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A Town So Poor In A Land So Blessed


Letter From Argentina

A Town So Poor in a Land So Blessed

For Jose "Pepe" Fernandez, May 13 will be a day to remember for the rest of his life. Along with 300 companeros, he had already spent 10 frigid, unnerving nights on a barricade across Route 34, the main thoroughfare through General Mosconi, the gritty Andean city where Fernandez lives and once--long ago--had a job. Just before dawn that day, as Fernandez slept for the first time in 48 hours, 1,600 National Guardsmen armed with tear gas and rubber bullets laid siege to what we might call the fortress of the unemployed that Fernandez and his friends had built across the road. "It felt like war," the 43-year-old Fernandez recalled afterward. "Everyone started to panic."

As things turned out, the panic was justified. After clearing Route 34, the National Guardsmen--many of them drunk, townspeople say--stormed the city, wrecking the shacks at a Wichi Indian settlement along the way. As for the fleeing protesters, they spent the next four hours torching City Hall and destroying local businesses, including Mosconi's sole bank. Only a procession of brave wives and mothers, with an icon of Our Lady of Fatima at the head of it, brought back some measure of calm. By then, however, 40 townspeople and soldiers were injured, some seriously; the deaths of two teenage protesters, found later in a car wreck, are still unexplained.

Violence is scarcely unheard-of in Latin America, but it has been rare of late in Argentina, which boasts the continent's most stable economy. Among the few exceptions now is Mosconi, a city of 25,000 that sits 40 kilometers south of Argentina's border with Bolivia in Salta province. And Salta has become one of those bitterly unbalanced regions one finds in the developing world--in Angola, say, or in parts of Indonesia. Salta is rich in resources but dirt poor in terms of per capita income. And Mosconi is where the difference between the two is most painfully evident.BIG DOUGH. It wasn't always this way. Not so long ago, Mosconi lived well on Salta province's oil and gas reserves. It's a company town, named for the military man who founded YPF as the state oil company in 1922. And until YPF was privatized nine years ago, Mosconi ranked among the most prosperous communities in Salta. Technicians such as Fernandez were earning up to $2,500 a month--big dough in rural Argentina. YPF spent up to $6 million a month to subsidize construction of spacious homes for its employees and civic buildings such as the hospital where Pepe Fernandez was born. In the idyllic, planned barrio of Vespucio, even the cinema, now shuttered and dilapidated, was a gift from YPF. "YPF was the first thing every baby uttered," says Estela Garcia, the daughter, wife, and mother of YPF workers.

Things changed when globalization came to town. YPF was privatized as part of the national government's effort to unfetter the economy. When Mosconi's refining operation was shifted elsewhere a year later, all of its 5,000 workers were laid off. But, oddly enough, the bonanza mentality didn't disappear overnight. Pedro Toledo still listens to the stereo set he bought with the $40,000 severance package YPF offered him. "Who worried about saving?" he exclaims. "The money was overflowing." It wasn't long, though, before the pain, which still lingers, began. At this point, 61% of Mosconi's workforce are without jobs.

It makes for weird contrasts. The Mosconi area still accounts for almost a fifth of Argentina's abundant gas production, a healthy proportion of the oil it pumps--and half of Salta's gross domestic product. But the backlog of unpaid utility bills means that most of Mosconi's residents must cook on portable camping stoves. Amid a wealth of mineral resources, there's brisk illegal traffic in the exotic animals--toucans, monkeys--found in the surrounding jungle. Alcoholism and crime are also on the rise. "People here used to laugh at all the problems found in bigger cities," says a local police official. "But now we have them here, too."

Count welfare and its attendant conflicts among those problems. After the refinery was closed, welfare checks became Mosconi's lifeblood, such as it was. Until May, the cash-strapped provincial government wrote 3,000 checks a month, each for $200. Fernandez, who lost his job after 17 years at YPF, lived on his; so did his companeros out on Route 34.

Then the cash-strapped government in the city of Salta, the provincial capital, abruptly cut the welfare roll to 500. And that's what set the stage for the protests and violence. At this point, the federal government in Buenos Aires is picking up Mosconi's welfare bill. But that arrangement is stopgap--and may not last. President Fernando De la Rua, elected last November, has fiscal problems of his own, including an inherited budget deficit of $7.1 billion that he has vowed to cut.SHARP CONTRASTS. The plight of Mosconi's residents contrasts sharply with the corporate compounds that have sprouted up like oases along Route 34 since YPF's de facto monopoly over Argentina's energy market was dismantled. These operations, many of them with big foreign partners such as BP Amoco, Royal Dutch/Shell, and Malaysia's Petronas, have invested heavily. Indeed, energy originating here is now exported to three neighboring countries--Bolivia, Brazil, and Chile--via costly pipelines and electrical grids built over the past few years.

But the investment hasn't translated into jobs--or not enough of them to put Fernandez and many others like him back to work. To understand why, you have to understand a little about YPF. As a state operation, it was distinguished as the world's only oil company to report losses year in, year out; in effect, Mosconi got fat on YPF's notorious inefficiency. And the new investors here operate in a far more competitive arena. Nobody refines in Mosconi anymore. And instead of training the city's unemployed to drill or build infrastructure, the multinationals fly experienced workers in for monthlong stints.

"Why are we so poor when our land is so blessed?" asks Alejandro Gonzalez, a 30-year-old former YPF man who survives on remittances a brother sends from Buenos Aires. It's a good question, and part of the answer, surely, can be found in Salta city. The provincial government's deficit has grown from $111 million to $700 million in the past four years--this even as the provincial economy grew, too, and foreign investment expanded.

Pressed by lenders and the federal government, Salta finally passed a more austere budget this year. But instead of targeting inefficiencies in the province's bloated, corrupt bureaucracy, the cuts fall most heavily on social programs. So, while the provincial legislature spends a daily average of $1,422 on each of its 83 members, 56% of the province's 1 million inhabitants live below the poverty level. During the 10 days Mosconi simmered, Governor Juan Carlos Romero was lodged at a ritzy hotel in Tel Aviv, on an official visit he refused to postpone.

The sky is overcast when Pepe Fernandez, chewing a wad of coca leaves, a common hedge against hunger here, takes me out on Route 34. The charred remains of the barricade--oil barrels, tires, utility poles--still litter the fringes of this stretch of it. Just 3 meters off the road, a couple of dozen highly explosive oil and gas storage tanks sit ominously undefended. "We could have blown up everything," he says with surprise as he surveys the scene.

It's a sobering thought--and not just for Mosconi and its desperate population. This city's problems may be severe, but they are only an extreme case of social difficulties evident elsewhere. Argentina's jobless rate, static at 5% during its much-hailed economic transformation in the 1990s, has almost tripled in the course of a recession now 22 months old. Will violence return to Mosconi? It's anybody's guess, given that the city's problems remain unresolved. And if Argentina's recession deepens, as many economists anticipate, the rest of the nation might be no safer than those storage tanks standing along Route 34.By Joshua Goodman; Goodman Reports for Business Week from Buenos Aires.; Edited by Patrick SmithReturn to top


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