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`Today, Argentines Are More Realistic'

International International Business


Economy Minister Domingo Cavallo is the primary architect of Argentina's economic turnaround. He spoke with Mexico City Bureau Chief Geri Smith in Buenos Aires:

Q: How much longer will Argentina's reforms last?

A: They are going to last a long, long time because with the fiscal balance and the peso/dollar convertibility plan we have achieved stability. Producers are getting used to operating in that context, which is more challenging than the inflationary closed economy of before. Then, errors in business were covered up by the economic disorder. Now, errors immediately jump into view.

Q: What about the downsides, like 10.8% unemployment?

A: Unemployment will resolve itself if we can convince Congress to approve new labor laws. Our current laws are inflexible, very European-style. But [unions] are realizing that this system is discouraging the creation of new jobs.

Q: Can Argentina sustain high wages?

A: Our workers' salaries are higher than in Brazil, Chile, and Mexico, but we can sustain that because we can continue improving productivity. Argentina invested in its people years before the rest of Latin America did, especially in education. That's an advantage we have over our neighbors.

Q: In Mexico, the poor in Chiapas revolted. Here it's the middle class that feels excluded.

A: Here the poorest sectors now vote for the government; it's natural because they were the most hurt by inflation. But traditional middle-class people are suffering the costs of economic adjustment--[former] public employees in privatized companies, small shop owners, farmers. We do have a problem of a diminishment in the standard of living of a portion of the middle classes.

Q: So the euphoria of economic stability has `orn off?

A: The Argentines are demanding. As long as that demand comes along with a willingness to make the necessary sacrifices and efforts, that's fine. The risk is that the Argentine gets carried away by demagogic speeches. If people believe that the government simply has to print more money, for example, it would be terrible. But today, Argentines are more realistic. They aren't bought so easily by the demagogic promises of the past, and that's progress.

Q: What's next to be privatized?

A: The things remaining [to be sold] are important for increasing Argentina's efficiency. The investments that will be made in ports and airports will have a spectacular effect on trade, also for tourism. We're also going to privatize our nuclear power plants.

Q: Can Argentina keep sustaining the increase in its exports?

A: Argentina is going to be a great food exporter once again--not just wheat and meat but more processed foods with higher value added. And we'll emphasize natural products. We're beginning to export more wines, now. We'll also be an important exporter of energy. In manufacturing, we're already exporting auto parts to Brazil. One Argentine company is exporting huge container cranes to Malaysia, Korea, and China, competing with the Japanese.

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