ARGENTINA: Through the Wringer

After several years of wild inflation, Argentina is getting a massive dose of deflation. Partly this is the result of crop failures, which have cut rural buying power to the point where industrial workers are losing their jobs for lack of demand for their products. But another reason is that Juan Perón has embarked on a policy of credit restriction so drastic that many long-established commercial houses are being driven to accept short-term loans from private sources at interest rates ranging up to 10% a month.

Buenos Aires department stores have cut prices right & left. Bankruptcies during the first eight months of 1952 were five times as many as in the same period last year. More important politically than the business wring-out is the growing unemployment. Of 130,000 textile workers, 35,000 are now estimated to be out of work; the percentage in the building industry is almost as high. Having tried valiantly to ignore the problem, Perón’s labor chieftains now seek deals with hard-hit firms to get employees from the provinces fired first, and to spread the work, through reduced hours and pay, among as many union members as possible. But last week, when Perón’s Labor Boss José Espejo turned up as guest of honor at a soccer game attended by 70,000 fans, he was roundly booed.

Already, Perón’s deflationary policy has driven the value of the peso on the black market from 30 to the dollar at the first of the year to 19 last week. By making Argentine business go through the wringer, Perón apparently hopes to 1) drive workers back to the land, where they are badly needed. 2) cut demand for imported goods and thus ease the foreign-exchange problem. 3) force more widespread price cuts and 4) drive more marginal operators into bankruptcy. Still cheerful and cocky, Peron promised never to help dealers by relaxing his credit restrictions. Said he: “If I don’t give [businessmen] loans they will have to sell merchandise—because they have it in stock—and you will pay 70 or 80 pesos for a suit instead of 500 . . . And if they go bankrupt, what do I care?”