Edging Closer to Open Chaos

More than 2,200 people have died in political violence and scores of others have been abducted by hooded terrorists since President Isabel Peron took office 20 months ago. But last week the violence took a new and ominous turn. A bomb exploded at the army headquarters in Buenos Aires, injuring 28 (including four colonels), killing a passing civilian truck driver, destroying a dozen vehicles, and even shattering windows more than 300 yards away in La Casa Rosada, the presidential palace. The left-wing Montonero guerrillas claimed responsibility for the blast, which seemed to signal an ugly change in their strategy: a new willingness to risk the maiming or killing of innocent civilians.

Both the right and the left seem to be embracing random terror and Mafia-style vendetta. Recently, the mother, father and sister of a youth named Federico Guillermo Baez were abducted from their home in the seaside resort of Mar del Plata, then later found dead. Their hands were cut off to delay identification. The next day the police announced that young Baez was the leader of a guerrilla squad that had killed an army colonel. The clear implication: right-wing forces had decided to avenge the officer's death by wiping out Baez's family.

Survival Strategies. The rising terror has been coupled with ruinous inflation, currently running at a rate of 600% a year and caused largely by the feckless government economic policies. While the treasury presses out billions of pesos each week to finance rising deficits, the Peron regime has tried to soften the inflation's impact on wage earners by imposing artificial ceilings on service and commodity prices. These ceilings, in turn, have severely squeezed farmers and businessmen, with the result that goods and services are simply disappearing.

With the near collapse of public faith in the peso--down from 36 to the dollar a year ago to 320 last week--Argentines have devised various strategies for financial survival. To get around the government's fixed dollar exchange rate on exports, for instance, some companies arrange for inflated invoices on imports, collect excess dollars at the lower official rate, supposedly to pay the phony bills, then cash the difference on the free market. Many shopkeepers have two sets of books--one that lists transactions at official prices and is shown to government inspectors, and another with actual prices, usually much higher, that customers pay. Each day shopkeepers rush to the nearest exchange to turn in their pesos for dollars, then buy pesos when they need to restock.

The rich deal with inflation by buying property that is likely to rise in value, such as automobiles and real estate, or stash their money in banks in neighboring Uruguay, where dollar accounts are legal. The average worker has no such sanctuaries. Like many other blue-collar workers, one factory stock clerk named Victor, 56, finds that his hard-won comforts are vanishing fast. Once his family regularly dined on beefsteaks; now, he says, "we don't know what meat looks like. We eat ravioli." His 13,000 peso monthly salary is now worth only about $40. Last year his monthly salary was just 6,000 pesos, but in purchasing power it was worth $166.

In an effort to put a lid on the pay-price spiral, Economy Minister Emilio

Mondelli three weeks ago proclaimed a "national economic emergency" and decreed sharp increases in the cost of some goods and services, including milk (up 31%), rice (70%), wine (78%) and local train fares (150%). Mondelli also pledged that wages would be allowed to rise no more than 12% and that a six-month freeze would follow. Enraged unions forced the government to agree to a 20% pay raise, but strikes and slowdowns spread across the country nonetheless. This undermined an Argentine mission to the International Monetary Fund in Washington. Unpersuaded that the Mondelli anti-inflation plan would hold, the fund granted only $130 million of the $314 million in credits Argentina had requested.

Coup Talk. The tottering economy compounds the political troubles of Isabel Peron, whose arbitrary and high-handed ways have made her increasingly unpopular even in her own party. Along with complaints about the economy, Argentines talk more and more about a coup--not if there will be one, but how soon. The military has an unimpressive record in governing Argentina: After trying to do so from 1966 to 1973, and failing both to solve its pressing economic problems and to stem political terror, the generals turned power back to civilians in virtual despair.

Given the present regime's incompetence, however, even the military probably could do better in restoring some semblance of order to the economy. Whether it could stem the violence is another matter. The guerrillas are clearly committed to a bitter fight, and the military is their sworn enemy. A coup might only clear the field of side issues for a long and dirty civil war.

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