The Second Revolution

In blunt words, President Eduardo Lonardi reported to his people last week on the state of the country's economy^ Argentina, he said, is like "a man eaten up by cancer, who looks healthy and capable of work until he suddenly falls down dead." The shocking facts of what had happened under Juan Peron:

P:Exports--the sales abroad of meat, wool and grains that once made Argentina one of the world's greatest trading nations --dropped in the last five years to one-half of their previous volume. Reason: Peron's government grabbed control of all exports and crippled farm production in an attempt to squeeze out profits to finance an ill-planned industrialization. P:Industrialization, too, utterly failed to bring Argentina power, steel, fuel, even such essential equipment as trucks and farm machinery.

P:The government's internal debt, largely borrowings from social-security funds, stands at 70 billion pesos ($3.8 billion).

P:Adverse foreign trade in 1955 will total nearly $200 million, and with deficits of earlier years will force the total foreign trade debt to $757 million. Reserves of gold and dollars are barely $450 million, although at the end of the war they totaled $1.6 billion.

P:Printing-press inflation in the last decade increased money in circulation per person by 500%, while production per person rose only 3 1/2%.

Said Lonardi: "If anyone had deliberately proposed to disjoint the economy and wreck its finances, he could not have done it with more perfection."

"We Shall Tear Down." To cure the economy, Lonardi proposed austerity and sacrifice, combined with economic freedom. "We shall tear down the absurd apparatus of interfering measures," he said. "We shall decisively encourage farm production . . . We shall busy ourselves with power production and transport . . . We shall cut wasteful expenditures."

The next day, having drilled home the need for fast action, General Lonardi took some himself. He devalued the peso to 18 per dollar (from a scale that ranged, depending on the commodity involved, between five and 14). That was "decisive encouragement" for farmers, who in effect got an incentive-creating boost in the pesos they get for the dollars their exports earn abroad.

Devaluation automatically raised the cost of imports; that was where Lonardi's proposed austerity came in. To smooth the transition and hold down inflation, the government for the time being planned to tax the more profitable exports, e.g., beef, and use the tax to subsidize the more vital imports, e.g., penicillin.

First Challenge. Lonardi's talk was plainly disquieting to Argentina labor, which now feared a drive to freeze wages and raise lagging productivity. Toward week's end, leaders of the General Confederation of Labor (C.G.T.), once a major bulwark for Peron and currently embroiled in a power struggle with rival labor chiefs, threatened to call a general strike. But Lonardi met the challenge head on. He suspended every union official in the country, empowered army officers to organize and run off union elections for 120 days hence. The strike threat petered out.

"This is Lonardi's second revolution," said an admiring Buenos Aires financier. "And it took more courage than, his military revolt on Sept. 16."

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