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JANUARY 21, 2002

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Q&A: "On the Edge of a Total Breakdown"

Influential Argentine intellectual Carlos Escudé says the country's new leader faces a "no-win situation"
Carlos Escudé is no newcomer to controversy. As an adviser to ex-President Carlos Menem in the early 1990s, the Yale-trained political scientist was the intellectual force behind Argentina's end to 50 years of nonstop confrontation with the U.S. and the start of an era of automatic alignment. The foreign policy coup was as dramatic as it was at first unpopular to the normally proud Argentines, who even coined a phrase to describe their newfound love affair with the yankis: carnal relations.

However, new President Eduardo Duhalde placed the future of carnal relations in doubt with the adoption of a populist economic program designed to disarm a ticking time bomb of social tensions. In a conversation with Buenos Aires-based Argentina Correspondent Joshua Goodman, the always outspoken Escudé shares his polemical views on the future of Argentine-U.S. relations and the competing domestic and international pressures facing Duhalde. Following are edited excerpts of their conversation:

Q: In light of the protectionist measures announced by Duhalde, what shape will relations between the U.S. and Argentina take in the near future?
You're asking me to look into a crystal ball. Unfortunately we don't know how relations will evolve. A lot depends on the U.S.'s reaction to Duhalde's announcements and the President's counterreaction. Were the U.S. to more vocally defend its legitimate economic interests, then it's very likely Duhalde would choose to confront the U.S. rather than risk angering the Argentine public.

But history has shown that this will put us on a collision course to financial isolation, something disastrous for any economy today. So this is really a no-win situation. Either he caves into foreign pressure and backtracks on his promises, with the huge risks of social chaos and anarchy that this implies, or he appeases the U.S. and faces the certainty of financial isolation. At the best we're threatened with instability for some time.

Q: Can anything be done to avoid the breaking point?
If Duhalde is extremely careful and foreign reaction is moderate, then this balancing act could go a long way. It won't be good for Argentina in the long term, but in the short term it can stabilize the country socially and politically. But if foreign pressure is greatly felt, than I'm afraid we're headed for a nightmare.

Q: How much of a populist really is President Duhalde?
It's a big misconception to call Duhalde a populist. Ideology has nothing do with it. If anything, he's a pragmatist because he knows the country is on the edge of a total breakdown and that his own survival until elections in December, 2003, is far from assured. If we're isolated economically and financially, then the consequences will be felt a lot sooner

Q: What sort of consequences?
We would be deprived of everything from foreign medicines to essential imports needed to maintain our telephone systems. The Argentine middle class is very much part of the 21st century technologically. But they could be thrown out of it very rapidly. Personally, I will have to get a credit card from a bank based in the U.S.. Otherwise I wouldn't be able to make any purchases on Amazon. Imagine that: It would be a complete tragedy for the middle class.

Q: Isn't there a chance that he could end up like Menem, who was elected on a populist ticket only to reverse course once in office?
If that were true, then what you're essentially saying is that Duhalde is a liar. And that's the last thing society will tolerate right now from its politicians. It's too late to disregard what the public wants. Plus, whatever similarities he may have to Menem, it's worth remembering that Menem's first economic policies were in convergence with U.S. foreign policy, while Duhalde's are completely opposed.

Q: Do you then consider Argentina's collapse a huge failure for U.S. foreign policy?
It most definitely is. But that doesn't take away Argentina's responsibility for getting itself in the mess in the first place.

Q: What will be the consequences for U.S. foreign policy in Latin America?
It's still too early to say for sure. But the Free Trade of the Americas initiative is for now dead. And if Duhalde is skillful to get away with this delicate balancing act long enough, then it will definitely increase the temptation for Brazilians to elect left-leaning presidential candidate Luis "Lula" Inacio da Silva.

It will also give an excuse for undemocratic voices in Latin America, like Venezuelan President Hugo Chavez or guerrilla groups in Colombia, to further their agenda. If you engage in some exercise of political fiction, then there's no limit to the fallout. If things really run afoul here, then the Bush Administration could be credited with losing South America for the free world.

Q: Will the rupture of relations with the U.S. automatically push Argentina further into bed with Brazil via the Mercosur trade bloc?
Definitely yes. By itself, Argentina is insignificant on the world stage. And since they have to be a satellite of someone, then Argentines would much rather be a satellite of the world's most powerful nation. But the truth is, the U.S. isn't interested in making Argentina by itself an integral part of its economic strategy, so we have to accept Brazil.

Q: Politically, how difficult will it be for the government to refrain from printing money and control inflation?
I'm very skeptical they'll execute any restraint at all. For pragmatic reasons, these people will rely on organized labor for political support. And as soon as labor leaders start demanding raises [to counter] inflation, the government will turn on the presses.

Argentina is famous for its corruption, but people forget that printing money is historically the shape corruption has taken here. At least in times of monetary responsibility, the amount of money you can make from corruption is severely reduced.

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