Rua in the 1999 elections, received a baptism of fire as he addressed Congress late on Tuesday.
Thousands of people spilled into the streets clanging pots and pans to protest against his appointment -- the same din that contributed to the exit of De la Rua and his unpopular economy minister, and of some of Rodriguez Saa's aides.
Duhalde is seen as a throw-back to old-fashioned Peronism, founded as a working-class movement by Juan and Eva Peron in the 1940s. It became a vehicle for free-market reforms under Carlos Menem's presidency in the 1990s.
As governor, Duhalde promoted job-creation schemes and defended local industry but ran up a budget deficit and faced accusations of corruption. One of his first promises on Tuesday was a new unemployment benefit scheme.
But he vowed not to lead the country with an eye on the 2003 elections, giving his word not to run next year.
Argentines can do little to preempt a devaluation since a 12-day-long ban on foreign exchange transactions remains in force as well as a $1,000 monthly limit on cash withdrawals.
Many hedged months ago by shifting pesos into dollars and taking them out of the banks to stuff into mattresses and safes. This purged the banks of 40 percent of peso deposits and 9 percent of dollars, forcing De la Rua to slap curbs on cash.
Even as the devaluation specter swirled, there was no panic at the banks on Wednesday. "They have been talking about devaluation for ages," said Marta, a pensioner. "Of course it will hurt savers, but it is better to start over again."
World markets have also had plenty of time to adjust to what has been called the best flagged crisis in history. Talk of devaluation had little impact on European and US markets.
Duhalde's team is expected to make quick contact with the International Monetary Fund, which sent $22 billion in aid over the past year but withheld cash last month due to overspending. Washington has said the Fund could provide fresh aid.
The US Treasury said it would be "supportive" of Argentina once there was a sustainable economic plan.
(China Daily January 4, 2002)
