On the Verge of Anarchy

The government treasury is scraping bottom. In Buenos Aires, queues of shoppers express shock and anger at what seem to be almost daily rises in the price of necessities. There seems no end to the wave of political murders by left-and right-wing guerrillas that have claimed nearly 600 lives during the past year. In short, Argentina today is a nation on the verge of anarchy. For a month, wildcat strikes paralyzed the country--a response to vain attempts by President Isabel Peron to force financial austerity upon a wilful urban work force. In fact, Mrs. Peron and a small clique of advisers known as "the Family" have been unable or unwilling to do anything but make things worse.

Last week the erosion of Mrs. Peron's power accelerated. After a 38-hour general strike and the resignation of her entire Cabinet, she was forced to accept some disastrous inflationary wage increases that will push Argentina's wobbling economy still closer to bankruptcy. The question of whether she could continue to rule seemed to come down to one issue: Would she heed the demands of the military, labor and old-line Peronist politicians and rid herself of her powerful and despised adviser, Jose Lopez Rega. At week's end she accepted his resignation from his twin posts as Minister of Social Welfare and as her personal secretary. There were rumors that Lopez Rega might have to face criminal charges dealing with his suspected connection with a right-wing terrorist group.

It was not yet clear whether the resignation of Lopez Rega's public positions meant his total eclipse or whether he would continue to exert his influence over the President unofficially. A former police corporal and an astrological mystic, he became private secretary first to Juan Peron, then after el Lider 's death to Isabel. As Minister of Social Welfare, for the past two months he had tried to replace Peronism with "Lopez Rega-ism," the name his critics gave to a program of staunch fiscal conservatism aimed at reviving a national economy devastated by decades of price controls and massive inflation-fueling pay hikes wangled by the Peronist-run labor unions. The artificially low prices, especially in the agricultural sector, have triggered drastic cutbacks in production and in surpluses for export sales. In June, Lopez Rega's hand-picked economy minister, Celestino Rodrigo, devalued the peso by 50% and decontrolled prices. Inflation soared to a rate of more than 100% annually.

Worst Insult. The initial government plan was to hold wage increases down to roughly 38% while the economy got back into line. But Mrs. Peron herself blundered badly. First she allowed a round of wage bargaining in June to go ahead as if there were no emergency. Workers in the 3 million-member General Confederation of Labor thereupon won increases of as much as 145%. When the government tried to roll these back to an immediate 50% ceiling, with later increases to total 30%, more chaos set in.

Labor Minister Ricardo Otero, 53, a loyal union man, resigned in protest.

Wildcat strikes crippled major industrial centers and 50,000 workers demonstrated in Buenos Aires' Plaza de Mayo. Ostensibly they were in support of Mrs. Perdn, but actually they were out to get Lopez Rega; placards denounced him as "son of a whore"--the Spanish language's worst insult--and "sorcerer."

The workers offered Mrs. Perdn an out: dump Lopez Rega and come to terms. Increasingly overwrought and emotional, she initially refused and bound herself to his austerity policy. That alienated orthodox members of the ruling coalition, Perdn's Justicialist Liberation Front, and brought the armed forces, which have-seized power from elected governments three times in the past 20 years, closer to center stage. Admiral Emilio Massera, head of the navy, told Mrs. Perdn hi Lopez Rega's presence that her adviser had to go. Finally, leaders of the C.G.T. ordered the general strike that brought the country to a virtual standstill for two days.

At that, the rest of Mrs. Perdn's eight-man Cabinet--including Lopez Rega--offered its resignation. Ultimately she gave in on the wage issue. The government would respect wage agreements that had already been signed, while unions that had not reached a settlement would have until next week to do so. Three days later she accepted Lopez Rega's resignation.

Power Vacuum. The crisis clearly has not ended, either for Argentina or for its beleaguered President. In Cordoba, left-wing guerrillas, who had remained aloof during the earlier maneuvering, launched a bomb and grenade attack. Police with armored-car support were called out, and a firefight lasted for two hours. In Buenos Aires, the Argentine legislature raced to fill a power vacuum--just in case the military decided to cut proceedings short. They voted to fill the vacant post of Senate president pro tern--at the moment, the next in line for the presidency--with Orthodox Peronist Italo Luder. That cut off Raul Lastiri, Lopez Rega's son-in-law and president of the Chamber of Deputies, who had hoped to retain the No. 2 ranking. The message to Isabel was clear: there can be Peronism without a Perdn, but not vice versa.

In the long run, the bizarre power struggle has done nothing to solve Argentina's fundamental problems. The enormous new wage settlements that Mrs. Perdn has agreed to are well beyond the ability of the government--or of many private firms--to pay. The country is close to broke. Its operating deficit is now estimated at $5 billion. Foreign-exchange reserves stand at only $750 million, while Argentina must pay $2 billion hi debt service charges this year alone. As a result of Mrs. Perdn's capitulation, domestic inflation began sprinting toward 200% annually. The choices facing Argentina now appear likely to be grimmer than before.

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