Something from the Boys

Argentines woke up one morning last week to find that, overnight, second-grade beef had shot up from 5 to 8 pesos a kilo, cigarettes from 1 peso to 1.50 for a pack of ten, cheap rum from 11 to 16 a bottle.* The rocketing prices were the result of a major overhaul of the nation's economy by the members of Argentina's Economic Council, known to Buenos Aires' harried financial community as Los Muchachos (The Boys). While observers both in Argentina and Washington thought the new measures might be sound in principle, Los Muchachos had landed their fellow citizens a hard kick in the wallet.

New Faces. The most obvious cause of the price jumps was a new tax law, more than 100 pages long, handed to Congress late one afternoon with a request that House and Senate rush it right through. Without discussion or debate, the Peronista steam roller obliged. The law increased tax rates on personal incomes, excess profits, capital gains, inheritances, gifts and sales, and slapped on stiff hikes in excise and customs duties. At the same time, the government removed price controls from many commodities.

A less apparent but no less potent price-boosting force, especially on imported goods, was the new foreign-exchange schedule of the peso announced by Finance Minister Alfredo Gomez Morales. The most spectacular jump was in the free market rate, which went from 9 to 14.25 to the dollar. At the same time, many import restrictions were taken off.

New Hopes. In issuing the new regulations, Gomez Morales and The Boys hoped to increase Argentine exports by cheapening them in terms of foreign exchange. They also hoped to lure back to Argentina, in the form of imports, some of the estimated $200 to $300 million which prudent Argentines have salted away abroad. In this way a stockpile would be built up in case of a new world war, which the Muchachos complacently expect. To attract more foreign capital investment into the country, restrictions were eased on the transfer of foreign companies' profits abroad, blocked for the past three years.

While the new exchange setup undoubtedly brought the peso's official value closer to its real worth (on the Montevideo free market it is traded at from 16 1/2 to 17 1/2 to the dollar), there was serious doubt in many businessmen's minds whether The Boys could achieve their overall aims. For one thing, critics pointed out, the painful rise in prices would bring on a new wave of wage increases, and accelerate Argentina's dizzying inflation. As for The Boys' hope of attracting new capital into the country, one economist summed up: "The trouble is that nobody can trust this present outfit. What they now give in a moment of generosity they could take away tomorrow."

*The peso is worth around six cents. Though the increases horrified local residents, dollar-bearing tourists still found it possible to regard beef at 25 cents a pound and rum at $1 a bottle with equanimity.

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