The Other Argentina: The Interior And National Development

The Other Argentina

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TT The Interior and National Development

Wstview Press A Member af Perseus X3002xs, L.L.C.

PaMisbd in 1996 in W U~jkedStag@ of A m d ~ aby Wmtview k g s , X=., SSF10 an@&Avenue, Baral&r, Co3iarads 80301-2877, md h the Unit& iE;i~g&orn by 'Wesrview Psgs, X2 Hid"$ a p ~ f : Rod, Cumw Min, Oxford 0x2 9B

p. cm, Indu&s bibliopapMd ne?.fefc;:nm md gadex+ XSBN 0-&133-C)S4brJ 1, Argenkina-&oaodc ~onafi~oas-Re@;janatl disp~ties 1. Ti$i@*

HC175,5335 2B6 330,%824c20 &e q\ti=me&@af the Amdew Nzarti~dSmdwd for: 3% pawr aged in this pulblim~en Pemanenw sf Papr far Wale$ L i b q Maehds B9.48-2 9M.

Contents List of Maps and Tables Preface

Part: One The Faeatkn; f nlerior 1 The Interior and the Argentine Nation

2 A History of the Great Divide

3 Understanding Argentina's Stagnation

Part Two The &anodes of"the fnkedor 4 The Northwest

Part Three The banamic and Patitial Elackardness of the Intteriar

T The Bacbard fnterior and the &errtine Natian

11 The Fiscal @st of the: Interior's Bzbardness

Part Five Summary and Gandusions 12 The Other Argentina

Gl@ss@y A p p d i r . The m e n r of Poverly in the Inte&r W ~ r Cited h About tlw Book and Author hda

Maps and Tables

Map of Apgentina Tables 8.1 8.2 8.3

Rate of Emigration from San Juan and San Luis, IW%1*1 Total and Provincial Paved Roads, 19W1981 Inhabitants with Aaess to Sewers, 1945-1979

10.1 Deputies Representing Each Province and the Provincial Papulatian, 291k1991

11.1 Redistributional Impaet of Copafiieipation 11.2 Revenue Sharing and National Treasuv antributions, 198&-1W1 I13 Tax Efhrt, 1988 and 1992 m 21.4 Provincial Government Emplopent and Wages, 2 A-1 A2

Indicators of Poverty, 198&1@1 Indicators af Poverty, 198b1991

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Preface This book would not have been possible if The h e t i c a n University had not sent me to Argentina to direct its study abroad program there, Bemeen 1987 and 1993, X directed the program for five semesters. Part of the progan consisted of a sericsof seminars to which I invited distinguished everts on Argentina. I was thus able to meet an astonishing array of the country's top thinkers, from former economy ministers to parish priests, from the wuntryfs mmost outstanding scholars to journalists and la'bor leaders, Another major segment of the program each semester w a several weeks of travel in the interior of the country. Due in large part to this travel program, X have visited altl but one af the twenty-three provt'nces of kgentina. At many of our destinations, I arranged seminars, faGtory tours, interviews with politicians, and visits to universities and think tanks, This wars an extraordinary opportunity to see Axgentina up close. Between two of these semester programs, 1 remained in hgentina on a sabbatical leave from the Department of Economics at my university and was able to get a good start on this book, My thinking a b u t the eeonomic problems of kgentina has been importantly shaped by conversations with hundreds of kgentines, To compile a list of the most infiuential and helpful of the people with whom I spoke would be a rzkrallenge, but such a list would surely inclucle Radf Arlotti, Ezequief Gallo, Ililda Shhato, Jorge Sehvarzer, Alejandro Rofman, Garlos Reborarti, Mberm Porto, Javier Villanueva, large Katz, Esteban Nevares, Carfos Emd6, Rafael Ramos Vertiz, Eduardo a n e s a , Jas&Mrtria Dagnino Pastore, Uki Goiii, Osvaldo Qrtiz, Ernesto Vigitizzo, Raquel E, Mmsamne, and Nidolas Tozer, In addition, Rairl Arlotti was most helphl in obtaining data for me. Arnong other things, Rat3 arjsil;ned the students in his class on agrimlmrat economics to look for data useful to my project, and several of their contributions praved to be invaluable. Adolfi, Castro Afmeyra of the Centro de Estudios e Investigaci6n para la DirigenciaAgopewaria was e~raordinarily useful not only in sharing his thinlu'ng about the topics addressed in this book but also in placing me in contact with numerous business leaders associated with the economy of the interior. They gave generously of their time in e~ensivepemnal. interviews and in preparing written respanses to long lists of detailed questions that I had sent to them. I would like to thank

especidly lost5 Esteban Onofri of the Uni6n Carnercial e Industrial de Mendoza and Juan Carlos Pina of the Centro de bdegueros de Mendoza. InportaM information w a also suppf ied generously by AIejandro Du hart and Carlos Epper of the AsociaciBn kgctntina de Criadores de Merino, Guillerma Bard, president of Humberto Ganale (a h o d promsing wmpav),h&Manuel Carda GonzBIez and Ernesto R. Geno of the Fundad6n del Tucuntsn, and Molfo Nav;qjas h t a a , a prominent business in Northeastern Argentina. The Foreign Agricultural Service of the U.S. Department of Agriculare also supplied difficult-to-locate published material and unpublished data. I have aver the years dizused at great length mod of the ideas in this book with Eileen Stillwagon, who has ako read and carnmented upon the entire manuscript; her reaaians, advice, and encouragement in this projed were absolutely wntral to its suGess. Alda Vacs of Skidmore College alsa read the manu~rigtand ot'fered invaluable commentary, Alejandra Garbacho, AIejandro Rofman, and Carlss Reboratti read the manuwript and made many useful comments, Marian Schwartz edited the manuscript. Garlos Reboratti invited me to use not only his personal libraty but also the ]$ray at the fnstimto de Geografia of the Universidad de menos Nres, an extraardinarib rich source of information about the regional emnomies of Argentina. Also very usehl was the library at the Xnstituto Tormato Di TelIa, where X was invesfigador vififanfe. The litzrary at the Consdo Federal de Enversiones supglied much useful information, Epeciallly helpful in finding arcane sources was ifs librarian Mafia 8.Armlia. Graeiela hnurro at the Biblioteea del angreso also provided enthusiastic assistanm, The library of the Csmisibn Econrimica para hkxiea btina y el Caribe in Buenos ,clliresand that of the Fundacibn Mediterranea in ecirdoba were also most helphl, hrly stay in Aagentina would have been impossible, or at least very much less produGtive and enjoyable, without the e~raordinaryand seeningly endless help of Nariana and Fernando Jorge? Narh hiss Etiennot, and Cynthia Jenkins. Jim and Rosemary Stillwaggon and Elizabeth Sawers did a splendid job of taking care of my affairs in the U.S. while I was abroad, praviding an invaluable support. It is customary at this point for the author to thank his family for putting up with him while he was writing his book. The fact that it is customary shauId not conceal my very real gratitude to my hmily, without whom all of this projeet would have been impossible and, in a sense, pointless, tany S a w m

Waslzingf on, D,C.

om

The Forgotten Interior

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The Interior and the Argentine Nation Argentina in the early part of this centufywas one of the most affluent natbns in the world. Its per apita income wm the highest in Latin h e r i a and higher even than in several Western European countries: In the halfcentury before the Great Depredon, hgentina had one of the highest rates of economic growh in the world, received and msimilated millions of European migants, and enjoyed a stable democracy, In the last six decades, the W n t i n e economy has g m n erratically, with long periods of stagnation and recession. Since rhe mid-1970s, kgentinak per capita income has a~trnallyfallen and is now less than that of Chile or Mataysia and scarcely higher than that of mailand or alombia. Before 1930, kgentina. received rnore European immigrants than any cauntry except the United States, but now kgentines are emigrating by the thousands. fince 1929, m civilian president has finished his or her constitutionally mandated term in office; most have been overthrown by the military or replaced thrau@ it fraudulent election. Mlitary dictatorships, each rnore brutal than the one before, have alternated with civilian governments. Under both civilian and military governments, corruption and incampetence seemed to grow without end. By the end of the 19m, self-doubt and pessimism had cnplfed the nation, Economic decay has been mast acute in Argentina's interior-the part of the country that lies beyond the fertile and well-watered gaslands known af the pampas, The current president has begun a thoroughgoing liberafization of the economy that has produced four years sf price stability and perhaps the new era promised so often in the past, Nevertheless, these policies have exacerbated the ewnomic pligfit of the interior. The eollapse of the economies of the interior now threatens the fiscal and political stability of the national government, kgentinak spectacular failure has attra~redthe attention of hundreds of whofars, both within the country and withoa. Some have remained bafared try Argentina's hilure. Sirnon Kuznets used to say that tbere were

4

n e Inu&r and the A q e ~ r i n eNation

only WO muntries whose development path economic theory cauld not eqlain, Japan and kgentina CVCfaisrnan 1987, 4). The problem for most scholars?however, is an overabundance of explanationsfrom which to choose rather than a lack of then. The most cammon eqlanation bfarnes policies pursued by Juan Bomingo Perrjn, president between 19$6 and 1955 and again in 1973 and 1974. Q t h m have arped that the root of the problem is the policy of import substimtion industrialization pursued by every government from the 1WQs until the present administration, Stiff others bfame the w u n t ~ ' sewnomic woes on the paliticaf stalemate that has jammed the decision-making process. Other eulprits indicted in the Xiteramre are the labor mavement, which is said to have had too much power, the disastrous drop in export demand after 1929,the country's eolonial heritage, its woefully misguided and costly foreign policy, its s u p p e d & precapitalist agiculture, its dependence on the Rrst World, and its antidevelopment culmre, There is at least a gain of truth in each of these explanations, but no singe evlanation will senre. As Jorge Schvarzer put it, &gentinat$ "failure on such a gand sale preciudes any single undisputed explanations (lW, 180; see also Ranis 1986, 150). The purpose of this book is not primarily to dlspute any of these common eqlanations, but it is to add to the list of explanat-ions. This book is the first systematic attempt to relate the intefi"arfsbackwardnerjs to the national economy" failure, h suhequent chapters will make dear, to ignore the interior risk disregarding an important--and perhaps cruciaLpart of the story, Without a clear wnception of the place of the b a c k a d interior in the national economy and polity, the search Eor a solution to Arvntina's problems is necessarily handicapped. The Invisibfe Inkrior- af mentina

The interior af Argentina mntains 70 percent of the nation's land and 31.5 percent of its population. It wuld have a much larger share of the population-perhaps more than half-except that millions of people from the interior were evelled by poverty and unemployment from their native provinces and moved to the pampas in search of a better life? The interior was almost entire& bypassed during the pampasf haif-century of glory that ended in 1930, Parts of the interior were worse off at the end of the born than at the beginning. During the sq-five years since: 1930, the interior has remained mired in poverty.) The stagnant interior has thus not been a part of the solution to kgentina's problem but instead has been part of the problem. Despite the demographic and economic importance to the hgentine economy of the interior, it remains neglected and ignored, invisible to most social scientists and politicians alike. It is excluded from the popular images of the country, both within and outside Argentina.' Information about the

ATLANTIC

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Provtnc~rb a M @ r y Metlanal ~ositDl

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interior is available, as the lengthy bibliography of this book. attests, The student of the interior, however, must be willing to look on dusty shelves in obmre libraries to find very mu&, Most analpes of &gentinaes praMems do not mention the interior at all. The few authors who do refer to the interior dismiss its importance, often using the cliche, "pocketsof poverty."' This gives the false impression that paverty in the interior is isolated and wide& scattered rather than systemic and ubiquitous. Withaut a proper understanding of the scope and sources of the interior's poverq, and the effect of the interior's poverty on the entire nation, policy makers will find economic progress eluske. me IMerbr aver the Years

The notion that the bacbard interior hot& back the rest of the nation. has deep roots in Argentine thinking although until very recently it W= fashionable to hold the opposite view. Toward the middle of the last eentury, Domingo Sarmiento (who later became president) and Juan Atberdi were leaders of a group of intellecntals and pafixicians who farmulated a strategy for the economic and social development of Argentina! In their eyes, the interior was backward and barbaric because it was the product of sixteenth-century Spain, indigenous peoples, and black slaves (Sarmiento 1868, 11,24; Aberdi 19M 118521,81-88). The people of the interior were lazy and bad no aptimde: fnr science, technolaa, or industry. The pampas, on the contrary, were civilized and progressive because they were peopled by Europeans, mast of whom arrived in the nineteenth century. Sarmiento believed that education muld change the mentality of the interior, Alberdi disagreed; he -red more imigration from Europe and an elite demoo r a q that excluded the poor. Until 1888, a great frdricidal struggle divided the interior from the pampas, For a time it seemed that the interior might even assert its hegemony over the pampas. Nevertheless, mueh of the interior was still without human settlement or populated by unassimilated indigenous peoples. There were a few pockets of development, but the emnomy and society in much of the interior had hardly changed in centuries. By the end of the nineteenth century, on the other hand, the speetaalar ascent of the pampawas well under way, The overwhelming preponderance of the pampean economy allowed the region to politically dominate the interior, was no longer The challenge facing Argentina at the mrn of the ~enmry to subdue the interior but instead to awlhlrate the flood of immipants that had dseended upon the counrry. Sarmiento and Alberdi's hrtpes for i m i gration from Europe had been fulfilled. The nevvcomers, however, wem wide@ perceived as culturally inferior, materialistie, and slow-witted, Nostalgia far the old days gave birth to a new national mythology of the gaucfio, the Argentine mwboy. Sarmiento and Alberdi had painted the rural

117ze I a f e ~ and r &e Aqentine Naaiiun

7

mestim as a barbarian, Now he was idealized as the epitome of nobifiv, generosity, loyalty, bravery, skill, honesty, and gallantry? Rural Argentina, as the national repository of traditional values, was rehabilitated, The gaucho mph and the glorification of traditional values represented rural kgentina, not just the interior, but the interior shared in the good press, If the interior" iimagt: ROW had a rosy glow, it did not mean that average Axgentines, the large najon'q of wham ROW lived on the pampas, thought mu& about it. The action was on the pmpm, and the rest of Argentina faded from the national eansciousness, The 1920s and 1930swere marked by political stmggIes that once again thrust the provincial question inta the public's conseiousnes, Xn the 1 9 2 0 ~ ~ the national government wm in the hands of a politial party whose political b s e was on the pampas. The president attempted to win allies among the disaffected members of the interior's elites and, failing that, to impose federal control over provincial governments. The uproar that these aggressive tactics provoked led to the country's first successful coup d'etat. The general who headed the wup was from SaEta, and wnsewatives from the interior continued to dominate the national pvernrnent until the early 194Os. As opposition parties stmggJed for control over provincial governments, the ranmrous antagonism beween the interior and the pampas cantinued to divide the nation, The economic decline of the 1930s made painful the muntry's dependence an Europe, which until then had brought such prosperity. Especially galling was the Roea-Runciman Treaty, a biiateral trade agreement betuleen Argentina and Great Britain that most Argentines viewed as humiliating. The villain in the popular perception of this affair was the pampean oligarchy, whose markets for beef and grain the treaty protected. It was felt that they had wilfingfy srrbmitted to British dictates to protect their awn intexests but, in the process, had betrayed the rest of the country. Xntellechlals from the left wing, such as Radl Scalabrini Ortiz, and from the right wing, such a bopoldo Lugones and the Irazusta brothers, blamed Argcntina's woes on foreign domination in a way that often poured salt an the old wounds that divided the pampas from the interior, The provincial question was thrust even more vigorously into public awareness in the 1940s. Percin's strident nationalism was a major part of his appeal to voters, He portrayed kgentina as the innocent victim of the rapacious developed countries. The enemy was the pampean oligarchy, which had betrayed the country to British imperialism. It was an easy step to picture the interior as the victim of the rapacious pampas. Per6n never missed a chanee to show his conern for the provinces. Indeed, he first became a wetl-known public fipre through his efforts to organize relief for earthquake victims in San Juan. He toured the interior often and dxamatically increased the national government's resources spent in the interior. Support. from the interior was crucial to PerBnk selection in 1 9 4 , and as the

8

The Infericlr and fhe Aeenrine Nation

years went by it played an increasingly important role in the Peronist movement. , the notions of efiernal and internal dependency had became almast universal among i~elleemafsin Latin Merica and had found considerable sympathy in hgentina. The belief that the principal obtacle t s the interior" prosperity was the garnp r the national gwernment that was a captive of pampean interesthwas now firmly estab- Iished and continued to dominate political discourse through the 1970s and 1980s.8 The military government between 1W6 and 1983 fostered a number of ecanomic dwebpment projects in the interior in order to protect the border re@snsfrom land-hunw neighbrs, The Radical government that followed repeatedly used notions of internal and external dependency to justify its policies. It increased subsidies to private businesses and governments in the interior and began to implement a xherne to move the capitaf of the muintfy to Patagonia. The liberal idea that are sweeping Latin h e r i c a today and guiding the present government of hgentina have traditionally been antithetical to notions of dependency. The idea that the interior has been ewloited by the pampas has been inereasin& challenged bath in the popular press and in dolarly monographs. Nevertheless, my arsment that the underdevelapment of the interior is a m;tjor obstacle to niltional ecanomic progress, and that it is the interior that is draining the pampas of resources rather than the ather way around, is still at odds with the preponderance of scholarly and popular opinion in &gentina.

n~ePrairies and $be Pampw; the SoIrlIt and the I d e ~ h r kgentina in 1930 seemed to have much in common with Canada, Australia, New Zealand, and even the United States. They all had large amounts of fertile land and thus a land-surplus rather than a labr-surplus economy. m e y all prospered by selling grain, meat, andlar wool to Europe, They enjoyed a temperate dimate, were mostly populated by recent Eurapean migrants, and had a mostly European cultural tradition. Nevertheless, the other "new countries' cantinued to g m after the Great Depression, while kgentina stagnated, hgentina's failure to keep up almost automatically frames the puzle of Argentina's stagnation in a mmparative: perspective, The nation that kgentinak eqerience ttore important similarities to those of the other "new countriesn first appeared in the early years of this century, In the last thirq years, as hgentina's arrested developmentbecame ever more mnspicuous, an avalanche af scholarly works on this theme has appeared? A stock phrase in rhis literamre is "the prairies and the pampas." The vast gassy plains of North America were settled at the same time as the pampas. The climate, the crops, the technolog, and even the markets were

Interior and lihe ArgenfineNafhn

92

largely the same, What is striking a b u t the "new country" literature is not the stress on the obvious similarities bemeen the prairies and the pampas but rather the lack of almost any mention of the equally obvious similarities B e ~ e e nthe baehard interior of kgentina, especially the Northwest, and the South in the United States. Bath the U,S, South and the Argenline Northwest are regions that initial& played a preponderant role in their nation" development but later Eell upon hard times, For both, economic starnation followerf nifitary defeat at the hands of the more mdern part of the country. Bath, at the time of their defeat, used modes of labar procurement that relied on wereion and vialence and cantinued to use premodern modes af labor organization well into the twentieth century. In the interior of mentina and in the Deep South, a large share of the labring population was nonvvhite, whereas the ecsnomic elite was of European dewnt. In bath regions, a smdl minoriv owned the bulk of the good agricultural land and the majority of the agricultural population W= landless* In both regions, agriculmre wm the economic base and a single crop dominated the eeonorny. The bachard and stagnant economy of both the South and the interior produeed a backward political culture centered on the patron-client relationship and the d u s i o n of a large share of the population from the democratic prows. Both redons played a role in the national political arena that was out uf proportion to their demographic and economic strengfh. Both regions harbored deep anger and reseotmenl, blaming their problems on the econornicaliy dominant regions, The U.S. South broke loose from its bacbardness and poverty, but the Argentine Narthwest has not. In both regl'ons at about the same rime the national government imposed apiculfural reform that began to revolutionize the economy, shaking loose a flood of dispossessed rnigants in the process, Roosevelt's Agricul~uralAdjustment Acts f especiallythe semnd in 1938) and made sharecropping unprofitable. The national minimum wage (also ensl~tedin 1938) drew f a b r out of agrialture, 'X'f"rese laws jolted the Southern economy to its foundaitians, The Statute of Periin (first enacted in 1944 and subequentfy amended several times) looked as if it might have a comparable effect on the Northwest, but it was not vigorously enforced, espeeidly afer k r d n was deposed. At any rate, the South vvas well endowed with agricultural resources and had other options beside cotton, especially +ems. The Northwest, with a far more limited agn'cultural resource base, has been unable to diversify nuch beyond sugar. The South also had an important manufacturing sector on which to build and the capital to finance industrial growth, Manufacturing in the South, although always outclassed by Northern industry, has been substantial since the colonial era, In the early twentieth cenmry, the South had several important industries, especially furniture, te~ites,tobarn processing, and steel. In the second half of the century, many other industries developed,

10

me Inbevior and the A ~ e n f i Nalio~x ~e

To this day, manufacturing in the Argentine Northwest is largely sugar refining; most other industries exist only beause of heavy subsidies. Perhaps mast important af all, the South is part of a cauntry that is far rieher than hgentina, By the mid-twentieth cent-ury, the barriers to the import of capital from the h r t h had been weakened, and a flood af capital aXlawed the region to be&in its spectacular ascent. These contrasts and sidarities between the Sauth and the Northwest illuminate the difficulties facing the kgentine interior and suggest hmorheses that h a guided this researeh. Bringing the interior, and especially the Northwest, into the dimssion of the differencesb e ~ e e hgentina n and the other "new muntries" helps us to understand the daunting sifuation that kgentina faws. Xn the United States, Canada, Australia, and New Zealand, the areas with mea&er agriculfurd rewurces were empty or had a very small indigenous popularion until the fate nineteenth wntufy, Xn the Australian outback, the RocQ Mountain region of the United Stdes or Canada, or the Canadian Arctic, Europeans settled only if there was an economic incenlive to do so. These regions, therefore, still do not have Iarge populatbns and, aside from the few members af the indigenous population that survived, do not have a disproportionate umber of poor people. At least among the European population of these regions, modem ecanomk and political instimtiuns prevail. The hgentine Northwest, in cantrast, is pporly endowed with resaurees, as Ghapter 4 will make cIear. Nevertheless, because of its praximity to the blivian silver mines, this region, was the e~onomieand demographic mre of *at was to become Argentina until the end of the eighteenth eentufy, The eountryk changed insertion into the world emnomy, however, left the Northwest of Mgentina without a role to play. The region has remained on the sidelines of history since the links to the sitver mines of Potasi were broken almost 200 years ago, Nevertheless, nearly a fifth of the country's population still lives in the Northwest. Traditional social and eeonomicstru~turespersist, Most a% the population is very poor. Argentina, therefore, finds itself in a position that is firndamentalv different from that of the other "new countries": It has a large, traditional, chranicatfy poor population in a resource-poor region..

This b o k is about ecanomic development, or rather the lack of it, in the interior of hgentina. EGonornic development is a social and economic transformation; it is cumulative; it takes a lcrng time; it cannot be irssessed by quantitative measures alicme, In short, it is a historicat process. To undexstand where this praeess might go in the fluture, one must understand how it has uunfalded in the past. Efforts to generate esanomic development in the interior of Argentina have sa far achieved meager results. Most of

"1'7redatehp and the Argealine Natkn

21

the few successes achieved in the past rested on unsustainabfe gavernrnent policies, Even if obstacles to developmentwere overcome, the legacy of the impoverished past wuld remain for decades into the hture. Necessarily then, an understanding of Argentina" sacbard re@onsrequires a historiwl foeus* The hgentine sugar industry illustrates the import= of a historical pempective, Sugar cane is the rnost important crop in the Northwest and sugar refining the rnost important manufacturing industry. Sugar, for several deades, hits faced stagnant domwtic demand and dwindling ert.ernaX markets leading to generalized recefsion in the Nurthwest, The liberdization policies of the present government, only inampfete&p a ~ u e dfor the sugar industfy, have produ~edin the last three years a atstrophic drop in sugar production, Our appreciation of the intractable namre of the problems k i n g the sugar industry and the Northwest is deepened by a shJdy of their history. The industry only arose in the first place because of substantial tariff protection and massive government subsidies. mroughaut its history, sugar production has continued to exist only becwse of these benefits, Since the inception of the modern sugar-refining industry in the 1870%most sugar has been grown on large estates. 'The wltivation and processing of sugar have employed either fareed t a b r or migant workers who are among the most poorly paid on the continent, For a centrary, the industry has suffered remrrent crises of overproduction. Sugar has brought riches to a few and poverty to many, thereby reproducing the skew in the inmme distribution that goes back to the sixPeenth centuv* The current malaise of Northwestern sugar is not, therefore, a temporaFy slump that will be easily overcome but instead a reflection of fundamental problems. Given this history, we have little rellson to expect that the indusrxy can transform itself soon. The Plan of This Book A smdy of Argentine history shows that the origin of the great divide that separates the interior from the pampas goes ha& to the sheenrh century, when the first European settlements were founded in what is n w ealfed Argentina, The interior and the pampas have been on very different trajectories for faur and a half centuries. Chapter 2 of this book is a brief overview of kgentine history with a focus on the origin and wntinuathn of the rift between the interbr and pampa. The chapter ends with an evaluation of the Menem government8sefforts to iibctrafize the economy and how these policies afict the interior, Chapter 3 review the debare over the ccluntry's eecanornie stagnation since 1930, Part Two eontains four chapters, each of which scmtinizes a region of the interior ta unmver the soure of its poverty and bacbardness. The foundation of the economies of the interior is agriculmre; other activities

12

The Interior a d the A~enriineN~trion

play a minor role. Beyond a modest arnaunt of naflxral gas and petroleum in Paagonia, Salta, and Mendam, there are no important mineral resaurws in the interior of kgentina." Much of the mining that now exists will not sumhe the current liberalization of the emnomy. mwpt in Mendoza, the anly important manufacturing industries in the interior are directly link4 to the processing of agricultilral products ar exist anly beause of federal government subsidies that are now being ended, Semiees a m u n t for a major share of GDP in the Argentine interior, However, they are produced, with virtualw no exceptions other than a smfl amount of tourism, far the local market, The economk base in the interior is thus ovewbefming@agricultural. There are few prospects for important diversjfication away from this agrimltural base in the next few dewdes. mus, the focus of Part Two of the book is agrictllmre, and other acthities will be mentioned only in pmsing. The bedrock of the interior's poverv if its lack of agialltural resourees. h understanding of the agialtural resource base of the interior will require knowledge of the pfiysical. geography of the land, emphasizing variables such as soil quality, qwantiry and seasonal patterns of rainfall, temperamre, and amount of sunlight. Of uitimate importance, however, is not the physiGaf character of the region's resources but instead their emnomic value. If no one wants to buy what the interior can prduce, then its rewurces have no value, To understand the value of the interior" resources, one must smdy the markets, bath domestic and foreign, in which the products of the interior are sold and the esent to which these groduGts are protected and subsidized by the government. It will be shown that without the subsidies that the national government can no longer afford, much of the interior" agicufmre is not vi;able. The pituciv of resources in the interior of kgentina does not by itself eqlain the region" poverty and bacbardness. Even with nneager physical resources, an efficient so~ioewnornicstmctilre can bring a mesure of prosperity, as demonstrated by Sauth Qrea and Israel. It will be arped in Part mree that the inefficiency of the interior's economy res& on the inequality in the distribution of wealth and income. Before this argument can be made, it will be necesary to document the nature of land tenure and the associated forms of agrimlmral labor in the interior in an effort to understand the character and @sentof inequality there, Part Two will show that the interior af kgentina presents an afmost unrelieved landscape in which a tiny minority controls most of the land and the impoverished majority awns, rents, or otherwise occupies miniamre plots or works for xniserhle wages on the large estates. Part T h e e shotvs how the lack af resources and the inequaliv in their distribution produces obstacles to the eeonomic developmentof the interior. Chapter 8 examines three different aspects of this issue. Tfie first is the unproductivenessof small farms and ranches in the interior. Povery makes

them unproductive, but this keeps those who operate them poor. Second, the potrerty and inequality of the interior have farce$ millions sf those without a job, a harne, or a fumre in the interior to leave. m i s demographic hernorrhage drains human r m u r w s from the interior and makes it more difficult for the interior to devetup, m i d , paverty and inequality in the interior lead t.o local and provincial governments with meager resour-, The inabiliv to build the infrastmcmre necessaq for develapment p s e s Eurther obstacles to ecanomie progress. Chapter 9 continues eqloring the consequencesof the interior's ecanomicbacbardness. It shows that poverty and inequality prodwe a bacbard political mlture rind a carmpt and incompetent poliw that also dimurage ecanamic progem. Part Four shows how the baebardness of the eeonomiesof the interior also imposes costs upon the entire wunty and haw this is a part of the explanation for the p a t & g e n e faikrre. Unproductiveness of agieulture in the interior means that it has required subsidies fram the pampean consumer by means of tariffs or other foms of trade protection and subsidies G.am the pampean twayer by means of a panopfy of government programs, Millions of emigrants have Bed the poverty of the interior and crowd into miserable shanvtowns surrounding the cities af the pampas, "flrese emigrants from the interim have brought with then their political culture, their aaeptance of corruption and authoritarianism, their ignorance of and ineqerienec: with democraq. This has reinforad the antidernoeratic and cormpt nature of national palitia. The rich and pawerhl from the interior have also l& their mark on national polities. ,Politicians frrom the more traditional parts of the interior art: presidents, senators, deputies, cabinet ministexs, Supreme a u r t justices, and military officers. The pemonaliistic, corrupt, and elitist polities of the interior is transmitted to Ithe pampas not just by the impoverished migant but by the local cau8r"IIowho finds himself in Buenos Aires in a powerfut position in the natiand government, The politl~alpower of the inten'or is out af proportion to its demographic and emnomic weil5fit. This eqtains in part the rearrent political stalemate that prevents the national government from pursuing csnsistent policies that migbt achieve a solution to the nation's problems, The politi~alimplieation wf the interior's baekardness far the hgentine nation is the topic of Ghapter 10. The inabiliv of the interior governments to generate the resources necessary to meet the needs of their citizens and the paliticsll power of the interior to demand resources has led the national government to make up the shortfalI. This is the subject of Chapter 11. By the 1980s, these subsidies to the interior became a torrent and were over half of the national gaveromentk budget deficit.. 'This deficit wrts the principal motor of inflation, which, since the early 1970s, has been the hi&est in the world. Thus, the problems of the interior are an important part of the explmation for the present crisis of the Argentine economy.

The final chapter of the book summarizes the argirment and discusses the policy impiications of the boo& findings.

1. Argentina" prfomarxec: a n this measure is ffequentEy exaserated. In 1929, for example, Argentina's per capita h m m e wcts less than half of the average of other &mpra& aparian ies (such as a n a d a mh Au~raEa)and of E w o p a n indust r i a k d muntries ( s Great Briain, Gemany, Bel&ump and Meden). In 1916 and h 1929, it was 38 pereent of the U.S. fikfulie: W, Smith 1989, l&f'7), 2. The Argentine census does not generate the data that wodd allow one t o h o w exa&ly the h t e ~ o r ' contribution s to the ppulation of kgentina, The most oomplete data were m l l d e d in 1970. Xn that year, in additim to the 27.6 p r w n t of the population that were residents of the hteriar, 13.*rant of Argentina" p p u b t i o n were nativm of the hterior who aved in the pmpm provhces. n u s , a total 41.3 p r w n t of the nation's p w i o s wm born in the h t e ~ o r . amparable data were not gathered in subwquent wnsuss. We do b o w , however, how many migrated t o the p m p a s from the i n t e ~ o af-ter r 1970. During the 1970%720,000 nxigran& left the hterisr l'or the pampas, joining the 2.98 million who were already there in 19'70. A s u m h g that none af these 3.7 rnilliion people had died or enrtigated by 1980,42,4 p r a n t of the Argentine population. wauld have been native to the interior, By 1991, another 326,Q00 p m n s had mig-grated t o the pampas, Natives from the interior were ming that none of the migrants from the then 43.6 p r c e n t of Argentines, again htedar had died or emigrated ( d e ~ v e dfrom INDEG 1984, 177; S I M 1975, 4243; and Indicadom eco&mic~-socialm,No. 10 [aptember 19825: 150). Of m u m , some of these migrants would have died (although migrants tend to be young and thus have a law m o r t a l i ~rate). Rough calectlatiom b w d on crude death rates indicate that easily more than 40 perant of Argentina's pre=nt ppulation was barn in the interior, nd or subsequent generation nrigrants from All of these calculations ignore the inteFior. Nipants tend %a be h their ehildbeadng years, For over a mntury, a substantial stream of migants from the inter;ior has contributed to the pampean population, m e data do not exist that would allow us to hm the p r e d s number, but a plausible g u e a would put the number of natives af the interior plus their children at dose to half the country's population; adding the third generation would ben8 the total t o over half. 3, m m p t for a handfitX af provhws in the i a t e ~ o rthat have reeeived enomaus subsidies from tfie national government, the interior still finds irwtf with a per capita ham that is half to WO-thirds that af the largest and most prosperous province, Buenos Aires (derived from CFI 1990,14, of the publimtion for each provinm), This m m p a ~ w nis misleading, however, sinm nearv a third of the ppulation of Buenos Aires Prwiam is a first or semnd generation migrant from the impve+hed hterior whom standard of living is not m w h higher than that of the f o b back home, Many migaats &am the interior also sett&$ in the other parnpean provinces of axdoba and Santa Fe, which shared the prospriq of Buenos Aires. Without this migration, the average h a m e a n the pampas would have been much higher and that of the interior lower,

me Interior and ihe Atgentine N a t k ~

. Sl

4. Xt is rare to meet anyone in Buenos Aires, for exampb, who t d e s any interest in the hter;ior (exwpt for immigran@ devoted to their native provinm), has much eane& or usfit1 infornation about the interior, or has traveled in. the kterior rewrts i on the far rside of the mantry). Mwting wople who closaly (exapt to & faUaw p % t i ain the United SQtes or who m&e =nu& trips to Miami, howwer, is eaq. S. For example, see Waisman 1987,76; Fienup et al. 1072,338; Nun 1968,8St;and J, Shbato 1988,170. Manzanaf (2988,331) tsok her ~ E e a p e to s task for ignoring the intehor of Arge-ntina and being b h d to the esensive pwerty found throughout the bterior, Nwertheles, the p h r a s * p k e t s of pvel-1;~" "has b m m e W widespread that even she w d it, unwittingly reiinfsr&ng the notion that she wm trying to disparage. Zn fact, there were a few p k e t s of pmspe* in the i n t e ~ o runtil the last m w n or ~ n years, q but even thew have faHea u p n hard t h e % T%e Appendk p r w n & statistic& e4denee of the e m n t of the htedorfs pverty, n of Samiento m d Alberdi, see Waisman 11)87,37-39; Botana 1977, chap. 1-3; J. Romero 1%3, chap. S; and Hafpedn m n g h i 15)80, prcjloga. For a contemprav restatement of Alberdi's radsm, see Rcibinstein 1968. It is interesting t o note that both Sarmienta and Alberdi w r e from the i n k ~ o (San r Juan and Tucumhn, reswively), even though they despised the re8onb bacbardness and e q o u s d liberal emnomic polides that many in the interior believed were d e t h e n tal to the provindat economies, 7. T o &eate and maintain this myth, generations of i n t e l l a a l s and educaton dwoted their eEofis (see especialb Rock 1993, chap, 2-31. Radicals such as Ricardo Rajas and Joaqui'n GomdIez) and a n e r n a t i v e s (such as b o p X d s Lugoneq Garlos Ibarmren, and Manuet. Gilvez) were prodnent wntributors to this current of thought h the ea& yeam. h t e r , Juan a r u l l a and Bequiel Madinez b t r a d a c a k e d on the tradition. An entire genre of literature appared, ramantiking the al gatxchem work wais Jo& Hernhndez's Madin Fiemo, but many other pwms, ewys, and novels followed, Qf sp&al. note was Ricardo GGiraldes" h a S e g d o Sambra, an enchanting idear~ationof gaucho fife. Of far more iimpsrl; was the molding of the educational isystem by the Ministerio de Instmcci6n Pfiblica and the Q n ~ j o Nadonal de mucadclin under the leademhip of individuars such as 3 0 ~ 6hRada Ramss, fiisardo Rojas, and a r l o s Ibarpren, n e i r g o d was to instill in the nation's youth the appropriate veneration af natbnal heroes, all of them predathg the remnt wave of immigration and many of them from the i n t e ~ o provr db 1%8b, Sff; D o k a r ~1975, 175-176). inces (Waisman 1987 442; ional system was deliberately partimlar a r p e s that the e the intenm nttt-ionalism that charadehes many =&on of Argenti Many of the Ieaderrr in this movement were from the most traditional parts of the inkrior, Safta and Santiago del fitera ( a r l o s Xbarpren and Rieardo Rajas). Others were from Entre Rbs, the most isolated and backurard part of the pampils (Juan CamlEa and the f r m s t a brothem), or from the peripheral pannpan pr0vineet.s of Santa Fe and ardoba, (Manuel Ghlvez and bopoldo bgones). 8. See, for example, b a r t e 1957; Dargoliz 1983,1980; a m a d i 1985,92;van der H q d e 1972, 16; Mamanal 1990, esp. 123-129, 144; Brim 1953; A p l l a 1984, esp. 2Off, and 1967; Rsfmnan 1981,39; and the early publications of the F u n d a ~ b nMeditenbnea headed by the wrrent emnomy minister, Doming0 Gvallo (far example,

Id

7h.e Inte&r and the Argentina Nation

Qvalla md Zapatai lflf36)" ''his notion of the dominancx: of Buenos A i ~ has s echoes in m u l a r humor, 'God k evewhere but his offims are ixr Buenas Aires,'" is an old aying ppular in the provinms (Buems Airm Her@&, Aupst 29, 1992, p. 9). 9, *, for example, F o g a q et al. 1979; Smithies 1%5; ;Scrlberg 1W7, 1%5; Platt and Di TeUta 1985; Dim Alejandro 1984; h n a n md F o g a q 1984; ng and Bradbury 1'983; Waisman 1987, chap. 3; and Di Tella and Zymelma 10, For the mwtxy m a whole, 0.3 p r m n t of CDP & s s in ~ning,which employs only 16,000 .workers ( U w , Mmemkr 26, 1983, p. 124). h the mid-l98Os, Salts aid Jujuy amuated for h w t 60 p r w n t of the nation's metauic mberal x? 198Sb, 28). Hmever, less than B p r w n t of these prminmsWCDP h g adivities In ather prmhws of the iatex=lar,the proprtioa of m m g m metalXic ntinerd mining was far les. Not only does metallic minerd mi&g play a small role in the emnomy of Argentha, its i m p r t a n e has fallen sh,arply iar r a n t ye= (by one-third in Juju;y and o n e + ~ bin Sala Bemwn 1970 and 1985) (CFI 1990, 14; see alsa Zamarana 1988b, 57M74). Mast of the metallic mheral ~ n i n has g been, until rmntly, d and heaviIy subsidhd by the government (Amna 1991a, 123). Nometallic minerall mining has also stap;ited. X3eWwn 1970 and 1985, output in the Nortbwea as a whob fell by near& one-bag (m11990, Regi6n NOA, 35). Ail of the natbn's coal comes from Pabgonia, rnostly &om Saflta C m . &a1 praductbn has sagnated sin- the 197@ (Gpkanelli 1988,71k711). The p ~ v a t h t i a nof ptroleum e ~ r a d i o nand refinkg iLa 18'33 wuld lead to a substantial evansion of the* activities. In the past, ptroleum has generated an& 1 of the intedor. Given kgentinak histoxiat a mad@ sthulus to the 1 ~mnomies ewfiencx: (which is similar to other oil-produelng re@ons around the worfd), it does not m m l&ely that petroleum will rejuvenate the interior of the wuntfy.

A History of the Great Divide The b r l y Years The &am that separates the interior from the pampas goes back to the arrival of Europeans in the Southern Cone of South America. The very first settlement there was in Buenos &res in 1536, but, the colony was abandoned five years later. In 1580, Buenos Aires was reestablished, but the city and the pampas that surrounded it remained on the sidelinesof Spanish America until the late eighteenth century. Mast of the popfation and economic activity in what is now Argentina during the siaeenth, seventeenth, and the first half of the eighteenth centuries was in the interior.

The pampas are now the economic heartland of Argentina, but in colonial times the pampas were largely devoid of European settlement, Cken the technolag of the epoch, the pampas were a desert, a vast, usetem sea of grass, a barrier hundreds af miles wide that separated the interior from the AClantic, Despite the Eertile soil, plentiful rains, and mild winters, anly widely scattered Indian tribes lived on the pampas for the first several hundred years of European settlement in the Southern Gone, Where there is nothing but grass, there is nothing with which to build a fence. Withsut a fence,only nomadic pastoral activities are possible. Not was crap cultivation or any but until barbed wire appeared in the late I the most rudimentary cattle raising possibleel The pampas are flat. With hittfe dlifirentiation of the surfaw, there are very few rivers and streams. Without surface waters, deep wells and the pumps to bring up waser from the depths of the earth are needed for both humans and their animals to sumhe. T'he development of the pampas thus awaited ineqensive tube wells and windmills.

f8

A fl&my of the Great Lfivge

a s t l y land and sea transport posed another obstacle to the development of the pampas. The tack of surface waters meant the absence of cheap water transport. The high cost of oxcarts and mule trains virtual&prohhited the shipment of products, such as grain, with a low value in relation to its weight. Cattle fould be walked to the port, but the port was 5,000 miles from Europe and almost that far from the Garibbem, too far for live cattle to be shipped ecx3noxnical)at-. The wool, beef, and gain, w k h in the late nineteenth century would bring groperig to the pampas, cauld not bc: emnomically shipped to Europe until improvements in the technolsg of sea travel made the trip afficientfY inexpensive. Steebhulled steamships, with or without refrigeration, did not appear until the 188b. Moreover, until the mid-nineteenth century, most of Europe imposed prohibitive tariffs on pampean goods. Without the railroad, the steamship, and Europe's readiness to import Argentine goods, the pampas had na role to play in the global ecanon?y. Fencing, water, transport, and tariEfs were not the only problems. The pampas were largely uninhabited and the few Xndians who did surrive in the wasteland of grass were numadic. The Spanish colonial -em was based on the extraetion lcrf tr&ute from indigenous peoples, principally by means of forced l a b r semi=. If the native population was not sufficienttydocile, they wulb not be made ta w r k for the Spanish conquerors, Invariably, nomadic hunters and gatherers make earemely poor agiwlmral laborers, and those of the pampas were no exception. Hostile and without agricultural skills, they were useless to the Spaniards. Thus, the Spaniards looked elsewhere for settled, agarian peoples to incorporate into their wlaniaf system. Horses escaped from the first settlement in Buenos Aires in the 1530s and ran wild an the pampas. The Indians soon learned to ride them, and thus the Spaniards did not have the military advantage that their monopoly of horses gave them elsewhere in the h e t r i w . Even if firearms could have been kept Eram the Indians, a rider with a single-shot rifle, even if it was breecfi lading, did not have a deeisive superiority over a mounted Indian armed with bow and arrow; the rifle could shoot farther and rnore aaurately, but the bow and atrow eould shoot rnore rapidly. It was not until a reliable repeating carbine appeared in the ear@18Zb that the kgentine army had rz weapon capable of dedleitting the Indians. The railroads that were built in the last third of the nineteenth cenmry allowed rapid troop movements, and the accompanying telegraph allowed carnmanders to h o w where the enemy was. The Campaign of the Desert finally cteared hostile Indians off the pampas (by killing them or forcing them into reservations) bemuse the army finally had the technafow to do the job at a reasonable cost. The windmill, barbed wire, railroad, steamship, repeating carbine, and telepaph allouled the pampas to be wnquered in the 1870s. Until then, most of Argentina's history was written in the interior?

With the meption of b e n a s fires, all of the cities founded in the first wave of Spanish conquest were lomted in the interior or near the boundary betureen the pampas and the interior. The first city was huncidn, now the apital of Parapay. In the ITdOs, other dties were founded in Tucumzhn in the Northwest and in aye (the provinces of Mendsza, San Juan, and San his), Within a few years, Salta, La Rioja, ardoba, Santa Fe, arrientes, San Luis, Jujuy, and Santiago del Estera were established. The rest of the interhr would have to wait until the end of the nineteenth or the beginning of the mentieth eenmry to be settled, In addition to st nearb and mare or ress docile indigenous l a b r far= with apicult.ural skills, all of these cities had an advantage that Buenss Ares did not: They fit into Spain's grand sheme for South h e r i c a . The organizing principle af Spanish South &erica, was to maximize the now of silver from the mines in Potosi in southern blivia. Argentina" seconamy was subordinated to that end. Most of the early hgentine cities were est;;iblished by conquhtadores arriving from the north, not from the Atfanric coast. The most impartant activig of these cities was either mule breeding or getting the males to Bulkia. Most were bred at the ~orthernor wedern edge of the pampas (near Santa Fe ar ardoba) and raised to m a ~ r i t yon the nearby pampas. They were then walked to Parosi, resting and feeding along the way in Tueumfin, Salta, and Jujuy, The mules were used either in the mines themselves or to cat^~y silver to Lima. From Pem, the silver was taken by Shjp to Panama and from there to Spain. On their way to Bolivia, the mules often carrid kgentine products-poor q u a l i ~textiles, apm(unmatured brandy), honey, tobarn, and smaH amounts of wheat and eorn, but the mules themselves were the most important commodities. The kgentine Gities irnported Spanish rnanufactclred goods that were mrried by mule from Lima. The other early hgentine dties were efiensions of the mlonies at Mund6n and Santiago, Grrientes and Santa Fe were founded by colonists from huncidn. These cities lay on, the banks of the river that connected Parapay with the sea and were used ta support the river traffic that linked AsuncirSn with Spain. h.fendoza and San Juan were colonies established by ehileans and w r e initial& part of the Chilean governorship. mey were simated directly m s s the h d e s froim Santiago and, until the Iate nineteenth century, their economies were organized around the fattening af cattle for the Chilean market, The formnes of the interior followed those of Potosi, In the latter half of the seventeenth century, Bolivian silver output fell, and the ecanomy of hgentina consequently srapated. In the f730s, a variev of reforms were implemented and silver production roughfy duubkd by 17W, reaching the peak that it had attained a century earlier. 'This brought a wave of pros-

20

A H&&y of the Great Div2e

perity to the Southern Qne, including the cities of the interior of kgentina. At the end of the eighteenth century, the interior was still the demographic Gore of what was to be~omehgentina. It had 70 perwnt of the population, but the rapid growth of the economy of the pampas was beginning to pose a threat.

Until the mid-ei@teenth century, Buenos Ares played a rnar$nal role in the cobnial economy. It was a mmmerGial city, but in an empire in which afl trade had to pass through Lima. The city's principal activities were either illegal or just skirting the law. All legal commerce was in the hands of Pormguese merchants. Oxaas would bring mall qumtities of silver, awar= diente, and wheat to the port for export ta B r ~ l Sugar, . Eumpean manufactured mods, and slaves were the major imparts. The port city imported most of its food except for beef, but then theportefios (the people of Buenos Ajres) ate little else but beef. Mter one and a half centuries of grawth, the city still had only I0,W inhabitants. Then the pace of development in the city accelerated, reflecting hi@er silver output in Bolivia. By 1760 the m;ajarity of the trade between the Southern Cone and Spain was naw channeled through Buenos Aires instead of Lima. Buenos fires benefited still mare t h u @ a sedes of reforms instifuted by the Spanish crown in the 1770s. British military successesin the Caribbean threatened Spain's traditional route to hlivia via Panama and Lima. Moreover, Sf>aincontinued to worv a b u t the threat of Portuguese expansion down the mast from Brazil. Qnsequently, Buenos Aires was made the ~apitaIof a new vieeroyalt?,(the largest administrative division of Spanish America) that included what is now the northern half of Argentina (the south was not claimed by Spain), blivia, Urnpay, part of GhiIe, and Parap;fy, Silver was now sent from Patosl to Spain via h e n o s Aires, not Lima. Some of this silver financed the reinforcement of the military capabilities of the city. The tables had now been turned; the wealth of the intenIor of South America was being used to serve the interests of the port city. Trade behueen Buenos Aires and Spain was legalized. This trade was heavily regulated, but the rewlations were evaded on a &rand scale, As the emnomy grew rapidly, the population of the city quadrupled behueen 1740 and 1810. The export of cow hide and jerked (dried or smoked) beef produced on the surrounding pampas expanded wiftly, A million cattle a year were being slaughtered by the turn of the cenmry, The expansion of the political, emnomic, and military p w e r of Buenos Ajres was viewd vvt'th some trepidation and dissatisfaction in the interior, This worsened in the 1790s as British naval power kept Spanish mercury (needed to refine silver) from reaching Buenos Aires. The resulting drop in

sifver production and consequent manetary contraction produced generalized mmmercial depression throughout the interior. Afoer 1800, Buenos Aires raised taxes on trade with the interior, provoking still more darm there. On the threshold of independence from Spain, there was already a simmering feud b e m e n the interior and the pampas. Independence and the Widening Split M e n Napoleon's armies marched into Spain in 1808, the Spanish people rose against the invaders. Within two years, Spain's colonies, including kgentina, also rewlted against the Freneh pretender. The revolutions of 1810 set in motion a proms that would soon lead t s independeness for all oE the Spanish colonies in Central and South h e r i c a . The more dynamic parts of Spanish h e r i m , h e n o s Kres being the most notable example, had little to gain and much to lose from remaining a Spanish wlony even after the French =re evelied from Iberia. The Spanish mercantile qstem required all goods shipped to and from the h e r i e a s either to originate in Spain or to pass through a Spanish port en route, By the end of the eighteenth cenmry, Spain simply maid not absorb all of Argentina's eqorts, and its srnaIl and baebard manufacturing sector cautd not supply Argentina's demand for manufacmred goods. Spanish merchants and government administratorsmonopolized commercial and politieat power in hgentina, much to the chagin of cdoflos. The French Revolution, together with the British industrial revolution, made Spanish memtilism in hgentina untenable, Once again, what happened in hgentina reflected developments elsewhere rather than any internal dynamic, Spain had fashioned her posfessions in South &erica into a coherent eeonomic and administrative unit, but as soan Spanish authority was gone, the system eqloded into a dozen or so fragments and the Viceroyalty of the River Plate dhintegrated, Within a year, what was Eater to be called Bolivia and Paraguay were independent muntries, U w p y quickly f"ollowed their lead. The provinces of what is naw called Argentina formed a series of ever shifring coditions, but it was the 18&0sbefore all the provinces were unified into what could be called the Argentine nation. Until then, the provinces were engaged in almost continuous war with each other. The Spanish ulnquest had been a process of founding what were in effect individual principalities. What held them together was Spain. As soon as Spanish authority vanished, the old viceroyalty splintered. m e moment indqendence was declarecl, a process was set in motion that produced chaos and stagnation in the interior and stimulated economic grawh in the province and city sf Buenos Aires, The formation of provincial armies drew resources from the interiark economies, and the use of those amies produced death and destmction, 'The independence of Bolivia led to a drarnatk drop in the silver trade which had been the economic

22

A

H&&v

of the Great B i v ~ e

mainstay for all of the interior except C u p * 'I%e end of the Spanish mercantile system =ant that the manufactures of the interior were no longer given preference and now had to campete with cheap British imports. The high cost of transportation within the Southern Cone gave some protection to local manufactures.' But manufacturing in the interior-relying on artisanal t e h i q u e s and b r w d Indian Iabr-wm so inefficient that these substantial transportation costs wuld not fully insulate the region from foreign competition. Thus, almost immediately after independence, each province of the interior enacted its own protective tariffs. The 1853constitution supposedly prohibited these provincial tariffs, but in fact they lingered on until well into the ~ e n t i e t hcentury, Tariffs in the interior provinces could keep British goads out of the interior, but they could not make Buems Aires or hlivia buy the interior's namufaares, Manufac~ringin the interior lanmishecl, and the re@onbecame inmeasingydependenr on the sale of food to and on handouts from Buenos Aires, The economies of the city and province of Ruenos Aires prospered despite the endfes warring with the interior, and with PorhJgal, France, and England, With Spanish mercantiIism gone, commerw flourished. f i r most of the period between independence and the Buenos aires prevented the interior ffom trading directly with Europe, Vir~allyafl of the trade betureen the Southern Gone and Europe Rrnneled through Buenos Aires, with only diminutive Montevideo sharing the booty. Revenues from the tariffs on this trade gave Buenos Ares the abilio to enform its manopo&, if necessary through military means. Since British merchants dominated carnmerce, the hgentine elite turned to the cattle trade as a source of inwme. The rich land around Buenos Ares swiftly fell into the hands of a few wealthy families, The export of hides and jerked beef grew rapidly, and the eqort af silver dwindled, Toward the middle af the century, the hunting of wild =ttIe for their hides began to be replaced by the breeding of sheep for their wool,

Political and military pawer in the interior was monopolized foon after independence by a series of catldillos, or warlords, such as Bernabb Araoz in Tummhn, Martin Gaemes in Salta, Faando Quiroga in ta Rioja, and Felipe llbarra in Santiap del Estero. meir retinue af slaves, peons, and gautchos (Argentine wwboys) gave them the military power to enforce their mfe within their province and wage war against other pravinces. The rise of caudillos whose poBtieaf and militaq power was rooted in the wuntryside was an exprerssion of and mntrfiuted to the decline of the interior's cities, In b e n a s fires, a succession of directors, triumvirs, governors, and dictators ruled, meir efforts, omsionally succeshl, to hree the interior into submission, their pursuance of free trade policies that prejudiced the

interior's manufacruires, and their blockades of the Paran$ River, which prevented the interior from trading with Europe, provoked conaant hostility with the interior and t"requentwar. The interior provinces wanted independence from Buenos Aires but, since the port was their principal market and only source of European manufactures, they were repeatedly drwn back into dependency. M a t finally ended this stalemate was the U.S. Civil War, The consequent drop in cotton eqorts from the United States and the soaring price of w o l pradueed an exgort barn of unprecedented proportions. Growing exports permitted rising imports that generated enough tariff revenues to end the conflict. The new national government, initially dominated by Buems fires, had enough money to finance an invincible army and to buy off the interior, A deal was stmck first: with the elites of Salta, Jujuy, TucumQn,and Santiago del Btero. There, irrigated agn'culture using more or less fared Xndian Iabar was still the eore of the emnamy. Catamara and La Rioja, on the other hand, had far fewer agrhlt-uraI resaurces, and their economy was bafed on a primitive form of cattle ranching, The gauehas wIZQ worked the cattle were an independent and rebellious lot, unsatisfactory roll: models, it w;3s thought, for the docile Indians emplayed by the elites of Salta and Santiago (Rutledge 1987, 152). Money from Buenos Aires, soMiers from Santiago and Safta, and an army general (Julio Row, later to become president) from Tueuman became the unbeatable cornbr'nation that finally allowed the supprefsion of the caudillos of Catamarea and La Rioja. It is important to recognize that the both pampas and the interior needed the union, The elites of the interior neecited money from the pampas to cansolidate their power att home. 'The pampas needed a campact with the interior in order ta achieve political stabilifcyand internal order (Bal6n. 2978, 53-54). n u s , the nation, of kgentina was b r n as an alliancti:between the interior and the pampas, not through the subjugation of one side by the other. A timely invasion by Paraguay produced the war that drew the new natisn together in a patriotic effort ta reclaim the lost territory, Es$~lzcieros (owners of large estates) from the pampas made fartunes supplying meat, leather, and cavalry mounts to the Argentine army when wool prices plunged after the U.S. Civil War.

13y the 1870s, retatbe peace bad settled upon the new nation after siay years of almost mntinums war, There were repeated rebellions and uprising ammpanying almost every election-the bloodiest was in 1880, when 3,W died-but no full-scale war. This peace, plus the ever ewanding demand for pampean agricultural products and a more or less stable gavernment, produced a rate of eeonomic growth that was quite possibly the highest in the

wrld. By H80 the Indians had been either chased off the pampas or killed, freeing up millions of acres of fertile, well-watered land for agricultural eqloitation, h r o p e k demand far what the pampas could produce seemed insatiable. When the woo) born s h e d , Argentina began exporting the wheat, corn, badey, oats, and linseed that barbed wire, windmills, the steamship, and the railroad made feasible. By 1888, 2.5 million hectares were under cultivation, up from almost nothing in 1850, By the early 189Os, almost W,W metric tons of wheat were being evorted annually, On the we of Warld War X, nearly 7 million hectares were in wheat alone and 2.8 million tons were eqorted (Rock 1985, f 36, 164). Afgentina also eqorted five cattle and frozen meat, Z3y the time Europe banned the import of live cattle for fear of hoof and mouth disewe, the technoloa to ship Ghilled beef to Europe uras in place, Esf~ncieros began replacing the wiry, criollo breeds sf cattle, whose tough meat muld only be jerked or frozen, with refined breeds needed fbr the export of fresh beef, The coarse, native grasses af the pampas were unsrtitable for the n w bxeeds, The estanciero would rent land for a few years a tenant farmer, who would break the sod and scsw wheat or carn. At the end of the lease, the farmer woufd sow alfalfa and move on to the next farm, The tenant farmer, therefore, paid the estanciero to ssw alfalfrt p a s t u ~rather than the other way around, Immigrants flooded into the country h m Europe. Net immigration in proportion to the countv's popullation reached a peak in the 1880s, but the abmfute number of immigrants was far larger in wbsequent deeades, reaching 40,000 per year in the 18Ws and 110,000 annualIy h m 1909 to 1914. By then, 30 perent of the Argentine population was foreign born (compared with 14 percent in the United States). Almosl all of these immigrants settled on the pampas; and most in pampean cities. The poptation of h e n o s fires, for example, increased 120 percent in the two decades after 1895, while the population of Jujuy and La Rioja grew only 5 percent.'

While the ewnomy of the pampas soared, the economies of the inteor three exceptions, stagnated. The brighter spots were in the rior, with sugar-producing areas of the Northwest and the wine-producing areas of aye, The railroad allclwed the sugar and wine ta be cheaply transported to markets on the pampas, and protective tariffs kept Brazilian sugat and European wine out of the country. Sugar cultivation began fint in Tucum6n in the 18aOs, and Iater spread to Salta and Jujuy &er the mrn of the century. Whereas the pampean economy was characterized by modern forms of tenant farming and wage labor, the sugar industry of the Norrhvvest depended upon Indians, initialiy as slaves and later as debt peons, with a liberal meamre of physical coercion to eompel work when other methods failed,

A Hk&y of the Crecrt Div1"11e

2.5

The laber far= in the vineyards of &yo was made up of recent immigrants from Europe working tiny plots of land (minifundi~s).In northern Patagonia, a handhi of fairly prosperous farmers produeed alficrIfa for export, As grain cuftkation and cattle raising spread a m f s the pampas, sheep raising was pushed southward into Fatapnia. In Catamarca and Samiago del Estero and along the Paranri River in Chaeo and Formosa, extensive logging operations cleared the forests. The rest of the interior was either bypassed by the boom on the pampas or was made worse off. T%e railroads and the general&free trade policies of the national gawrnment doomed manuhcmring in the interior since it: wuld not eompete with cheap European imports, In h Rioja, for example, 17.4 percent of the economically active population worked in textiles in 1869, but only 4.6 percent in 1914 (Fennel 1970,16). The provinces whose economies stagnated m e to suppty migrant hawest labar both to the pampas and to the mare dynamic parts of the interior, With the exmption of aye, the social and economic stmcmres of the interior, especially in the countryside, were little changed. "By the end of the nineteenth century, mueh of what it was like to live in the seventeenth cenmry m t d be recaptured by merely stepping outside the provincial capital" (Scabie 1988, 7)*

The ernomy of the pampas, so heaviIy dependent upon exports to Europe, ran into serious troubte during World War I, After the war and until 1930, the dow and fitfixt growth in Europe meant that gampean evorts p e w at a less frenetic paw than before the war. The strucmre of the pampean ecanomy chalked out during the golden age af the pampas was hardly modified, The mast important change, but only because it was a portent of things to m m , was the awleraled growth in the manufacture of import substitutes. In the interior, the sugar and wine industries continued to prosper through the 1920s. Some other regions of the interior experienced a mnsiderablt: boom. Verbil. mat6 (a bitter tea that is the national beverage) mltivation saared in Misiones, and mtton cultivation grew rapid& in Ghaco and Formosa. Wool produdion continued to expand in Patagonia, especially in the far south, as did irrigated agficulmre in northern Patagania. Tobam cultivation b e e n in the Northwest and expanded in Gorrientes, h g i n g in Catamarm, Santiago del Estem, and in the Northeast had passed its peak, but remained at a hi& level. It looked for a moment as though the interior W= on a path to prosperity, following the pampas by only a half cenfitry. Ta the outside ubsemer, hgentina appeared to be one of the richest and most dweloged countries in the world in 1929. Measured by per capita income, it was among the ten mast affluent wuntries in the world. In the

A Hheo?y of the Great 19ivge

26

pampean zone, per capita inwme was probably very dose to that of Canada and Austntlia. The country ranked eleventh among the major trading nations of the warld, b e n o s Aires was the largest city on the east coast of the h e r i c a s except for New York and was one of the great culmral centers of the Spanish-speakingworld, kgentina had mare automobiles per mpita than did England and more doctors per eapita than any Eumpean w u n v except Switzerland and Hungary (Waisman 1987, 7; Diaz Alejandro 5970, 5657). The h n g Decline

The Great Depression marked the beginning of a new phase in m e n tina's history. The dramatic drop in demand far Argentine eqorts that remlted from the collapse of Europe's economies forced the country to 1aok inwrd, A modest revEval in grain demand at the end of the Depressha was nipped in the bud by World War 11. During the war, Europe desperately needed Argentine beef and grain but had neither the manq to pay for it nor the abiliv to protect the sea lanes to Soufh h e r i c a , For many years after the war, Argentina was cut off from markets in Europe (exeept for fascist Spain) by the U.S.-led boycott that retaliated again^ kgentina far irs neutrality during the war, By the end of the boycott, Europe hacl embarked on an effort to feed itself without Argentina's help. Europe soon became an exporter of food and an important competitor of Argentina. The nation vvould never again regain the markets for its products that were Xost in 1930, With the waning of demand for what the pampas muld produer: came the Xass of interest in and the ability to invest in new techncrfagies, Just when agricuIture in the industrialized countries began a revolution based an chemial fertilizers, pesticides, and new varieties of plants, technolagicat change an the pampas nearly aased and kgentinar missed out on a whale generatian of productivity pin. It was not until the late I output of gains and oil seeds in Argentina finally exceeded the prwar peak, The economic decline immediately produced political instability. The government was a political machine, very much in the made of the plitiml machines in the large industrial cities of the United States at the time, What hefed the political process was government jobs; the decline in tariff revenues in 1930 meant that the government had to lay off workers (Patter 1979, IS), This csst the Radicafs their support within the middle class, helping make possible the country's first successful military coup d'etat. When the mup came, no one protested. Politicat st.abiliv of a sort was purchased in the hllowing years by blatant electoral fraud. When that ceased to yield a government with the appravaf of the wuntryS economic efites, another military wup toppled the civilian government. The cycle repeated itself aver and aver again. It was not until 1989 that an Argentine civilian president left affica because of electoral defeat rather than military takeover, Military

governments afternated with civilian, but none seemed to be able to find a new path that would recreate the pampaskre-1B0 success. No longer able to depend on foreip markets, the Gauntry pulled on its own botstraps. Tentatively, during the 1930s, and with considerable vigor after 2945,the country embarked on a process of import substitution industrialization, In the hte f lilil-Os, agiwlturat policies squeezed the surpfus out of parnpean agrialture to finance industry and attempted to raise wages in rural areas. m e result was a depression in pampean agrieulmre. The interior was complete@bypassed by the dramatic growth in manufacmring but was hewed 'by other policies of the nationd government, Since the economies of the interior had came to revolve around the suhidized praduction of goods for domesticwnsumption behind a tariff wall, the gavernment's poliey of produ~tianfor the home market meshed with the organizing prineigle of the interior's ecanomies. a t t o n prodtletion in the Northeast w s one of the higest winners, sin= textile manufilcturing was the centerpieceof the government's industrialization strategy. Tung oil and fater tea in Misiones, tobacu, and citrus in Corrientes, Salta, and Jujuy, apples and pears in Rio Megro and NeuquCn, tomatoes in the Northwest and Patagonia, as well as the traditional wine and sugar of Qyo and the Northwest also flourished during the 1 9 4 0 ~1950s, ~ and in some cases during the and 1970s as well. The interior enjoyed a measure of prosperity while pampean agriculture stagnated; as a consequence, the interior" share in national agricuttura! production rose from 22 percent in the late 1920s to 32 percent in the mid-l95& (Cilberti 1964, 53). While these cfianges brought ecanomic grovvth to parts of the interior, millions who could find no place for themselves in the interior" sew order emigrated ta the pampas. Beween 1945 and 1975, kgentina eqerienced modest economic growth. CDP grew about I perent per year, far bdow the growth rates en;tayed in the pre-1930 golden era. An economy minister wuld finally appear to have found the solution to the country's problems. The eurrency would be devalued and fiscal discipline pledged. A spurt of grovvth wuId gush the economy foward. No sooner had things begun to improve than the demands of various sectors, especially the urban working class, would be imposed on the economy. Rising wages would generate inflation. The demands of ofher sectors for subsidies would inmewe the budget deficit. Inflationaly pressures would build, and the ntrrency would become quickly overvalued, leading to dedining exports and agriculn~raland industrial stagnation. The depresive effects of the growing trade deficit could sometimes be postponed by fareign loans, but inevitably the government would be breed to impose fiscal austeriv and the economy would slide into re~ssion.The cycle would repeat itself; each time, a brief period of gawth would be followed by m even longer period of recession.

Repeated economic failures brought dissent and political violence=, Various left-wing groups began campaigns of kidnapping, bank robbery, and bombing the right wing organized death quads whi& conducted disappearanws and aminations. The largest political party in the country, the Peranists, was for all practical purposes banned fxom participation in elections. From his exile in Spain, its leader, Juan Damingo Pertin, seemed to be putting every effbrt into encouraging disorder and violenct: in the hopes that the country muId finally ask him to return to give le@tim;tcyto the government and bring stability; His =beme finalty worked, and the military government paved the way for his return to hgentina and to the presidency in 1973. Perbn was an old and ineffective man by then and caul$ not wntain the violence he had helped to create. He died shortly after his triumphant return. His wife, the vice-president, succeeded him to the presidency. She had been a barroom dancer when they met shortly after Percin left Argentina in 1955. During the long years in Wdrid, she had no political role, Totalk unqualified to nan a country descending into cfiaos, she failed on a grand scale. When the military intenrened onee again, they had no intention of preparing far the remrn sf democratic government-they intended to rule Argentina forever. n e y imposed El Proceso de la Re~qanrluzcr'rinNational, or more simpfy cl proem, their plan to restructure Argentine politics and ecanomics. In order ta end the threat of left-wing insurrection, they e n g a ~ in d a eanpaign of brutality. B e m e n 9,000 and 40,000 people were kidnapped, tortured, and then murdered.' They made some efforts to end impart substitution industrializatbn and replace it with a liberal trade regime. In the end, their failure was even more spectacular than the failures of governments that had come before. Despite brutal: suppression of the trade union movement, until then the strongest in Latin h e r i c a , they were never able to quell inflation? At the root of the problem were their efforts to radically restmare the economy-rapid stmcttlral shifts typically are inflationary even in the best of circumstances. Perhaps even more important, the ljovernment was never able to end the fiscal deficiits that drove inflation. There were several reasons for this. One was that mrruption was as rampant as ever. Moreover, the military embarked on a weapons-wing binge, Their jingoistic bid to claim territoty occupied by Chile nearly provoked a war and justified the arms buildup, Lastly, huge subsidies to military-related industry continued. Under elproceso, the interior suffered the same kind of repression as the rest of the couMry, The army wiftfy moved to stamp out a guerrilla insurrection in Tucumhn and suppressed organizations that spoke far the rural poar. Subsidies, trade protection, and reptation that had dispropor-

A H&rory of flte Great Divge

29

tionately helped the rural poor were reduced or eliminated, The gavernment attempted to impose fiscal discipline on provincial governments md revenue sharing was cut back sharp&. At the s a m time, the military mowd to stimulate econoKlic development in the parts of the interior that they vieuled as militarily strate@c, Subsidies to Patagania, evedally in distant Tierra del hego, increased, since the generals believed that GhiIeFsabifiq to seize the region from kgentina would be discouraged by economic dwelapment there. Xn northern border provinces such as Misiones and SaIta, bridges aPld roads were h i i t that began to break down the isalation of the region. Formosa, on the Parapayan barder, rewived a number of special benefits, The government instituterl ai vast program of subsidies to manufilmring in La SoJ'a, across the border Erom Chile. The bid to end inftation with a crawling peg exchange rate policy, implemented just as the secand oil crisis triaered a spate af dobal inflation, spawned an extraordinarily overvahed currency that in turn stimulated an enormous mnsumption binge af imported goods. The prior trade liberalization and the overvalued cunency produced a sharply negative rate of effeake protection. Industry just shut down, incapable of competing with imported pods. As the private economy callapsed, public spending (including stale enterprises) reached four-fifths of CDP, up from less than half in 1976 (EEL 19(31a, 22). This w a the hi@est in the nonsocialist world. The w r l d financial crisis that resulted from the second ail shock in 1979 and the: attempts of the United States to deal with it by raising interest rates cut off the flow of loans to Argentina; the country was cau&t shart. In a desperate bid to rekindle enthusiasm for the pvernment despite the mined economy, the a r q invaded the FalHand Eslands, territory that Britain had peaeehlly possessed for 150 years, Despite skilled and heroic aviators who were able to sink several British warships, the hgentine invaders were overwhelmed. To add to the disgrace, many kgentine officem deserted their men in the field, while others pocketed funds designated for supplies. The image of leaderless raw recntits (the best saldim were held in reserve for the expected yar with Chile), freezing in the bitter South At-lantic winter, without proper clothing or food, while their officers fled to Buenos Aires with embezzled Cnds, enraged Argentines. Lacking even a shred of legitimacy, the military then began to prepare Eor the refurn of a democratic government, N e n t i n a Since the Returm of Democracy

Rafil AIfonsh, the new president in 5983, attempted to reconstruct the insti~tionsaf democracy, He was able to bring the top leaders of the military government to trial, but a series of military mutinies forced him to few@undone most of the job of prosecuting military officers involved in the "dirty war" against subversion. At any rate, his sumssor ganted clemenq

for all of those who remained in jail. While Alfonsin merits some praise far leading the country through the diffimlt transition to democratic rule, his handling of the eeonorny wsts ineffective. R r capita GDP fell 1 percent per year during the decade. The military gsvernment had left the country saddled with an enormous external debt. The countly could not even pay the interest on this debt, let alone the principal. The: world economy in the 1880s grew sluggishly and commodity prim5 slumped after 1%5, Since three-quartersof hgentina's eqorts were agricultural pods, eqort earnings stagnated. Corruption remained at the customary levefa The government's attempt to reinvigorate import substitution indusfrialization required ever greater fiscaf deficits. The eeonornieti of the interior had mllapsed, and the nations! pvernment's attempt to bail them out worsened the budget crisis. Repeated military insurrectians and mutinies sapped his authority and drew his attention away from the economy, The apposition controlled the Senate throuaout AIfonsink administration and the House of Deputies during the fast two years. Their eontrol of the Qngfess aHowed them to obstwt any attempt to reform the emnomy, Without serious restructuring and with only price controls to stem ever mounting inflationary pressures, the ecanomy drliked toward disaster, Efy early 1989, it was clear that AXEonsSn*sparty could not possibly win reelection in the May balloting. Without a doubt, the Peronists, who had trditbnally been associated with papulisrn and redistributive policies filvoring the working class and domestic industfy,were ping to win, During their previous Wrn in office in the mid-f97&, chaos and inwmpetenw mfed. The Perarrist candidate for president, Orlos Menem, sounded like a traditional populist, The well-to-do panicked and massive capita! flight ensued, triwring ever more infiation. Menem won the election in May but was not q p e d to take office until the end of the year. The lame duek AIfonsin had no credibility left, and canfidence in the ecanamy vanished. The result was hyperinflation, At its peak during the first w e k of July, prices trigld. Alfonsh had no choice but to resign in disgrace, months ahead of rschedule, and Menem took over.

Argentines were atounded when Menem announced a program to liberalize the economy, end impart substieution industrialization, balance the budget by cutting spending and coliecting taxes, end subsidies to industry and the provinces of the interior, and privatize hundreds of enterprises. After nearly two years of modest progress, Menen hired Domingo Walla as his economy minister. Since then the pace of change has been dramatic. The government pegged the kgentine eurrenq ta the doIXar and vowed never again to devalue. It established "convertibility,"which eliminated the role of the centrd bank as lender of last resort to the banking system and backed

A H&&ry of lkt? Great mvicie

31

the money supply with U.S. dollars. The government accelerated the process

af privatization and appears to have balanced its budget (at least until late 1994). Defense spending was halved and the number of troops cut by 80 percent (Sims 3994a, M ) . Althou* federal subsidies to the provincial governments that helped to sink the AIfonsin administration have grown, a new sense of fiscal discipline was imposed on the provinces. Much of the trade protection, regulations, and subsidies that kept the economies af the interior alive were ended by presidentiaf decree. Unpmfitable railroads and factories were closed. The effects of these meaures w r e dramatic, The rate of inflation dropped haply; it was 7.5 percent during 1993 and less than 4 percent in 1994. Real wages fell, helping the country's competitivenes in foreip markets, GDP in dollar terms m r e than doubled sine 1989, although most of this reflects the shift from an undervalued eurreney to an avervalued one and the recent addition af the informal ecanomy to the natianal amunts, The impravements in the emnomy allwed Argentina to enter the Brady Plan and reschedule its external eommereial bank debt (but with only a disappointingly small write-down). This imprimatur allowed Argentina to borrow more from foreign commercial banks at fmrabfe interest rates.

mere are significant problems that discourage one from unguarded eahusiasm over the Menem government, Corruption %ems, if anything, to exceed that of the previous government; at the vey least it has becclme far more visib-le than in the past (see Chapter 12). Not only is corruption an important drain on the economy, the government increased its hdget deficit during the second half of 1994 in order to woo back the voters who had deserted Menern wer the corruption issue, Menem claims to have nearly ended inflation without price mntrals, but the single mast important price in the eeonomy-the ex~hangerat-has been fixed since early 1991. Inflation was thus repressed rather than eliminated by the now ovewalued pew. Consequently, progress on fighting the world's highest rate of inflation (since 1970) has been nuGfx emaerated. The overvalued peso prejudiced domestic industry, which cannot compete with artificially cheap imports, and so the trade deficit baflooned, In 1990, there was an $8 billion trade surplus; in 1994, the trade deficit was nearly $6 billion, a $14 billion reversal in four years. Rents and the prices of services ( b t h nontradables) soared, distorting relative prices. Although inflation was nil in the first half of 1994, by September it began to rise sharply and by ~ a n u 1995 a ~ reached a hventy-month high of 1.2 percent, a troubling development.' During the first full year of Plan Cavallo, industrial production grew a healthy 7.6 percent, In the following year, however, the rate was less than

half of that and was only slightly higher in 1994 (Biretzosllfirtss Her~ld,January 8, 1995, p. 2). Mast of this gowth in manufacturing since 1990 was either the remvery of ground lost in the terrible years at the end of the 1980s (manufaewringoutput in 1993 was scarceEy higher than it was in 1987) or among automobite producers and rfieir suppliers. The auto industry wuld not sumive without regulations that virh~allyprofiibit imparts; the price of an automobile in Argentina is swernl rimes what it is in industrialized countries. The?eapital p o d s industry, unprotected from foreign -petition, shrank 60 percent since the beginning of Plan Cavallo. Interest rates crept upward throughout 1394, me growing tax burden imposed by the gcivernmentts efforts to balance the budget proved to be an additional burden, especially upon small businesses (Green 1994,3a). Unemployment more than doubled since f 991 to over 12 percent (and to 23 perent including underemployment),the highest level ever rewrded. mese offiicial fipres do not measure rural unemployment, which has been estimated to be more than 14 percent? Rising unemployment and falling real wages h m generated considerable hostility in the working dass and the rapidly shrinliing middle class. Much capital entered the c o u ~ r yas structural adjustmenf loans From the World Bank and Xnteramerican Development Bank and as currenq stabilization loans from the International Monetary Fund. In addition, over $5 billion of foreign private eagital has been used to pur~hasenewly prinratized companies (Buenos Air@$Herald, November 13, 1994, p. 2). mere has also been at msh of spewlative csapital into the Buenos Aires stack exchange, pushing up share pniees. This capital inflw has financed the current amount deficit. Little real investment, however, has taken place. Despite cheap capitat goods imports made possible by the oventatued peso, few competitive industries able to survive in the world marketplace have emerged. The flood of capital that has aftowd the- country to run a trade deficit and meet its obligations under the Bra* Plan is slowing, The World Bank -which has recently given more money to Argentina than any other country exeept China and India-announced that it will stop lending to Argentina in 1 9 5 since the country's peer capita income has grown toa high, In September 1W4, the government refused to accept any more IME; loans. With dedining gctvernment revenue due to cuts in business t a e s and rising expenditure prompted by the May 1995 elections, Argentina would not have been able to meet the IMF's fiscal targets. Rather than risk an embarrassing review or ask far a waiver, the economy miniaer decided to look Eor the needed funds elsewhere? There will soon be no more state enterprises to privatize, md this source of foreign capital will be gone. In early 1994, interest rates in the United States began rising, slowing the flow of capital to kgentina.

The mst of Menem's adjustment has fallen most severely on the provinces of the interior, 1E"heseprovinces are sparsely populated, arid, underdeveloped, and chronically gaar, bearing a peater resemblance to the rest of Latin Ameriest than to the fertile, well-watered pampas with their rich farms and large industrial cities. Trade liberalization, a decline in subsidies, and the government's insistence on provincial fiscal discipline have placed most of the interiork economies in crisis, mere, unemplaynxent:rates range up to 35 percent.

In December 1993, there were violent protests against the austerity &ernes forwd by the Menem administration on pravinciat governmeats In La Rioja, where almost 10 perwnt of the provinwts population and 28 p m n t of the emplogred work for the provincial government, an announcement that a fifth of the public workers wsuld be sacked and the wages of the rest reduced led to a protest that left SWinjured. The demonstrators burned d m the door to the government building and forced the police into temporary retreat. A few days later, the legislature rescinded the austerity program. A week &er the outburst in h Rioja, there was even warse vioience in Santiago del Estero. The gavernment announced that it could not pay the $350 monthly salary of provincial workers (they had nat been paid sinw August), although senior officials continued to draw their $16,000 monthly salaries, T%e; protesters in the provincial capital burned down the government house (minutes after the governor and his ministers escaped), the courthause, and the legislamre and attacked the residences of government leaders. mere were four dead, fifv injured, and much government and private properv destroyed toy the viafence, The protests stwlerated during the first half af 1994, In January, proteston blocked roads in Patagonia, protesting government policies toward the fruit and aluminurn industries; Northwestern tobacco growers also demonstrated. Pn March, Tummhn, and in April, Sal& and J u j y exploded in violent protests; more public buildings were burned and more proesters were shot and teargassed. Jujuy's economy, for example, had strmnk 26 percent since 1983 and unemployment was 28 percent; unemployment in Tucumh was 29 percent?' In May, nine strikers were seriously injured by police in Tierra del F u e p while protesting the economic difficulties in the industry that has long been the most heavily subsidized in the cmntry. In February, March, and April 199S, there were seriws dismrbances in Tierra del Fuego, Jujuy, Tucumhn, Neuqukn, Rio Negro, La Rioja, Catamarea, Cham, and Salfa. Violent protests continued in Tucuimhn in June 1995.

Events in M e ~ mhave shaken the Plan Oval10 to its roots. The parallels behveen the insurrection in Chiapas, Mexico, that began in January 1994, and the rioting in hgentina that began a few days earlier were widely discussed in the Argentine press. The effect of the rebellion in C h i a p a 4 8 bilIion of wpital fled Megm in four monthsdast its pall over Argentine capital markets. The cfisis in Mexim fallwing its December 1W devaluation produced an even more severe impact on the Argentine economy. When the Mexican peso was floated and lost more than half of its value in a few weeks, financial markets throughout Latin America felt the effect of declining investor confidence. Argentina was the worst hit. Share priceTs on the Argentine Bolsa had been falling since mid-19%. Mter the Megcan devaluation, the stoek market last nearly a third of the vdue of shares traded in only three weeks. By March 1395, share prices were down 60 percent from the previaus December, and over $4 billion had been withdrawn from the banking system, threatening its liquidity." In discussions of Argentina's financial crisis, the U.S, and Argentine press repeatedfy mentioned the announcement that a major paper and wood pulp manufacturer in the Argentine Northeast mufd not service its debt, The crisis of the regional economies cast its shadow over national financial markets. The M e ~ c a ndebacle fareed a major course mrrectian an Cavallo. In January, he ehanged banking regulations in a w;ly that r e d d the distinction bcween the peso and the dollar and lowered reserve requirernems in order to expand the system's liquidity. In February, a $1billion spending cut was announced and restrictions on bank withdrawals were imposed, In March, even more drastic s ~ pws r e taken. The central, bank began fending to bank in a way that some observers say violated the spirit of the convertibitiv system, whi& forbade the central bank from playing the mIe of lender of last resort to banks in trouble.12 On the other hand, the government's willingness to undergo a sharp monetaty contraction underscored its cornmitment to forgo a devaluation (Barro 1995, A14). The government remrned to the IMF and aked for the loans it had declined six months earlier plus $2 billion in additional loans. A $1billion loan was negotiated with the lnteramerian Development Bank and another from the Bank of International Settlements. Local businesses agreed to buy $2 billion of government bonds. These infusions of capital will still fall short of the $8-15 billion (estimates vary) needed in 1995. Tax increases and more budget cuts totaling $3.5 billion--roughly equal to capital flight since the Mexican devaluation-were announwd. Tariffs were raised to the m~xnunnallowed under MERCOSUR, the common market established with Brazil, Paraguay, and Uruguay at the beginning of the year."

Already by March and April, there were encouraging signs that the worst of the tequila effea ww in the past. A bumper hawe* on the pampas produced Eatling food prims and a drop in the consumer price index afrer several months of troubling innation, The p a d harvest also stimulated eworts despite a recent Brazilian devaluation. The econorny slowed with the new austeriv measures and this put a crimp in imports. The resulting drop in the trade deficit was good news, Instead of backtracking, avallo used the crisis as an opportunity to push for further restmewing such as labar taw modernization and pension reform. Menem" reelection ta the presideney calmed investorshemes. Nevertheless, the recession will also reduce government revenues and heighten political dissension. There are important differences between Medco and Argentina. At the end of 1994, Argentina's trade deficit as a proportion af its GDP w a smaller than Medw's and hgentina's hard Gurrency resenres in relation ts its trade deficit were much iarger, Nevertheless, Argentina's currency reselves fell by 17 percent between December and March?' Furthermore, both muntn'es' ewnomic plans have depended on the import of substantial quantitiesof speculative capital, which can leave as soon as investors become nervous. The kgentine economy, despite the recent impravemem, remains in a precarious position. The avewdued p m remains at the center of kgentinak crisis, since it dimurages earports and enmurages imports. Xnhsions of fareign capital are needed t s make up the difference, For a half-mntrury, every economic plan designed to r e m e the Argentine economy hm gone up in flames when the ovemafueb Gurrency was devalued. A devaluation would thus shatter the credibiliv of Menern and Ca;valla, trig%er another inflationary cycle, and threaten to campletely undermine aXf of the refarms af the last five years, The Achilles heel of the Plan Cavdlo may prove to be the mrxy state of the interior's seeonomies and the political dissent this spwns. Unemployment rates exceed 25 pemnt in severalprwinces, Provincial gclvernments eannat meet pqrolls. The banking system in the interior is in crisis as 40 percent of provincial bank debt is unrecoverable (Friedland 1995). Part Two of this book will make ctear the precarious state of the interior" emnannies and show that no easy end to the crisis of the interior is in si@t. Notes I. T'he produdion of hides and jerbd beef on the pampas began in the East c;~uairlerof the eighteenth wntuq, Wild eattle were hunted far their hides; the meat was usmlly left ta rat. C I o s to wa&r transpoit, =me of the meat was salted, d ~ e d , and shipipped to the &ribbean to feed slaves. Agdalture, properly spe&ng (ranching and mop cultivation), was unirnprtant on the pampas until the weand half of the nineeenth mntzlry. 2. In pwing, ane might note that the prairies of the United States and Qnaida

were not settbd until the 1880s for the %me reasons that the pampas remained unexploited. 3, For example, the cost of shipping goods by land from Salta ta Buenos fires was over s w times the cost of shipping the same goods kom Europ to Buenos Aires. Qr shipping from Clonientes to Buenos &es on the Paran6 River was ten times the mst of the journey &om Ewope (Femel 11170, 15). 4. Lipset and Bendh 1195,320;Rock 1f285, 165-166; and b t t e s and Santu 1978, 7. 5, %liefmer 6 p r e a m e s from the book Nicnca M& written by a government eommiwion established by the demwiztic government of Rairl Alfonsin a&er the M t a q left p w e r in 1983, The book dwmented 9,WO a s s af d h p p a r e d persom. The commision that wrote the bmk is now called the SubseaeMa de Derechos Numanm. On November 12, 1991, T s p k e with staff members Lie. hticia Pemas and Dra. AlEa h Roca, who helpd write Nuaca Miis and stiU work for the ' * mey be8eved that the military Efled as n x q as M,OW peopje, far muId be documented. Many people, they arped, were afraid to mme fomard with evidence so won after the end of military rule. Others plam the estimated deaths at up to 30,000 (&W York Ernes, Oeober 2, 1994, p. 42). 6, The wage share of national hmme averaged 43 p r a n t from 1970 to 1975. Xn 1976 it fell to 30 p r m n t and to 25 perent the following year, Same of this was due to @peridation, which shified inmme to profits and rents, but part of it realted from the deliberate p o E q af the; government. BeWeen 1976 and 1989, the wage share averaged 30 prcent of incame (Medina 1992, 20). Tke effect on industries pralfu~ngfor the domestie market has been calamitous, ft is interesting to note that the present Peronist government has done nothing to raise the wage share of national hwme; it is stilt 22-25 perant. "7 Buems Airas Herald, Oclsber 6, 1994, p. 2, and Febwary 12, 1995, p. 3, 8, Buenos Air@ Her@&, January 8, 1994, p. 2; and January 25,1995, pp. 7, 14, 9. B u e m Aim Hemld, October 21, 1993, p. 10; and Qaober 2, 1934, p. 3. 10, Buems Air@ Herald, January 9, 1994, p. 20; Mueh 20, 1994, p, 6; ApGf 10, 1994, p, 3; July 31, 1994, p, 2; and April 23, 1995, p. 3. 11. Buerzos Aims Hem&, J m u q 15, 1995, p. 2; March 12, 19%, p. 2; and April

.

I, March 6, 1995, p. 617; and March 10, 19515, p. C13. 13. &ems Aims Hemld, March 5, 19%, p. 3; and Mareh 19, 1395, pp. 2, 7. 14. New York Bmm, January 22,1995, p. E%; and me WaN Smet Jounzal, March 6,1895, p. 61'7. b also Bano 1995, A14

Understanding Argentina's Stagnation kgentina is an irtlportant country wirh a perpledng history that has attracted the attention of hundreds of scholars, n e y have offered many different eqlanations for the great hgentine hitare. +The following survey shows that, although there is some truth in all of the prominent eqlanations, and considerable merit in a few, there is enou* lacking in each evlanation that scholars should not rest in their search for a complete understanding of &gentinafs stagnation. m i s brief review ends by showing haw a proper evaluation of the rote of the interior in the national emnomy is necessary to fulty understand the comentional ewtanations of the great Argentine failure, Import Substitution, Industrialization

Far six decades, hgentl"na pursued a progam of import substitution fndustriatization, As elsewhere, IS1 created more problems than it solved. Part of what motivates IS1 is pcrtitical nationalism, but the ewnomic ineentive behind ISI is relief from the wnstraints imposed on economic growth eqort ~ pessimism by the lack of foreip exchange. In the 2930s and 1 9 4 0 ~ prevailed, not surprisingly $ven the behavior of wrld markets at the time. If one could not increase exports, then the only solution to a balancre-oftrade deficit was to reduce imparts, The way to reduce imports, it vvas believed,was to produce what k;td been imported, that is, import substitutes, Initially, IS1 often brings some sumess, Import substitutes that are typically the first to be produced, such as textiles, matches, beer, garments, and firmifure, require small mounts of skilled labor or imported capital and can oEten use domesti~llyprodu~edinputs. This first, easy stage is quickly over, and later import subscinttes, such as appliances, electronics, intermediate goods, and srutos, arc: usually capital intensivt: and require imported cornponents. Rayafties for the use of foreign brand names and technolou, plus fees for management semiees, a n be evenshe. All of this puts a considerable strain on the countfyk balance of payments.

In order to get the new import substitute industries started, substantial subsidies are required, hmediately, demands are plsteed on the government budget. The wnsequent fiscal deficit generates inflation, and, if unanticipated, h a the desirable effect of transferring resourms from consumers and workers to profits, thereby enmuraging investment. A little inflation, however, often leads to chronic inflation, which undermines the: reliability of price s i p d s and thus discgarages investment. Ln order to generate the resources needed to subsidize industq, the agricltlturaf sector is queezed. The farm sector declines, but since it is typiaffy the pn'ncipal generator of foreign exchange, the balance-of-paymentscrisis is exawrhaf.ed. In order to protect infant industries from foreign competition, tariff and other forms of trade proteetion are instituted. Without the challenge of foreign mmpetition, these industries remained infantalized, requiring permanent subsidies and trade prateetion, This permanently eurses the consumer finduding other IS1 industries) with high prices, poor quality, and indifferent sewice. The intense level of government involvement in the emnomy encourages rent-seeking behavior, that is, efforts to seek gain by changing the juridical and regulatory environment rather than by inaeasing productiviv. The domestic market is too small: for industry to take advantage of economies of scaie. ISI, therefore, produces a chronially inefficient and stagnant emnomy with perennial foreign exchange crises. T%e foregoing applies in all of its detail to the hgentine economy. Indeed, kgentina has had an unusually fang and intense experience with ISI, which began in the 193@, where= most of today's developing muntries began IS7 in. the 1950s and I . Moreover, hgenfina has had unusually high mtes of effective protection (Belassa 19132,37). Can IS1 provide a satisfactory exlpfmation far Argentina's failure? In the early postwar years, XSX was highly recommended by almost every development economist in the world and was pursued by virtually evely Third World country. In an earlier epoch, all of the industrialized countries exeept Britain had used some fsrm of ISI. lit is diEfi~ultto fault Argentina far doing what most ather cauntries were doing or had done. IS1 failed to produce prosperity and sustained growth anyhere in the world, but nowhere did it seem to fail as spectacularly as it did in Argentina. Many countries were able to make the transition from fSl[ to a more outwardly oriented devefopment stratea, Argentina's attempt b e ~ e e n1976 and 1%3 failed. Although there are many enmuraging signs, it is too early ta know whether the arrent efforts to eliminate IS1 will ultimately a r e the country's stagnation. IS1 is in part a symptom of the cauntry's malaise and not simply a E a full a m u n t of cause, ISI is an important part-but only a par Argentinafsfailure.

At the top of many lists of villains in Argentina is Juan Dominp Per6n.I Per6nfspursuit of IS1 was one of his many failures, according to his detractors, Some of .them incorrect& blame PerBn for initiating IS1 in hgentina; he surely intensified ISI, but there is an essc=ntiaf wntinuity between the policies of the 1930s and those of the 1940s (Villanueva 1976). Furthermore, Perh's critics ignore that after he was. deposed, the bait framework of XSX was strengthened. Near the end of Fer6nfsfirst presidency in the 1955, only 3 percent GDP was produced in publicly owned industrial firms (including mining and public utilities) (Dia klejandro 2970,417, SW). By 1987, more than 7 percent of GDP arose in public enterprises (Bour 1993,226). It was not until 1976 that a thoroughping f$eralization of the econolny wm attempted, but the effart met with modest succes-s and Affonsin's government afrer 1983 rolled back much of these earlier @ins. Some of kgentina's w e s can be blamed on ZST, but ISE cannot be blamed on Per6n. Per6nts detractors frequrently criticize: the exessivc: violence and regression he used to maintain control. Scures of opposition politicians were edled, others were beaten up or imprisoned, and perhaps a few were killed. Beronists ti@rly controlled the press and canfiscated the property of appanents. None of this, however, w a new to Argentina, wrhiGh had a long histofy of political violence. Per6nfsuse of violen~eand intimidation pales in comparissn to that wfiich was used by the anti-Pmnist governments that eame later. It is difficuft far an outsider to understand the vituperation with which Per6n's critics call him fwist because of his use of repression wfiile not applying that same label to the despots who preceded him or butchers who followed him in office. Perhaps the explanation is that the targets of Ferdn's repression were not the traditional ones. The Peronists first inwrporated the urban and rural working classes into the national political p r o m , mis political mobilization oaurred in an atmosphere of authoritarian violence, leaving an indelible stamp on the working class that would come back to haunt the country time after time? Thus, even if Peronist violence was no more than t h a of its predecessors, it o m n e d at a entsiafly inuppormnc: moment, After f er6ntsouster from the presidenqin 1955, he continued to incite violence during his long exile in Spain. He encouraged terrorist violence, including kidnapping, bombing, bank robbery, assassination, and even p e r rilla war. Certainly, a shafe of the blame For the blood that was shed during the repression after 1976 lies at the feet of Perdn and hk blIwers, If Perrjn is to be mndemned for using and instigating violence, what be did bentvfeen 1955 and 1973, when he was not president, pmved far more damaging to demoeratis political discourse than what he did as president.

Part of the explanation for ArgentinaS stapation lies in the country's politi~alinstability, which Perbnts mahods did much to create. The singEe most important camponent of the caalition that brought Perdin ta power was the urban warking class, He was able to manipulate the l a b r movement he had created in a way that kept its power in check, Once the milster manipulator himself was gane, and once the labor movement w a in opposition to the government rather than its political base, labor came to play an extremely disruptive role. Not until a Peronist government came to power in 1989 could the genie be returned to its lamp. It is probably safe to say that in no other country in the Third World, and in very few among the industrialized nations, h a the labx movement been so strong, h obstreperous and pawerful I a b r movement contributed to the political stalemate that prevented the government from pursuing cansistent policies to end the country's stagnation.) Perhaps the problem was not the empowerment of the l a b r movement but instead the repeated attempts to redwe its influence after Per6n w a deposed. The attacks on the f a b r movement in the late l%&served to free the unions from bureaucratic restraints by eliminating entrenched leaders and to reestablish links of wmmunieation betureen leaders and rank and file. This left the I a b r mwenent far better equipped to challenge the ~ Schoultz 1383, 89). government (Rock 2 9 7 5 ~201-202; Na, It" Not Per6nfs Fault

There are ather problems with accepting the notion that PerGn was the principal source of Argentina's economic problems. One line of thinking attempts to exwlpate Percin by arping that the hostile mernal environmenl gave him no options other than the one he chose (Fodor 1975, 2986,1981)). W e n he came to power in 19*, Argentina's traditional markets in Europe had been ravaged by war. The United States, the major trading wuntfy in the poswar period, was a producer of the same goods that Argentina wanted to eqort and thus could not take Europe" place as the country's chief market. Indeed, the United States was leading a world boycott against Argentina. Only fascist Spain would take Argentina's beef and grain, but they had littfe to give in return. Britain bouBfxt some Arlgentine eqorts but would not sell Argentina the goods it wanted, such as machinely and coal. M a t they did buy from Argentina they paid for with uneonvertible sterling, which could only be used in Britain. Perbn, like many in the late 1940s, believed that world war would wan be@nagain and kgentina would be still more iwlated. PerBn thus had littfe choice but to intensify ISE, altfioua one might quibble over haw he did it. His purchase of the decrepit Arge~inerailroads from the Britisk has been round& criticized as a poor bargain and a waste of the mantry's foreign exchange reserves, which were among the highest in

the w r l d when he took office. Nevertheless, most of what he used to buy the railroads was blacked sterling balances that were athewise worthless, From this point of view, the murce of Argentina's problems was not IS1 or even Pertjnfsversion of it but the hostile w r l d in whi& hgentina found i-tself? Even if Pertin were somehow uniquely ta blame for the country"^ problems, fie W= merely a product of his environment. Argentina created hirn. kgentina enthusiastidly voted hirn into the presidency every time he ran for the offim, each time with a higher share of the wte. Every time but one that the p a w he aeated was allowed to stand in an election, It taok the presidency, While in office, Percin inspired intense devorion on the part of his adherents that is unique in Argentine history, Mter his death, alledanee to his mernary seemed even more intense. Even if Perdn is to blame, he is merely a metaphor for Grgentina (Waismm 1987, 253). The trauble with "great men" explanations of history is that they do not explain history.

'I'he idea that Argentina's dependence on Europe ar the United States is a m;?jor or the major taus of the country's problems p e s back at Ieast a century. Already by the 1sS>Os,verbal attacks on British-owned railroads and public utilities and W,S,-owed meat paGking plants were common. In every international forum passible, kgentine diplomats assailed the colossus of the north. The level 0%nationalist rhetoric heightened during the Radical governments between 1916 and 5930, but the prosperity of the f 920s muted this potentially eqlosive issue fDiaz AleJ'andro 1970, sentiment became much more widespread during the turbufent 1930f, and much of the anger was centered an the Rom-Runciman Treaty, which many Argentines felt was humiliating* Resistance to U.S. imperidism permeated Perclin's rhetoric during the 1940s. Efy the l%&,the notion that the major industrialized muntries were to blame far the problems of the mid Writd began to seep into the thinking of academic diswurse, until then dominated by liberal ideas. b o n g the intetlecmal leaders of this new way of thinking wa;s the hgentine, Ra&XPrebisch, who headed the United Nations%~conamXR the early ic Commission on Latin h e r i c a and the Caribbean (E-), l9Ws, Ado Ferrer applied the ECMC ilpproach to an analysis of the hgentine emnomy, concluding that one of the basic obstades to industrialization W the link bemeen the pampean agro-exporters and the British (1963, 115). Dependency theory blossomed in the late 596k and soon came to be the dominant paradigm of the social sciences in La-tin America. Its influence in the industrialized muntries, especially among saciolagists, was also substantial, faime Fuchs was perhaps the most eloquent academic ta adopt the dependenq perspective in Argentina. Other Agemines who used the

dependencyframework include Ramos, An tonio, Pefia, Lebedinsky, Brodersohn, SlutzQ, and arradi, nomic dependency can be broken down into trade and ownership dependency (Waisman 1987, 70). Until the era of import substimtion, Argentina's prosperity was high& dependent on its exports, but this is no longer the case. In 1989, of eighty-three middle- and upper-inwme countries analyed by the World Bank, only nine had a smaller share of CDP going to eqorts than did hgentina (World Bank 1991, 22&221). Unlike Ganda or Australia, Argentina does not have appreciable mineral resources that it can export. Most of Latin America, however, depends on a single crop or sin@@mineral, where= kgentina's temperate climate ean and has produecd a vsriety of products, By this meaure, Argentina has a low to intermediate degree of dependency, kgentina has a smaller share of its eqorts p i n g to a singe wuntry than does Australia, Canada, New Zealand, and ~ e n v - o n Latin e h e r i c a n and Caribbean mntries, ZR short, Argentrade dependency is less than most developing countries and less than tina"~ even many industrialized countries. Argentina's dependence on foreign ownership is not particularly high either. In the early pars, mueh of Argentina's cwital was foreign owned, but this propoflion has declined dramatically. At the outbreak s f World War I, half of the country's fixed capital was foreign owned, and the figure was still one-third during the Great Depression. By the mid-1950s, only 5 percent was foreign owned (Waisman 1987,68), Fareign investment began rising in the late 195Qs,and by the 1980s most private large firms were again foreign owned. Small firms, however, hire the majority of manufacturing workers, and almost all of them are owned by nationals. At any rate, the great wealth of kgentina is its land, and almost all of it is owned by nationals. Dependenq theory has described well the msts that dependenq imposes, but the theory does not perform well as an eqfanation of the souret: of a country's poverty. Many rich, industrialized countries, such as Britain, Canada, Lwcemburg, and Nonuay, are highly dependent economid f y , politically, and miturally on the United States and other rich muntries; dependenq per se does not seem to muse povery, It does not seem to prevent a muntry from growing rapidly (far example, South fi;orea, Taiwan, and Singapore are highly dependent oa expar&) or from joining the ranks of the prosperous (for emmple, Ireland, Spain, Canada, New Zealand, Australia, and Austria). Dependency is more a symptom of a country's poverty and small size than a cause of its underdweloprnent. Even if dependency theoly could explain the source of underdevelopment, it does not seem to offer any reliable policy prescriptions. ISI, for example, was pursuetd initially as an attempt to reduce dependency, but if it had any effect, it was to increase dependency rather than reduce it. In short, dependency

theory contributes little to an understanding of the sources of Argentina's failure.

Many analysts use the Iegaq of kgentina's colonial past to explain its present stagnation (for example, Stein and Stein 1970). In the Iatter half of the nineteenth century, this befief was common arnsng liberals, who despised the traditional criolIo alture, In modern form, these idea persjst to the presenr day, Rock arpes that the founding principles of Spanish caIonia1 society were eqloitation based on race domination and tribute and that these east their shadow on the present. Golaniat structures established in the saeen th cenmty were "invariably refashioned rather than tran~nded: he arpes, In the mentieth cenfury, "economic g o m h was still primed by foreign apitaf and access to foreign markets; land tenure patterns betrayed numerous legacies of monopoly; manufacmring remained weak and mnted; and Buenos Aeresupheld its historic economic and political primacy" (1987, mii). Many authors have emphasized one of these aspects in partimlar: the ownership of a large share of Argentina's land by a small minority. Even Sarmiento condemned the Spanish form of land tenure as one of the principat causes of the barbarism found in Argentina (cited in Slatta 1983, 97). Many of these authors describe the structure of land tenure in hgentirra as prerzapitafist. This view was propounded forceblfy biy E C U C in 1959, and its currency has continued.' These authors make a variev of arguments, but mo are the mast f equently used, First, the large farms and ran&= are inefficient beeause their owners urere and are not Euffy apitafist in the sense that they do not maximize profits. Instead, they are at least partially motivated by the social prestige of owning land or hedging against innation. This leads to an inelastic supply of agricultural cammodities, since the magement af large estates is not responsive to price changes. This line of thinking has been persuasively criticized by many authors: The gist of their arguments is that pampean agriculture w a dynamically responsive to changing marker mnditions until the 1 B Q s and achieved levels of productivity comparable to those of the United States and Canada. The stagnation of pampean agriculture after 1930 resulted from depression and hostile government policy and not from a precapitalist mentality. Moreover, the ownership of land on the pampas has bemme steadiiy less concentrated since then. The second argument made by thase who blame the eountq's woes on the structure of land tenure is that small farms are inefficient because they are rypimlly operated by an impoverished tenant with little incentive to think about the long mn. This leads to a lack of investment and low productivity. The evidence presented in Chapter 8 demonstrates that the small tenant

farms in interior are mu& less productive than large ones. Whether or not the law productivity of these smatl farms means tfiat they are inefficient is addressed in Chapter 12.

Another line of thinking blames Argentina's stagnation on its Latin or Mediterranean mlture. malities such as authoritarianism, intolerance, pemnalism, individualism, mrporatism, patriarchy, fatalism, lack of initiative, militarism, and antipathy to industry are said to have been imported from Spain and, in some formulations, from Italy. m i s idea dates back to at feast the early nineteenth mn.hary, when de l[bquewille explained the eontrast between the United States and Spanish h e r h on the basis of cultural difkrenees. Weber's analysis of Protestantism and Catholicism and Parson's analysis of Spanish &erica developed these ideas further, and many others have followed in their footsteps.' Several authors have applied these notions to Argentina? mere are a varieg of problems with the culturat eqtanation for emnomic backwardness? Perhaps the most important is that culmre has been a terrible predictor of economic performance. In the early postwar years, for example, it was alleged that the supposedty antidevelopment cultures of South Korea, Malaysia, nailand, and China would keep those countries from ever developing, yet they are now the fastest gowing in the world (Belassa 1988, S 2 7 6 275). ff the Hispanic or Mediterranean cutcure is supposed to keep b r i n America from developing,why then are Spain, Italy, and Portugal now among the mast rqidly growing countries in Europe? Culture is cntciatly important in understanding how societies work, but a society's m1tu;re is laae& a reflection of the conditions in which the society hnctions, a l t u r e can take on a life of its awn and may have considerable inertia, rf the underlying reality of a society changes, hwever, its m l ~ ise soon fsrced to make some sort of adaptation. Political culmre is central to the arpment in Ghapters 9 and 10. Nevertheless, my analysis of culmre is always mated in the economic conditions the society faces, Other Theories of h e n t i n e Strrpation

The a h v e eqlanations for kgentina's failure are the ones that most frequently appear in the Iiterature, but there are others that also merit mention. Di Tella and Zymelman (1973) argued rhat hgentinak diffimlties began with the cfasing of the frontier. Until then, growth had been based on the opening up of new lands. When ail of the useful land was exploited, a new path to develop me^ had to be found. In the United States, Canada, and even Australia, innovative entrepreneurs led the way, In Argentina, the: entrepreneurial class was accustomed to a pmcess of capital awmulation based on rent and m g h t governnent subsidies or legal monopolies that

stifled gowth. The end of the frontier thesis has not garnered many adherents. Perhaps the reason is that it mere& pushes the question back entrepreneurs act as they did? Di Tella one step: Why did the -Mine and Zynelman's unsatishaory anwer is that the hgentine response was nomal and that the U.S. and Onadian responses were the exwption. Jorge S6bato (1988) developed yet another explanation. He argued that the Argentine "dominant class" m a l e a d in the early decades of this century in a period of extraordinary price instabiKq. Variable prices made investing in fixed capital risw. The richest rrsra~ckmsw r e able to hedge their risk by combining grain grawing with cattle fattening. Since the grain was praduwd by tenmt farmers and wntractors, and mttte were fattened an gmtures mwn by the tenants, the estancier~did not have to own much f ~ e d capital. The benign pampean climate further differentiated the Argentine mtancks f r m the more capital-intensive farms an the Nart-h b e r i c a n prairies: on the pampas, cattle can graze all winter without the need far fodder, which requires fixed capital for production and storage. Unlike their counterparts in the? other "new wuntries," the dominant class in Argentina never acquired the habit of investing in fixed capital. Since most technological change is embdied in fixed apital, technological proFess has been slow, me Argentine proclivity far financial and eomrnercial activities, and dislike of industry that requires heay fked investment, was imprinted on the dorninant class in its formative years. It continues to shun f ~ e investment, d and wnsequentfy the &gentin@ emnomy stagnates. S6batots crucial empirical assumptions have been criticized (Sawen 2994). The industrial efites of the United States during the early stages of development faced geater price instability than did the Argentine dominant class during its formative: years. Furthermore, Sgbato has ovenrated the effect af the harsher North h e r i c a n winters. Even if SBbata were carrect in his argument about the fornatian of the dominant c l ~ she , annot canvincingy explain why the dass could not adapt when faced with a different economic environment. Why should one believe that the Argentine e m cieros would creatively and agresively respond to changing market conditions between 11860 and 1930 and then fail to adapt to new eonditions after 19307 One does not need to posit this kind of inflexibility or culhlral lag on the part af the dominant class in order to u n d e r ~ n dtheir reluctance to invest in manufacturing, since there are more plausible reasons that have to do with comparatiwe advantage* At. any rate, other important interests mse to power after 1930, and SAbatok sweption sf the dominant elms must be reformulated (Bortantiero and Nurmis 1969, 30). Carlos Esctld6 (esp. 1983, 1987, and 1988a) argues that Argentina's stormy refatians with other countries, in particular the United States and Britain, have imposed substantial,wsts upon the esnorny, thereby cantributing to the country's stagnation. Escudk contends that Argentina has pursued its foreign pofi~ywithout any cost-benefit analysis, Few benefits have

been obtained and the casts have been very high. During World War II, for enmple, hgentina smbbornly resisted declaring war on Germany long after its defeat was certain, The United States punished Argentina fbr its neutrality with a b y w t t that crippled the emnomy in the late 1940s. hgentina crould not buy U,$,machinery, such as oil drilling equipment, that was cmcid to its development effort, Moreover, the United States prwented other countries from selling desperatelyneeded raw materials to Argentina and did not permit Europe, exeept Eor fascist Spain, to import kgentine wads (&ad& 11983,253-3M), During the 1970s, extreme nationalism &mast led the countFy into what would have been a eatastraphie war with Qile, and during the 198&, it did produce a costly war with Britain over the Falkiands. Even after the militaly government resigned in disgaee, the new democratic government pursued a policy of belfigerent provacation, Britain's response wm ta harden its position and declare a 21)o-mile ex~lwsionzone around the islands, The islainders naw have the hi&est per capita income in the hericas, thanks to the royalties derived from fishing rights in the exclusion zone. NW enduwed with an independent saurce of incame, the islanders will never consent to Argentine sovereignty.. Xn addition to these commerciaf mnsequenes, strident nationalism, in Esmdbk skew, encouragesauthoritarianism,militarism, and dogmatism, none of which promotes economic progress (Emdb 1980, 185-189). Since the 194b,therefore, Argentina has repeatedly incurred substantial costs because of its ~ationalistforeip policy, and these costs are part of rhe evlanation fsr the catlntry's stapation, h e n t i n e SLamatian and the Xrrkrior

Qne of the purposes of this book is to extend the conventional list of eqlanations of the great Argentine failure by including the role of the normafly invisible interior. The conventional fist omits the disproportionate flaw of resources from the pampas to the interior that was a major reaan for the bmkruptey of the federal gavernrnent in the late IS)& and Eor the infiation that plaped the economy (see Chapter XI).. In addition to e~endingthe conventionaf fist of evlanadons for Argentina's failure, this book also illuminates of some of the standard eqlanations for Argentina's stagnation. Surefy a major c a s e of the cowtly's problems is the inefficiency brought about by import substitution industriali%ation. The conventional view is that the gavernmenttsprornotianof IS1 began with the Pinedo Plan in the 1930s and was accelerated and consolidated by Perrin in the 194b. In faet, IS1 began in the 187b with the sugar industry in the Northwest and was part of the covenant that gave birth to the Argentine nation. For the next siwty years, the policy of promoting import sufistimtes was canf_inedto the interior. Chapters 4-7 show that the em-

nomies of the interior are with few exceptions still based on produeing import substitutes. In addition to sugar, these include wine, tobacco, yerba matb, cotton, tea, rice, tomatoes, and fruit, virtually all of the major products of the interior except wool, The long histoy of IS1 in Argentina, the first half of which was exclusivefy in the interior, helps us to understand why IS1 in kgentina has been so intense and why ridding the crzuntry of IS1 has been sa difficult. The invisate interior stands behind other sandard eqlanations of Argentine stagnation as well. One of these eqlanations focuses on the violene and repression in hgentina"s political histofy. a a p t e r tO argues that at feast part of the authoritarianism of Per6n and subsequent leaders derives from the political culhlre of the more traditional parts of the interior and its inwbation of authoritarian political behavior, In addition, it is shown that Perdn never would hay(: been elected in 3946 without the interior's votes. PerBn's support in the interior grew after 1946, and the interior mntinues to be a pivotal part of the Peronist coalition. If Percin is to blame for Argentina's problems, then the interior carries a disproportionate share of the blame far Perdn, h o t h e r explanation for Atgentinds starnation emphasizes the culmre it inherited from Spain or from eolonial Spanish h e r i e a . The pampean economy, however, was created by a wave sf immigrants, the majority of whom did not come from Spain and who arrived almost a century after independence from Spain. ansequentfy, the Spanish or eslonial legaq that burdens the Argentine economy is transmitted to the country to an important degree via the traditional interior, especially the Northwest. Stitf another explanation for Arl;entimts stagnation is the economic costs imposed by excessive nationalism. The interior plays a disproportionate role here, too. It has already been shown in Chapter 1 that intellecmals from the interior played a prominent role in artiwfating nationalist: ideas and in struczmring an educational system that would inculcate nationdist values and w h s in the: nation's youth. Chapters 10 and I1 demonstrate the effect of the interior" nationalism on the policy-making process at the na:tional level and in the regional allocation of the federal govc=nrme~"s resources. In short, a study of the interior not only adds to the fist of conventional eplanations of the great kgentine failure, it alw allows us ta understand beaer many of tkase eqlanations, Notes 1, For example, Dim Alejandro 1970, chap. 2; W. Smith 1989; and Snnithies 1965. 2. b r example, see Moreno 1966, 77-78; Alexander 3.951, 8-11; and Pui~rcis 19"7, 69% This strgment has been most foreEixlly restated by Germani 1980b, 10S115. See Chapter 10 Belw for an eaeaded diwsion af thc: airwmeat. 3. T%is emphasis on political stalemate has b m m e part of the csxlventional al and palitial reality of Argentina in the last hdfantury. utidona regarding the

48

Understanding Argentina's Stagnation

Examples of those who have propounded the stalemate thesis are T. Di Tella, O'Donnell, Portantiero, Waisman, Wynia, and Corradi. 4. It should be noted that Argentina has always been at the mercy of the demand for its exports. The sixteenth and the early eighteenth century are other examples when long periods of stagnation were caused by weak export demand. 5. CIDA 1%6,19; Gilberti 1964,8233, and 1962,120; Ferrer 1%3,21,114-115, 185; Fuchs 1965; Scobie 1960 and 1964; Solberg 1985 and 1987; Beker 1973, 147; Manzanal 1988, 319; CONADE 1964, 10; Stein and Stein 1970, 137, 145; Tenembaum 1946, 65-93; Monteagudo 1956, 27; Oddone 1956; Gori 1958, 14; Jefferson 1930, 142; Taylor 1948, 156; and Weil 1944, 87-1 11. 6. Cort6s Conde and Gal10 1967; Laclau 1969,291-2%; Flichman 1974,407, and 1982, 95-100; Diaz Alejandro 1970, 183-189; Obschatko and Janvry 1971, 284; Murmis 1978; Barsky and Murmis 1986,69ff; Llovet 1988,253ff;and J. Sibato 1988, 26-30. 7. See for example, Harrison 1987; McClelland 1967,217-221,226-228,406411; and Gillin 1965. 8. For example, Fill01 1961; Kozuij 1988, esp. 109; Weil 1944, chap. 3; Crassweller 1987, esp. 2, 94; and Calvert and Calvert 1989. 9. See Waisman 1987, 95-117, for an extended review of this issue.

The Economies of the Interior

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The Northwest Each of the n e a four ehapters is a. detailed emmination of one of the regional subeconomies that make up the interior of Argentina.' The purpose of these four chapters is to begin to analye the bxkwardness aE the emnomies of the interior and to lay the basis for an understanding of the role of the interior in the past and future ecbnomic development of the Argentine nation. The Northwest is mmposed of six provinces: Tucurn&n,Salta, Jujuy, La Riaja, Catarnarca, and Santiago del b t e r s , The eastern part of the region is a continuation af the broad plain that borders the Paran6 River. Santiago del Estero is almost entirely on this plain, as are largc: seaions af eastern Salta, TucumBn, Catamara, and I;a RIQja. The western part of the regon is mountainous, The entire redon is arid, and, with few exceptions, irriga-

tion is necessary to carry out anything beyond subsistence agrriwltrural and

pastoral actilt.ities. In the early colonial period, the Northwest was the most dense@populated region in sauthern South h e r i c a . In the parts a l the Noflhwest where irrigated n ~ m l f u r was e poss&le, Indians had settled long before the Incan and Spanish esnquests. The mnquering Spanish inmrporated these Indians into the New \nJorldtsversion of feudalism. Where the land was too arid to support irrigated agriculfure, there were wibely scattered hunting and gathering societies at the time of the Spanish conquest. In eastern Salta, these Indians were left alone until the beanning of the twentieth century. In the highlands of Salta and fujuy, the indigenous population was brought into the Spanish colonial system paying land rents in kind. In La Rioja and Catamarm, the nomadic herders were simply exgelled through disease or conquest, Where crioZZos displaced the indigenous population, small-scale irrigated agiculture appeared in the few places where it was possible. Elseuvhere, extremely land-extensive cattle breeding developed based on cattle exports to Ghife or Bolivia,

In ealonial times, the emnomy was organized around suflporting silver mining in fotosi, blivia, Independence from Spain in 1810 swered the klivian connection, and the Northwest settled into a timeless stagnation in which, generation afxer generation, little changed, This was especially so outside the tiny provineiat apitals. l'%ere, the economy, the technology, and the culture at the end of the nineteenth century were virmally the same as they had been two cenhlries earlier. The region was cut off from the rest of Argentina and the world during most of the nineteenth century by pro.iain;cial tariffs, nearw continuous war, high transportation wsts, and hostile Indians, and 1870sp r o d u d profound changes that shook the region to its roots, Provincial tariffs began dedining in the I paign of the Desert eliminated the Indians from pampas in the late 1870s: Most important of all, the railroad that reached Tuaam6n in 3876 and Jujuy in 1891 replaced the oxcart. Small-scale artisanal manufacturing had been declining since the loss of the Bolivian market in 1810 but nearly disappeared in the last quarter of the nineteenth cenmry, unab)e ta compete wirh the imports from Europe and the parnpas that the railroad made possible. 'The number of t e ~ i l workers, e far example, fell by aver half b e ~ e e nf 869 and 1895 (Rutledge 1987, 155-156)" Subistence agriculture remained in only a few isolated indigenous communities. Cattle breeding began a precipitous decline in the 1860s that cantinued well into the mentieth century. M a t replaed these activities was the large-scale cuttivatian of cornmereia! crops and the factories to pracess these products. The first, and still by far the most impartant af the sugar. Repeated crises of overproduction t h e first was in the 18 ave enmuraged some diversification into ather crops, such as tobarn, citms fruit, cotton, and tomatoes, but sugar cantinues to dominate the regianal emnomy.

The production of large quantities af sugar in the Narthwst began in the f 87b, when the railroad from Buenas Aires reached Tuamin, Toward the end of the nineteenth cenmry, as the railroad pushed northward, sugar cultivation spread into central Salta and eastern Jrzjuy. Sugar produdion went from almost nothing in 1876 to I(43,Wmetric tons twenty years later, Ely I930 the industry produced sver 380,W tons of sugar annuafly, and by 1940, 540,000 (Rutledgr: 1987, 163, 188). During the 1980s, pmduction hovered between 1.2 million and 1.6 million tons (Huici and Jambs 1989, 173). The present government's liberalization of the emnomy has produced a sharp drop in sugar production, which is now around one million tons annually. Tuwmbn continues to dominate sugar production in kgentina, producing 55 percent (down from 70 percent in the 1980s) of the national harvest; Jujuy accounts for over one-quarter, and Salta, one-eighth.3

The precipitous declines in provincial tariffs and transportation wsts in the last third of the nineteenth eentnixry were not by themselves sufficient to propel the new industry, sin= sugar .could move in either direction on the new railroad. Sugar from the Gribbean was so chestp that the arrival of the raifroadt would have spelled the end to Northwestern sugar crultivation without vigorous intelvention by the government.' The single most important type af assistance @ven by the government was the pmtectirve tariff. Between 1835 and 1882, the sugar tariff rose gradual& Erom 15 percent to 25 percent. In the early 18W, the tariEf on unrefined sugar (then, the principal product of the hgentine industry) ljvmped to 43.5 percent, and a few years later to 108 percent, As the sugar produmrs of the Norfhwesr increasingty produced refined wgar, the tariff on this grade w a also raised, reaGhing 286 percent in 1912 (Rutledge 1987, 158; Guy 1988, 353fQ. By raising the price of sugar to consumers, the tariff impased a transfer of resources h m the consumers, largely on the pampas, to tbe interior. Moreover, the Brazilian government responded almost immediately to the tariff on sugar with duties on hgentine meat, so that panpean cattlemen were hurt as well (Rock 1985, 233). The national and provincial governments gave other important assistance to the sugar industlry. nrough a "flaod" of wedits and bank loans from the National Bank and h m other banks with goverment baeking, the s u p r industty had resources available to install the latest tednofogy in sugar refining (Santamaria 1984, 126; see also Rutledge 1987, 15&-161). The first modern sugar mill began operating in 1884, and dozens more soon foflovved, Federal government e k r t s ta eqand sugar production were so successfuf that they quickly ran up against the wall af inadequate local demand. By 1894, produetian already exceeded domestic wnsumption, and by 1896, ammulated stocks of wgar were equal to almost two years" csnmmption (Rutledge 1987,163). The government responded by subsidizing the export of sugar until the immedide crisis passed, Sugar d Cheap Mar

Even with the railroad, the proteaive tariff, and generous subsidies, the rapid expansion of the a g a r industry would have been impossible without a plentiful supply. af cheap l h r . In the last thirvfive years, mechanized harvesting has reduced the demand far hawest labr, but even now, sugar cane cultivation in Argentina takes thirty-&@to forty-five times as much labar per hectare as mybeans (Nmzanal and Rofman 1989,183). In the hundred years before this mechanizatian, cane production was far more I a b r intensive and required even more copious quantities of unskilled seasonal mrkers than naw, Furthermore, the mills that process the cane into sugar require many thousands of workers as well.

To understand the nature of the harvest and sugar mill labor force, one must understand the strucmre of land tenure in the sugar-producing areas. The Spanish conquerors divided the region into huge latifundia in the sixteenth and seventeenth centuries. The arehetyl~lalpattern was for the leader of the calanizing expedition to daim a substantial amount of land for himself and to grant his chief lieutenants major estates as well, the size of the estate refle~tingits ownerk position in the military hierarchy. In same areas the original royal land grant forbade subdivision of the land through inheritance. The ownership of some of these estates has been shuffled around and others have been extensivelysubdivideff, but many of them have remained intact, In Tucunngn, some of the estates have been divided into minifun&os, tiny famify farms too small to support a family. Even there, the majority of the sugar is grown on large estates? The smallest Mzinifirdios use only the labor of the hrnily that owns them, but the larger hrms require wage labor. Not only are large quantities of wage fabsr needed in sugar production, but the labor demand is concentrated during the five or six months of harvest. n u s , the sugar growers are most eager to find workers they can send home at the end of the harvest so as not to pay them during the off-season, When the modern s u e r industry began in the 21870s in Tucumin, the first harvest workem were Armno Indian slaves, prisoners of war from the C a n p a b of the Desert that was being waged at the time on the southern pampas, This source of labor dried up at the end of the war (Vessuri 1.977, 2QI). In the 188&, Rocak army turned north to paci@ the Indians in the territory seized from Paraway during the War of the Triple Alliance fought in the late 1.860s. mere were several Indian tribeethe most important of whi& was the Wichi, often allied Martam-scattered a b u t eastern Salta and what would become the provinces of Formosa and Ghaco. They were hunting and gathering societies thaf had little eantact with Europeans or even the fncas that preceded them. The army established a series of forts in the region, and the soldiers in these forts recruited Indians to work in the sugar harvest, The flow of workers was insufficient for the burgeoning sugar industry. Until 2911, most of the Chaeo was not under the army's cantrol. In that year, a new ~ampaignwept through the region and finally pacified the Indians, The preamble to the presidential decree authorizing the campaign stated that one of its major objectives was to obtain workers for the sugar harvest (Rutledge 1987, 177). The sugar estates paid the Indians in kind* mey were often paid part of their wages long before the harvest and were forced to work to pay off their debt, The balance of the wages was paid at the end of the harvest, leaving the oppormnity to discharge the workers a few days early and pay nothing at all because of some alleged breach of the invariably verbal contract. On occasion, local chiefs were given the wages of their subjects,

whom they compelled to work in their place. The low standing of the Indians gave them no basis to challenge their mistreatment. Physiml coercion and carporal punishent were routinely used (Reboratti 198S)b, 123). Wages were far lower than in other parts of Argentina at the time, and the working day (frequently melve hours) was longer (Rutledge 1987, 178). The Ghaqueiian Indian tribes were not a very satisfactory saurce of labor! Their numbers dwindled from disease as typically happens when Eurspean populations first impinge on native hericans. Furthermore, the Indians were desultory and ineffective workers, since they were accustomed to the rhythm of life in a hunting and gathering economy, Thus, the bulk of the Xabor supply for the sumr hanrest had to be reenaited elsewhere. Nearby prsvinws soon =me ta be the principal wurcs: of sugar workers (Rutledge 1987, 278ff). Santiago del Etera, Catamarea, and fia Rioja had only a small amount of irrigated agieul.ture. Subdivision of irrigated land through inheritance produced tiny plots unable to support a family. The cattle industry mllapsed after the close af the cattle trade with Chile in Deforestation in the late nineteenth and early ~ e n t i e t heenmries denuded most of Santiago del Estero and the wooded areas in eastern La Rioja and Catamarm. me resulting desertificat;ion left the population impoverished and underemployed. mese provinces pravided a fnrithl recmiting ground far the cane growers. Like the Indians of the Cfiam, the C ~ Q I I O S aE Santiago del Estera, Gatamarcrr, and La Rioja were incorporated into a migrant fabor system that used perpetual indebtedness to force compliance. Sinee most of the peons were illiterate and innumerate, it was difficult to prevent frequent abuses, such as recarding fictitious loans or failing to reeord payments (Santamaria 19&f>,70). Shop owners often served as recruiting agents for the sugar estates. Many landlords eeased cultivating their land and lked on the wmmissions they earned by sending their peons to the sugar firanrest (Santarnaria 1984,129-121). Some sugar mills in Tueum6n purchased land there and in surrounding pravinees, The tenants had to pay their rent in l a b r serviec: during the sugar hanest rather than in cash, S~garU d e r g2e Radi'caX Governme- and &c) ComorrJanct;a

The Radial governments (1915-1930) were less sympathetic to the sugar industry than the ennservative ones that preceded them. During Uiorld Wair 1, the government permitted the importation of sugar and set a maximum price for the domestic product. The industry evaded the price ceiling by shipping large quantities of sugar abroad and then reimporting 160,W tans (Rosenmaig 1988, 93-94). Betvveen 1916 and 1921 they lowered the tariff on sugar to 80 percent (Supplee 1088, 75). By 1927, the tariff was down to rau&ly 60 percent., but the drastically undervalued peso

meant that the rate of effective protection act-ually rose during the 1920s (DimAlejandro 19m0,290,298). In response to several violent I a h r conflicts bemeen 1919 and 1922, the national and prwincial governments passed a number of labor reforms (Santamarh 1986,73-S). mese included a minimum wage, an eight-hour day with premium pay far overtime, and restrictions on work by children and women, The refusal of the sugar industfy to abide by these new laws provoked more violent strikes and lockauts, The government of Tucum4n responded with repression by the poliw and the army along with attempts to mediate the conflict. The erisis of overproduetion returned in 1926 and 1927, prompting renewed effoFts by the government to Gope with the prablem, One response was a provincial law requiring the sugar mills to obtain no mare than half of their sugar cane from their own estates. This guaranteed the minifirndktas a market and pushed up the price of land, which in w n enwuraged the sugar mills to sell or rent their land. The naivnal government in X928 ratified the provincial law and established a syby whieh the pvernment: fixed the price of cane.' Sugar cane cultivation began in Srrlra and Jujuy at the end of the nineteenth cenmry, but. it experienced a period of eqlasive gowth during the l%&,despite the unsympathetic Radial gvernments. The sugar was grown in the sparsely settled Ramal, where there was no nearby labor surplus, This contrasted with Tucumiin, where much of the hawest labor lived nearby. AwrdEng to a 1937 census, over 90 percent sf Tuwmano sugar farms were so small that they muld not EulIy enptay the Iabor of their owners, who thus were available to work for the large estates and in the sugar mills (Santanaria 1984, 125). The northern sugar estates initially obtained their liabor from sources that Tucumfin had pioneered, the Chaquefian Indims and the impoverished peans from the southern part of the Northwest. By the 192@, however, the pace of eqansion of the sugar industry in Salta and Jujuy provoked a severe labor shortage that required some ingenuity and ruthlessness to solve. Some plantations continued to use substantial numbers of Wichi into the 1940s, but the rest found another source of labor, In the Puna-the high plateau or algiplano of werstern Salta and Jujuy --lived several partially assimilated Indian tribes. Absentee landlords who resided in the provindal capitals owned the land, The ewnomy of the Indians was mostly pastoral (sheep, goats, llama, and alpaca), but they also cultivated same quinoa, potatoes, and alfalfa, h artisanal textile industry produced a cash income, and in some areas there was gold washing as well. The Indians paid their rent in wool or textiles. , large sugar estates of Safta and Jtrjuy began BegEnning in the ]LE&the acquiring the lands on which these Indians lived! The process was initially aided by the provincial gavernment, with the connivance of the nat:ional

government, which expropriated the lands for the use of the sugar estates, 1By the 1930s, the land was being bouet outri&t. The largest landowner in the Northwest, Robustiano Patrcin Costas, possessed almost 1 nnI"llion hectares (about 3,500 square miles, an area half again as big as Delaware) in Jujuy and Salta. The object of this aquisition was not the meager bit of poor quality w o l that the region wuld pro&= but rather the people who lived there. Instead of paying their rent with w o l or textiles, the Indians were now required by the new landowners to pay with labor service.. At the beginning of the harvest, the Indians were rounded up by men, often armed and using d i p s , and transported to the valleys ta cut the cane during the six-month harvest. In some departments, half the men were carried off to the harvest (Rebratti 2976,2%), While they wrked, they were overseen by foremen vvho arried firearms and liberally used the whip when a fist, boot$or verbal humiliation did not motivate the desired work; habits. The foremen were often deputized as poliwmen and muld use physical coercion with impuni-

v9

Not surprisinlZfy, the wages of these hawest workers were wry low, If they were paid anything, it only covered the food they ate while working in the harvest. Treatment.of workers fram other regions was only marginally better, Tmicaily, their wages w r e in kind or script that had to be spent at a company store, where p r i w were far above those prevailing elsewhere. Workers were o&en cheated out of their wages, with little recourse. The response ta any protest or challenge of the employer's authoriv was immediate dismissaI if not inarwration. Nf forms of wllective action were rigidty proscribed. Hawesting sugar Gane by ma&ete is backbreaking woxk; the: workday was twelve hours, The workers lived in squalid compounds on the estates in miserably precarious shelters." World sugar prims collapsed at the beginning of the Great Depression, and cheap imported sugar once again threatened the Qlrgentineindustry, In i1930 a csup d%t.at.led by a member BE one of the wealthiest sugar-praducing families of Salta removed the Radicals Erom office; the new government quickly raised the tariff on sugar (Rutledge 1987,187). Until 1943, government leaders continued to be sympathetic to the agar industry.

In the late 1940s, the Peronkt gavernrnent encouraged the gowth of labor unions among the cane wcrrkers and instigated modest reforms in the treatment of the Indians from the Puna. The use of forced recmitment was ended, Wipping or other forms of wrporal punishment were, at least an paper, prohibited. The overseers were no hnger permitted to wrry firearms. Wages had to be paid ~ i c c monthly : instead of at the end of the harvest. The government expropriated land in the Puna owned by the

largest sjugar estates, although it did not redistribute the land to the Indians who worked it. Besides the decline in the use of violence, not much changed for the harvest workers. There were unions, but they spoke mostly for the factory workers, not the field hands. When Perrin fell from power, the unions lost mu& of their power to help anyone (WhiteEord 2977, 101IW),In the h n a , the use of debt, which had proved sa effective in recmiting workers in La Rioja and Catamarm, supplanted the lash, ?To replwe the Indians who would not come down from the hialands without physical coercion, the sugar estates bctgan to recmit large number of Bafivians, who soon came t s comprise the bulk of the harvest lahar force, Conditions for the sugar workers have improved little sin= then, Even today, the fieldwarkers receive migrable wages and live and work in terrible conditions, In Salta and Jujuy they live in compounds with hundreds of residents for the f i e or six months of the hamest. The housjng is without nrnning water, electricity, or sewers, and as many as three families crowd into a room of four square meters, in Tucum;in, the hanest workers often build their own houses with mud or canvas walls and eane roofs (Neffa et al. IIIS, 99). Peronist policies toward labor in the sugar industry pushed up the wages of field hands, producing a dramatk profit squeeze, In IlrcumBn, many estates sold or rented their land in tiny parcels to former employees. City dwellers bught much of the land and employed wage workers or tenant farmers (Yanes and Gerber 1989, 49; Lecin 1976, 250). n e r e were already far more rnhifindi~sin the province than in Salta or Jujuy, but under Percin, the process of fragme-tion of land ownership took a big step faward. Sugar Since $the First Pedn Gover~nre&

When Perbn was deposed in 1%S, the government began f ~ n cane g prices paid to the growers based on its sugar content, not its wigXlt. The gowers responded toy planting cane with a higher sugar content, and the immediate result was another crisis of overpradu~ction, The government answered with evort subsidies. The wrld price of sugar wm unumally high: in the early 196h due to the failure of the European beet crop. Q o r t subsidies and high prices led to a surge in Argentine sugar production. When the international sugar price fell in 1955, the worst crisis ever hit the Argentine sugar industry, The federal government reacted to the crisis with several measures aimed at reducing sugar production. In 1966, growers were allowed to produce only 70 percent of their 1965 hamest, and the quota was reduced again the foUowing year, Furthermore, by 1967 the quotris for all farms with 3 or fewer he~tareswere caneled entirely. The government clused several sugar mills in 1966 and more in f 967, In Tucumrin, many sugar estates that were

in the most desperate financial situation responded to the crisis by again selling their land to the workers they were sacking, creating still more minifundios (Vessuri 1973, 214). Sugar production in Tucum6n fell by half in two years, while sugar prices dropped by 25 percent, producing a disastrous dedine in income for sugar producers (Baneo IgfSS, 23-26). A fifth of the province's population emigrated within a few years (Rosenmaig 1988, 97). Even after considerable diversifiation inra other crops and the heavily subsidized growth of manufacturing in Tucum&n,cane cultivation and sugar refining in the 19m still amunted for over one-quarter of the gros provincial product (Tmmne and Lizarraga IW, 77). Until the Menem government decreed an end to the y t e m in 1991, a ccrmplex maze of price supports and praduction allocations regulated sugar production. A branch of the federal government, the Diretci6n Nacional car (DNA), annually fixed the price of sugar, the volume of production, and a quota for each producer that depended on the previous year's production, Obligatory quotas for sugar export were assigned to e x h mill if projeded production exceeded projeaed domestic demand, Besides protective tariffs and price controls on eane and srrgar, the national government subsidized the industry in a variev of other witys. Wen the world price of sugar was low, the gcrvernment subsidized exports. In 1982, Eor example, eqorted sugar received a 25 percent subsidy, not ineluding the subsidy for the import of capital p o d s used in the pracfuction of sugar for eqort* Eqorters of praessed foods that use sugar as an ingredient received a subsidy that ampeasated them for the difference beween the domestic priee and the lower world price of sugar. Furthermore, until 1989, a ceiling on the production of fructose (made from corn or grapes) prevented greater cgmpetitian from this type of sugar.'" One-third sf the cane crop during the 1980s was used for making alcohol that was mixed with gasoline for he1 (Earriga 1991, 2W), The government established the price of alcohol on a cost-plus basis to insure the profitability of its production. In the late 29W, alcohol subsidies cost the national pernment $75 million (U,S,) per year (Oarriga 1991, 2M). Until 1989, the sale of gasoline not mixed with alcohol in the provinces of the Northwest, the Northeast, Santa Fe, and Entre Rhs was prohibited, thereby encouraging the production of alcohol for automotive fuel, The cost of producing alcohol was three to six times that of gasoline.12 Thus, without the requirement that aluthol be mixed with gasdine and the federal subsidies, no aImhol would have been used as automotive fuel, implying a one-third drop in the amount of cane sugar demanded. Furthermore, the government faed the price of gasoXine as well, and this implied a hrther subidy to alcohol production (Carrip 1991, 18&-193). The national gavemment did not tax atcahol used for fuel, although gasoline is heaviXy taxed, impJying yet another implieit subtiidy to the sugar industq (Baracat and Satazar 1985, 158).

The federal government indirectly subsidized the sugar industry in the Northwest by supporting provincial gavernmnts in the re@on, As dismsed at some leash in a a p t e r 311, provincial governments have received federal governmentfunds through several diEerent revenw-sharhg programs. Over the decades, the provincial governments in the Northwest have subsidized the sugar industry. in a variety of ways, Without a w s s to federal revenues, they muld not have been sa generous. Furthermore, provincial banks lent vast sums of money to the sugar industry, and the national central bank bailed out the provincial banks when these loans turned sour. The federal gavernment has also subsidized the sugar industry by assisting the building and operation of dams and canals used for irrigaian, Most of the land used to &rawsugar grown In the Northwest is irrigated, Both the provincial and federal governments subsidized the c;onstnrction of most of these irrigation neworb and continue to operate them without charging the user the full economic cost of the system, ljvhich wuld include paying back the eapital investment (Connisibn de Tierras Aridas 1878, 2f22)*

A summary measure of the benefics received by the sugar producers is the differenm betvveen the: Argentine price of sugar and the world price multiplied by the amount of sugar sold, By this measure, in the late 1980s, the sugar subsi* averaged over $200 million annually (Artana 1991c, 24). In 1991,the Menem government eliminaed virtually all sugar subsidies by presidential decree, The government has reduced most tarifi, but sugar is one of the few imports that have an additional protective tariff on top of the flat rate applicable to all goods (Campbell 1992, 3). This tariff; however, was not sufficient to prevent the import of 2W,OOQ tons of sugar in 11293, Sin@ the start of the arrent ewnarnic plan, sugar production has fallen by 36 percent in Tummbn, with its tens of thousands of unp~oductive minificndktas, and by 24 percent in Safta and Jujuy. By 1992, the price of sugar had fallen by over 40 percent from its level in the late 19811s, although it has since recovered some of the lost ground." The contraction of the sugar indust-r_lrin Tuwmhn has displaced Ernm the land an estimated 100,aOU people, who have crowded into shantytowns ringing the provincial capital. If the government eliminates the extra taria on sugar, productlan is likely to falf stiff fclrther. In the event that MERCOSUR ever bcwmes at reality without sped81 protection for Pvgentine sugar, imports from Brazil would destroy much af the Argentine industry, Given its central importance to the Nsrthwest, this would produce e~raordinaryhardship for the region,.

The mot of the sugar industryk problems is low productiviv. Sugar cane yields in hgentina in the late 2 9 3 0 ~for ~ exampie, were the lowest among the world's ten largest producers and only one-seventh of the average

yields in Hawaii. By 1969, cane yields had improved considerably, although they were still far bdow the more productive growers. A prob;abfe reason for fome of the improvement was the withdrawal of the least productive growers during the terrible crisis of the late 1960s. In the last half of the 1980s, yields were actually 20 percent below those of the first half of the 197h. &parent@, the less productive growers reentered the market, bringing down the average yield. According to unpublished data from the Foreign Agricultural Service of the U.S. Department of Agriculture, Argentina's srrgar cane yields in the early 1 were less than half those of the most productive country; among the thirteen largest eane sugar growers Argentina ranked ninth. In the last few years, yields have declined as low or negative profit rates in sugar cultivation have led to disinvestment." The most important reason for these low yields is geography. Almost all Argentine sugar is grown south of the tropics. The weather is too cool and the sunshine insuEficknt ta produce the yields that more fawrably situated muntrics can obtain. Moreover, most of the sugar in the Norlhwest is gown on irrigated land. Rmssive irrigation, encauraged by its artificially low cost, has produced salinization, wterlosing, and cnnsequently lower yields. Proper drainage would meliarare these prohtems, but drainage canals are prohibitively eqensive, Moreover, Northwestern sugar must use unproductive w r h r s , IBolivians still make up the bulk of the harvest fabar and work in canditions that one leading newspaper of Buenos Ajres recently called virtual slavery (a&, February B, 1W2, p, 28). In Tuarngn, unproductive family workers canstimte a substantial share of the sugar labor force, In the late 198Qs, sugar producers with fewer than 20 hectares made up over 90 percenl of the sugar farmers in Turnman and produced over one-third of the harvest.'' Yields in cane production in Tucurrran are one-half to WO-thirdsof those in Salta and Jujuy, where large estates using wage labor predominate." Domestic mnsumption of sugar has declined in recent years fGuzm%n 1986,29), Costly Afgentine sugar has trouble finding markets abroad, even with substantial subsidies, Sugar ecports are e~reneiyvolatife.Fbr a halfcenmry beginning in the Great Depression, the United States imported sugar at several times the w r l d price in quotas allocated to each cuuntry, including Argentina. The United States suspended the program in 1974. When it was reinstated in 11982, both the premium paid over the warid price and Argentina's quota were much smaller than before, In the United States, the werldk llargest importer of sugar, consumption per apita has been declining and Gorn sugar has been substituted for cane and b e t sugar. The European ammunity ceased importing s u p r and try the early 1980s was the world's second largest exporter.I7 In the early 1 9 8 0 ~the ~ world sugar price fell alnast W percent and by 1985 had reached its lowest level in hrty years (Garriga 1991,199; Guzmgn 1986,28), By then, the price of sugar in Argentina was nearly lnnirenv tines

the world price (Guzmgn 198fia, 28). In the last few years, world prices have recovered part of their lost gaund, but it is diffidt to view the fun~re of Argentine sugar with optimism, Given the growing protectionism in world markets and the huge subsidies given to sugar in the European G m munify, Brazil, and Australia;, which Argentina cannot afford to match, the outlook for Argentine sugar eqorts is dismal (Papini 1993,2), As the sugar crisis produced by Menem's liberalization of the economy demonstrates, the problem facing kgentine sugar producers is holding on to domestic markets rather than finding foreign ones.

Tobarn is the second most important commercial crop in the Morthwest and amunts for nearly twlo-thirds of the national hamest. In Salta, where 40 percent aE the region's tobaeco is grow, the value of the tobam crop is larger than that of sugar. Jujuy grow almost half the region's tobarn, and it is the second most important crap, Tn Tucunngn, tobacco production has increased rapidly in recent years and is now one-eighth of the region's tobacu, crop.'@ Tobarn grown in the Northwest is almost entirely of the light leaf varieties fburley in Tueurniin and flue mred in Salta and Jrtjuy). Light leaf tobarn requires fertilizer and pesticides for its altkation and gas- or waodfired mring barns, whereas dark leaf tabam does not. Thus, the production of l.ighr leaf tobam uses moderately sophisticated teeknotoe and a fair degree of capitalization, in sharp contrast to the dark leaf tobarn produced in the Northeast. At least as early as the l%@, the national gavernment began encouraging the produetion of tobarn. In the early years, the domestic industry was protected by tariffs, In 1927, for example, the tariff on the import of tobarn leaf wil?i 54 percent, but given the drastically undervalued peso, the effective rate of proteaion was actually far higher (Diaz Alejandro 1970, 291,298), mere was also a substantial tariff on tobarn gzoducts that pmtected the domestic rnanufac~rerand basted the demand for bcally gown tabam, In the late 1920s, 60 percent of the tabam cansumed by h g e n tines was imported. After three cleades of encouragement of import substiation, only 1 percent was imported, afthough consuimption had increased by 70 percent (Dhz AIejandro 1970,498,514). In 196'7 the federal government added a direct subsidy to this tariff protection. 'The government privatized cigarette manuhcturing and simultaneously created an agency, soan =fled the Fanda Especial del. Tabam (ET), or Special Tobacco Fund, to assist the producers." The FET subsidized tobacco g w e r s by paying them for each kilogram of t a b a m they sold, Inithlly, this subsidy was about 80 percent of the market price, but the premium has been nearly twice the market price in some recent years.

Between the early 1960s (pre-FET) and the late 1980s, the market price of t a b a m in Argentina fell by 27 percent, while the farm gate price rase by 93 percent, the difference being entirely a result of FET subsidies (Kippes et al. 1991, 16&-169). The FET also guaranteed a market to the farmer. Since the tobam was eqorted at the market price: (rather than the farm gate price, which could be almost three times as much), this was, in effect, an eqort subidy and was recognized as such by GAIT (Kjppes et al. 1991, 161). T'here was more, Three-quarters of the funds spent by FET' went to subsidies of tobarn production other than the price supports just mentioned. The IFET alw made low or zero interest loans to tabam growers (a huge subsidy given the high rates of inflation and high nominal interest rates to match), subsidized purchase of fertilizers and pesticides, financed construction of wring barns and warehouses, and contributed to the sacial welfare fund that provided medical and housing asistance to the g w e m (ICj'ppes et al. 1991, 161, 170). The size of these subsidies made tobam uniquely favored among Argentine agricultural products." A summary measure of the benefits received by the tcrbam producers is the difference bewecn the Argentine price of tobam and the wrld price multiplied by the amount of tobarn sold. I?y this measure, in the late 198&, the tobacco subsidy averaged nearly $1OO million annually (Artana 1991c, 24). The present pernmentfs program of liberalizing the emnomy has affected tobam less than many other apiculture products of the interior. As part of the emnamic reform paekage, however, the government sidetracked a third of the funds approved for the FET between 1991 and 1993. The government, under considerable pressure from Congress, decided in early 1994 to give to the growers all of the FET fundsa2' The additional FET subsidy allowed growers to receive the same price for their tobarn in 1994 as in 1993, defpite a drop in the world price af tabam.

The cultivation of tobam is extremely labor intensive. Even today, with a modest amaunt of mechanization, a hectare of tobam in the Northwest requires 1 6 1 % workdays (depending on the type of tobacco) per year, 5&80 perreent mare &an sugar cane (Manzanal and R o h a n 1989, 183). The hamesting of tobaeeo is especially time consuming. Since the leaves on each plant ripen at different times, tabam must be harvested several times, and the leaf picker must be abte to diwiminate beween ripe and immature leaves, It is thus diffimft ta mechanize: tobarn harvesting, although it is possible to mechanize other steps in the cultivation of the crop* In Salta and Jujuy, just over 40 percent of the tobam farmers have less than 10 hectares of tobarn, but they produce only 11 percent of the

crop, The rest of the harvest is about evenly split bet-ween farms with IWO hectares and those with more than 40 (Catania and Carballo 1985, 43,479. The growers work under contritct with a t a b a m company that supplies all of their inputs, monitors their cultural activities, and buys the crop at a preafranged price (U.S. E m b v 1993c, 4). One souree descnl&ed the grower as a "special rype of shareclopper" (Yanes and Gerber 1989, 51). Given the labor intensity of the tobam harvest, wen many mall farms use wage labor. Thus, tobam cultivation in the Northwest must employ many thousands of migrant workers. Presumably, during the fiat half of this century, the harvest workers in t a b a m were similar to those used in the sugar hawest. By the early I%@, mtivians began to work as seasonal harvest hands, and presently they make up most of the harvest labor for both sugar and tobarn, Small farms are far more prominent in tobacco production in Tucumdn than in Safta or Jujuy. Nearly half the t o b a w producers in Tucuman have only 2 or 2 heaares of land, and anly 1 pereent of producers have more than 26 hectares. Half of the tobam is grown on farms with less than 5 hectares. nree-quarters of the tobam farmers in the province o w their farms.z2 Therefore, as with sugar, family labor produces much of the tobacco in Tucurnfin. T'%eyare augmented on the larger Earms by migrant workers who come predominantly from the nearby provinces of Santiago del Estero and atamarea.

Ebth the short- and the long-term prospects for the tobarn industry show fittie grounds for optimism. Northwestern production of light leaf tobam eqanded at the eqense of other regions where dark leaf tobam is grown. Light leaf tobam is already 94 percent of the harvest, so further gains on this -re must necessarily be mall. Moreover, light leaf tubaceos have a higher nicotine content than dark leaf, so less is needed. During the 1970s, the amount of tobam in the average Argentine cigarette fell by 12 percent. Domstic demand for tobacco has declined in the last two decades. The recession that has engulfed the economy since the late 197h amunts for some of the decline, but there are important secular trends, too. The public is beeoming more health conscious, in part spurred by the p e r n mentfsantismoking campaign initiated in 1984 (Gatania and Carballa 1985, 19,33), fn October 1992, the a n g r e s passed an antismoking law that was even more stringent than the most restrictive laws in the United States. President Menem vetoed the law, but the episode clearly signals trouble for the industry. in the future. Tobacco prices drifted downward in the 1970s and 1980s, and produetion in the Northwest stagnated.= Between 1990 and 1993, the economy improved, domestic demand for Northwestern tobacco increased, and prices

partially recovered. The region% tobacco production regained and then surpassed the previous peak of 1983. The improvement in the early 1990s was apparently temporary. Production in 1994 was expected to fall back to the 1990 level as profitability of tobacu, cultivation declined. The decline is entirely explained by falling eqorts; the ovewalued peso and rising input costs are to blame. Exports of tobacco from the Northwest fell by 40 percent between 1990 and 1993 and are projected to fall by over one-third in 194 due to an overhang in w r l d stocks of tobacco and a new U.S. law restricting the use of foreign tobacco in cigarette manufacture (FAS 1994b, 23,27). Sales of Argentine tobacu, are also prejudiwd by smuggled foreign cigarettes, The most scrious obstde to the eqansion of tobam cultivation in the Northwest is its high cost, h o n g the nineteen largest powers of fluecured tobarn in the world, onv five countries have y i e b per hectare lawer than Salta and Jujuy. There, the yield is two-thirds of the average of the four most productive producers." Most of Northwestern tobacco production is irrigated, raking its cost above that in other parts of the world where tobarn cufti.cration is rain-fed. fn TuamBn, most of the growers are unproductive minifundkias. Wages for harvest labor are higher than for most of Argentina's competitors. Argentina is able to export its tobacco only with substantiaf subsidies. The Menem government's plan to end these subsidies has been stopped at least for now. The logic of liberalization, however, requires an end to srrbsidies of this sort, and the wntinued pampering of Northwest tobacco is unlikely in the long run. Even if the high cast of Argentine tobacco were not a problem, prospects for the world market do not look encouraging. Antismoking policies and a growing health awareness have restrained tobam demand in the industrialized wuntries, Xn the medium term, world tobam demand wi1E sure5 grow as demand in the Third World increases. Nevertheless, many wuntries more suited to t a b a m production than kgentina will be tcying to expand their market share. World tobarn prices have been falling for some time. As protectionist sentiment rises around the globe, Argentina's subsidies of tobam exports are IikeIy to meet with retaliation. In the long term, the prospects for tubam are bleak. Fruits, Vcgehbtes, and Cotton

The Northwst is a major prsducer of tomatoes and other vegetables, citrus h i t , and cotton. Most of the tomatoes are made into juice, paste, pulp, and other kinds of tomato-based sauces in local processing plants and sold on the domestic market. Other vegetabXes grown in the region are almost entirely cclnsumed as fresh produce in local and national mark&s. The Northwest produces much of the country's citrus cropabout threequarters of the lemons, a fifth of the oranges, and a third of the grapefruit

(Cattaneo fW3,19). Citrus fmit is one of the very few crops in the Norrhwest that has shown any dynamism in recent years (Guzmhn I W a , 28). In Tiucumiin, citnas production in the late 1980s accaunted for about 10percent of agrieul~raloutput and in Salta and kjuy about S perwnt, but these proportions have increased with the decline in sugar production (Yanes and Gerber 1989,23). Most citrus h i t @own in Argentina is sold fresh to the domestic market, T h e lemons grown in Turnman are the prindpal exeeption; most are made into juice of juiw concentrate, cattle feed, lemon oil, ar vitamin 6. Since the 191iOs,Santiago del e t e r a has produced a eansiderable quantiw of cotton and now vows about 15 pcrent of the nation's crop, Much of this catton is pown in the northeastern corner of the province adjaicent to the cotton belt in Cham and Santa Fe. More recently, catton has been cultivated in Salta, Jujuy, and Tumm4n, and together they a m u n t far 5 percent of natianal prodwaion (US, Embmy 1 W a , 4)" For the most part, these crops are gown either on large: farms using capital-intensive methods or on tiny minifindios using traditional techniques. In Salta and Jujuy, the farge farms ace mostly former svgar estates. The bulk af the irrigated land in Santiago del Estero is in large farms* In Santiago del Estem, beween the 1920s and the early 1970s, new irription projects were lautnched in the Rio Dulce and Rio Salado basins. Since then, the area under irrigation in Santiago del Ester0 has not expanded due to the tack of water. The shortage of labor is also a serious bottleneck whenever there is a goad harvest (Wessuri 1973, IQ,22). The large farms have very few permanent workers but armies of harvest lahr. One of the largest farms in Santiaga del Estero, for example, employs 6 peons and 500 harvest iaborers ta work its I,OoQ hectares (Vessuri 1973,22-23). 73e source of this Xlanrest Iabor and seasanal warkers in the processing plants varies amrding to the re@on*Many Bolivians w r k as wage labor in the fields of Salta and Jujuy. Most af the seasonal workers in Santiago del Estero are foeals, either landless wage workers or minifind&tas who are not fully employed on their own land. In TueumAn, most migant farm workers come from Catarnarca and fantiaw del Estero, The few medium or large farms in Catamarea and La Rioja use labor from the ianaliy employ migrant ]Bolivians as harsurrounding rminqundios and o vest workers. Besides the Iargf; tomato, cotton, and citrus farms, there are many thousands ofnziniftandi~s with small amounts of irrigated farmland scattered throughout the Mrthwest. n e s e farms grow a variey of h i t s and vegetables almost entirely for the domestic market, In the north of Jujuy along the banks of the Rh G r a d e in the Humahuaea Canyon (Quebrada de Wunahuaa), for example, peons grow corn and alfalfa for their families and livestock and onions for sale in nearby markets. Gfayate in southern Salta has vineyards, and the valley of the Rio Galchaqui in western Salta produes alhlfa, grapes, h i t s , and vegetables (Santillhn and Ricci 1988,

582-585)" At the opposite end of the region, there are thousands of minifundi~sseattered through Catamarca and La; Rioja. In these oases, the principal crops are grrapes, olives, walnuts, mtton, tomatoes, alfalfa, peaches, tobarn, asparagus, and citrvs h i t (Martinez 1981, 2; Santillian and Ricci 1988,591-593). Citrus is Fawn on mixlifindios in Tuwmdn. In Santiap del Estero, sandwiehed between the large farms are minifindios that grow sweet potatoes, squash, sor@um, olkes, melons, and alfalfa. mese minifundbs for the most part are extreme&small. For emmple, the average irrigated farm in h Rioja has 1.03 hectares (Marthez 1981,2). Subdivision of land through inheritanee has produced ffagmentation of land ownership." Many minifundios are farmed by tenants, most commonly as sharemppers (Wessuri 1973, 12, 17). mere are also large numbers of peons who farm miniature plots of land that they receive free in return for I a h r semices, Sugar and tobam have reeeived most of the government" ssubsidies to the region, but tomatoes, citnxs, and cotton have also been subsidized or protected from foreign competition. Most government subsidies of tomato and citrus did not go directly to the gtower but to the industrial processor and eworter, The growers bendited indirectly through a strong demand for their crops. Gotton and tomato production was encouraged from the 1930s by the governmentk support of import substit-ution industrialization, Bemeen the early 1930s and the early l%@,there was an elevenfold increase in tomato production in Salta and Santiago del Estero.= Subsidies from the federat gavernment increased sharply in the 1 9 a . The collapse of the sugar market in that decade had catastrophic wnsequences for the emnomy of Turnman. T%e gavernment responded with "Operacibn Tuwm%n,"a federal government program that subsidized new industries locating in the province, including citrus-processing plants, By the early 2970s, these industrial promotion benefits were generalized to other provinces, including those in the rest of the Northwest, Tomato and citrus h i t cultivation grew hand in hand with the processing industries that came into existence with crucial assistance from the government." Moreover, most of these crops are irripted and thus received a substantial subsidy fiam the government, which built the irrigation newark, The users of the irrigated water do not cover its full economic cost since there is no provision in setting fees to pay the capital costs of the dam and irrigation canals (amisirin de Tierras hidas 1978, 21-22).

Inadequate demand plagues Northvvestern agriculture, In the 1980s, citrvs h i t was a =mess story, but near-term prospects are not favorable. Bq" 1990, eitnrs eworts were a @owing share of Argentine production, reaching 32 percent. They accounted for just under 1 percent of the

country's exports and 2 percent oE the world market, The country had become the fourth largest exporter of lemons in the world." The prospeas for continued growth in citnts exports, however, are problematic. In 192, Argentin& citrus exports fell sharply, and in the first half af 1993 they fell again, this time by almost one-half. The problem is the overvalued peso and the protectionist harriers raised by the European Union. The U,N,"s P ' , & and Agricultural Organization predicts that far the rest of the deeade the production of citrus worldwide will grow faster than the demand.a Citnss h i t production in the Northwest faces strong foreip campetition (the United States, Brazil, IsraeX, Chile, Cuba, Spain, Greem, Mexico, and M m = ) and domestic ampetition from ather provinces (Entre Rbs and arrientes). Brazil, in particular, is a potent competitor in the counterseawnal market. Beween 1975 and 1990, Brtlzilian citms production increased 93 pexwnt, while AFgentinafsgrew only 6 percent. During the 1980s, Brazil amunted for 6Q percent of the world's increax: in eitnts production, hgentina, hovvever, has not been able to emulate Brazil" suecess. The lack of markets, oveqroduction, and low praductiviv pfape the produaion of tomatoes as welt, ?Tomato yields per hectare in Salta and hjuy average half to WO-thirds the yields in ernlogically similar areas in devclaped muntries (Vanes and Gerker 1W,42; fNTA 1988, 118). Salta faces mmpetition from other areas in kgentina, particularly in Buenos Ares, Tomato products meet imense foreign smpetition as well, thus mos kgentine tomatoes, procesed or ffesh, are destined for the local market, The market frPGing hgentine Gotton has eqerieneed esraordinary difficulties in the last two decades. A detailed analysis is given in Chapter 6 on the Northeast, where ~ o - t h i r d sof the countfy" s t t o n is gown,

The poorly designed irrigation systems of the region have produced widespread deterioration of the fields an which most of the crops of the Northwest are g w n , The n e ~ o r kof s irrigation canals are not designed to drain the fields, producing an elevated water table, salinization or alkalization, and watertoaing. Subsidizing the water has encouraged its excessive use, which has exacerbated these problems, In Santiaga del Estero, for example, salinization or afkdinizatian affects 60 pereent of the irrigated land. In Salta the figure is 45 perwnt and in TunrmAn 43 percent, In the latter province, 32 percent of the irrigated fand is waterloged (f3arnes 1988, 259,263-264; Imrfia and Cantos 19138,165). The soils of the region are of poor qualiv. mere is little organic material in the soil, and the poor soil strucmre allows it to be easily compacted, b s s of soil porosiw, nitrogen, and mimrganisms and an increase in acidiv are Gornmon problems. In many inigated areas, the slope is messively steep. n u s , the topsoil erodes easily. M e r e erosion is severe, pllies fQrmand all of the topsoif is last.

Despite the high costs and lack of markets for the products of irrigated agriculture in the Northwest, the government announced in 1992 the constmction of an enormous system of dams, eanals, reservoirs, and cfiannels that would take water from Tummhn and Santiago del Estera and transfer it to La Risja and Catarnarw far the prpose of irrigating crops. The cost of the project was estimated at nearly $2 billion, a b u t $5,000 for every person living in the two provinces. San Luis has recently launched a $75 million project to expand irrigated agriculture with partial funding from the national government (Pascuehi 29512a, 2, and I W b , 2). Xn the late 197% when markets for the products of the Northwest were stronger, a government s&@ canduded that &gentin& irrigation infrastmctulrewas three or four times larger than market conditions warranted. But the building crtntinues, Poorly designed irrigation systems are not the only problem. The petroleum industry in Salta has cleared much land for their operations, which has led to soil erosion (Barnes 1"38,264), Indiscriminate low*ngand overpasturing of animals (discussed below) have produced widespread degradation of natural forests and @asslands in the region, The resultant descrtification has in some places threatened irrigated agriculmre. In western Gtamarca, for example, bIwing sand dunes have severed fields, filled irrigation canals, inundated houses, and obstntcted roacfs (Prataviera and Michelena 1888,70). The development of mining and mmufacmring in the region has polluted rivers used for irrigation, The worst ofinden are sugar refineries, cement and cellulose factories, olive-promsing plants (which use and discard huge quantities of wustic soda), and smelters, Contamination by heavy metals (boron, cadmium, mercury, and lead) and synthetic toxins (such as biphenols, PCBs, and petroleum byproducts) is common.1° The deterioration af the region" agricultural resources has prejudiced the productiviv of the land, For example, during the last decade, yields In citrus production in Argentina have been stable despite efirts to raise productivity (attaneo 1993,4). Abuse and averuse of the land are the likely culprits,

Athough there is still a modest amount of Ioging in the Northwest, most of the region's forestry resources were "mined" earlier in this centu? Hardwood forests, predominantly quebracho, covered most of the province of Santiago del Estero and much of eastern La Rioja, southern Salta, and southern Catamarea. The arrhal of the railroads in the 188as allowed their intense exploitation. The wood was used to manufacture tannin (a chemical used in tanning leather), railroad ties, fence posts, buildings, furniture, firewood, and charmal. Tannin hctories and saw mills appeared near the laging operations,

Logging in the Northwest has led to irreversible desertification. The foreas were usually dear cut, The re@n was already semi-arid and became much more arid after deforestation. Once these forests disappeared, they typically did not regenerate spantaneously. As of 1987, after millions of hectares had been dear cut, just over 6,QOOhedarerj had been refarested in the Northwest, most of it in Salta (hdrade 1989,287). The formerly forested land is now cavered by brush that supports a mall charwaf industv, but rnost of the trees are gone forever. As the forest cover disappeared, certain kinds of grasses and other plants that thrived in the shade and humidiv generated by the forests muld no longer suwive, As the ~ o u n d mver was lost, the soil became mueh more susceptible to erasion by wind and water. In La Rioja, for example, nearly half the provinee has suffered serious levels of erasion; 27 percent of the prwinct: has eqerienced severe hydraulic erosion, and 9 percent eolian erosion. An additional 11 percent has had moderate levels sf hydraulic erosion (Biurmn 1988a, 118; ARdrade 1989, 298). Furthermore, deforestation in the Northwest contributes to flooding in the Rio Paran6 basin and its tributaries in Northeastern Argentina (Bay6n and Dugan 1993, S), W e r e the forests are not dear cut, the loggers take the best trees. This negative selection leads to progressively inferior farests (Roecatagliata 1992, 17). The timber resatlrces that remain are the least economic to eqloit. They are in remote areas, on steep slopes, or are scattered trees rather than dense forests. Most of the forests still standing have been degaded by the overgrazing of cattle and goats. The provincial governments facilitated the evloitation of the forestry g resources of the Northwest by selling huge trats of land to i o ~ i n mmpanies and investors. Between 18% and the end of the cenmry, the government of Santiago del Estero sold 46 million hectares for a half-centavo per hectare. Investors in Suenos Ares bought in a singe block almost 3.8 nillion hectares (an area the size of Massachusetts, Connecticut, and Rhode Island combined). n e s e were the largest land sales in kgentine historyl During the 1920s, President Yrigoyen blocked more sales of public land, but until rnost of the forests had rtanished (Dargoltz sales resumed in the 19W,137-139,155-156). PIans are currently under way to a t down much of the remaining forests in northern Santiaga del Estero ( B w mAires f i r aid, May 15, 194*p. 4).

During the first half of this century, most of the forestry workers came from within the provinces in which the logging took place. The economies of Santiago del Estero, Catamarca, and La Rioja were stagnant, and a labor surplus existed. The timber operations replaced small-scale, land-extensive cattle ranGhing sa there was a supply of tabor nearby. Many workers would

alternate workjng as wadcutters and cane cutters sinee the activities tended to complement each other sewanally. The economic position of the modcutters W% little different from that of the cane and t o b a m workers diwssed abve. m e r e were a variey of laws related to accidents, work by children and women, and night work., Santiago del Estera even had a provincial fabar department as early as 1928. The Radical administration in the 1920s and the Percin government in the 1946s made sporadic efiForts to enforw these laws. Ear the most part, the law was on the side of the companies, not the workers. As in the sugar fields, it was not unusual to fjnd mmmhioners or justices of the peace who were aEsa overseers far the login8 mmpanies (Dargoltz 1980, 325-126). The lo@ng that remains is a hi&-cost operation, unable to generate much profit or pay p o d wages (Bas 1985,53-54). The work requires little skill, sa woodcutters come from the sane pool of paorXy quafified jslbor that harvests cane or tobarn. The lurnbejacks of today work under conditions that are little better than those that existed in the first half of the mentieth century. Wages and working wnditions today are comparable to those of other unskilled agriculmrat wage workers in the re$on, During the cutting season, they five in the woods in precarious shelters with scant aaess to water. ]In the off-season, they live in the shanwowns that surround the small cities and towns in the Ioging regions. Pastoral Aetivi ties

Cattle breeding in the Northwest began at the time of the first Spanish settlements, It was a mainstay of the ecllnomies of the =@on and generated signif a n t eqorts to neighbring countries. When the railroads arrived, crop cultivation and logging replaced most of the cattle ranching, In the north, cattle breeding reached its peak in the 1930s. Xn parts of the southern Morthwest Xoaed off b ~ e e 1880 n and 1950, however, cdittle breeding has reappeared, In reeent decades, the cattle herd in the Northwest has declined substantially and is now only 2 million, Slaughterhouses in the region worked at 20 percent capacity in the mid 1980s." Gattle ranching in the Northwest is extremely tybxhard and unproductive, As one observer put it, ta speak of this acfiviy as a t t i e breeding is almost a euphemism (Cafferata 1988,29; see also Vessuri 1973, is more like hunting and resembles ranching on the pampas before the middle of the nineteenth century. Zn the dry season, the animals gather around the few watering holes. At this time, the young are brand4 and some of the cattle are carted off to market, Fences are rare, and the cattle stray as mueh as 30 miles from their winter watering holes. m e r e are practically no sanitary controls and no selective breeding. The cattle are mostly a tough, wiry c ~ l b breed whose anastors arrived in the shecnth century with the first Spanish settlers, m e animals produce only a small amount of low-

qualiv meat. In the northern part of the regon, tropical disease+incIuding rabies spread by vampire bateafflict the cattle (Prudkin and Reboratti 58). Athaw* using anly a small amount of very poorly paid labor, ranching in the Northwest is so inefficient that it produces little profit. Most of the cattle are raised on huge estancrixs, A few of these are royal land grants from the sixreenth cemry that are still intact. Most of the ranches, howesler, are vety small with anly a few score head of cattle. Xn La Rioja, for emmple, there are 135 ranches with at least 5,000 heaares (about 18 square miles) that mver 60 percent of the cattle Iand in the province, but 55 percent of the ranchers have less than 5 hectares that together cover only 0.2 percent of the cattle land. In Jujuy, the 3.6 percent of the farms (which includes cattle and crops) that have 5,000 or more he~tares(all or virtually all cattle ranches) Gaver two-thirds of the agiculmral land in the province. In Tucumh, where only 0.3 percent of the farms are of this size, they mver 37 percent of the agriculfural land. In Catamarca, the numbers are 0.6 percent and 38 percent. In one: department in eastern TuamBn, fourteen ranches whose w e r a p size is nearly 24,W hectares (SO quare niles) owupy nearly half the land. Xn another deparlrnent in northeastern Safta, four ranches together have 240,000 hectares, or 850 square miles." On the large estaneias, the cattle are worked by hired hands. Since the cattle wander unatended through the bush for most of the year, there is almost no work required. mere is not even the jab of riding fence in most of the Morthwest beaus@there are almost no knees. Only a few permanent workers are needed-as few as one per 5,W head (Slatta 1980, 3738). A few esra hands are hired during the busy season. The l a b r force in land-e~rensivecattle ranching is among the p o r e s paid in the cauntq, The wark is extreme4 dangemus, and serious injuries and awidental deaths are frequent. Falling off a mnning h a w that steps in an animal burrow, falling from a horse k i n g broken, or being gored by an irate steer are Gomrnon hatzards (Slatta 1980,4%5O). On the smaller spreads, the standard of living is nag very different from that of the wage worker on the large estancias. Since the cattle require as much ar; five hectares each, substantial amounts of Iand are needed to generate much income. Often, the ranchers use government land, fypicaljy without paying any rent. Since their income is minimal and there is not much work to do on their smdl ranches, the operators or their family members often work as harvest tabor on sugar or t o b a w farms or in the vineyards of aye, Despite the modest earnings in primitive ranching, widespread paverv and unemployment in the regon force many of the poor into this activivtoo many from the point of view of environmental conservation." The lack of clear title to their land is both cause and effect af the pwerty of the small herders. Without title to their land, there is no incentke to care for the physical environment or make capital improvements, At any rate, their

poverty means they do not have the resources to make necessary investments, even if they awn their land (Natenzon 2988, 177). Qvergrazing has significantly reduced the @ass wver and promoted erosion and desertificartion. When the disappears, the wws eat the s h m b and trees, there'biy awleraring the degadartion of the environment, Species of plants that cattle eannot eat have replawd edible types. Without ground aver, especially grasses, the inciidenee of fires declines, and then fire can no longerr play its rofe in maintaining the fertiliv of the soil (Reboratti 198(3a, 23). A r d the watering holes in the dry season, the cattle trample and cornpat the soil, reducing its ability to absorb maismre, Overgaing was so e ~ e n s k as e early as the 11930s in eastern Salta that it contributed to a decline in the herd (Reboratti 1989a, 23). Prospea Eor cattle ranching in the Northwest are extremeEy bleak. Since the turn of the nineteenth cenmzy; more prodactive breeds of cattle have been introduced on the pampas, producing beef of esremely high quality at a vefy low cost, +T%ereEined breeds suitable for the pampas cmnot suwive in the harsh environment of the Northwest. The region now imparts most of its beef from the pampas (Tmccone and Lizarraga 1990,W; Cuzm%n1985b, 28). m e r e are also almost a million p a t s in the Morthwest that sompete with cattle for food (INI)EC 1%3, cuadra 5.3.3). Goats forage voraciously and contribute significantly to environmental devadation. In an important sense, howcver, the widespread breeding of goats in the Northwest is a eonsequenee, not a cause of this environmental devastation. Once indiscriminate Xoging and overpawring mined the land, a t t l e did not thrive in the region and were replamd by p a t s (Michelena 1988, 121). The goats in the Northwest are used almast entirely for their meat (although there have been some recent everiments in Santiaga del Estera introducing dairy goats), Goat herding is a part of the subsistence agicrtlftural economy In the redon; little of the meat is marketed, In the cold and arid h n a of Safra and Jujuy, sheep, goats, llama, and alpaca are bred. Overgrazing in the hostile climate has led to the degradation of all of the natural past-ures in the area. This, in. turn, has fed to wind and water erasion, In southwestern J.tljuy, erosion is so bad that there axe 100 hectares of wind-blown sand dunes (RsmAn and Santos 1988, 103). bgumes and Cereals in the Umbra1 a8 Chsreo

A narrow strip of land known as the Umbra1 a1 Chaeo ("the threshold of the Ghaco8) lies b e ~ e e nthe first mountain ranges of the h d e s system and the gear arid plain to the east. The mountains wring moisture out of the westerly winds, and some of it falls on this strip, Until the early turentieth cenmry, most of this land was eirher empty or used far land-eaensive cattle breeding of the sort just described, Part of the southern Umbra1 al

Chaw was initially farested, but these forests were dear cut in the late nineteenth and early twentieth cenfury. In the last twenty-five years, alyicu1n;tral gowth in the Umbral al Chaca h a been earaordinarily rapid. m e area praduces beans (kidney, black, white, and soy) and grains, most of which is exgorted. The bean and wheat farms use the latest agriwlmral techniques that produrn yields comparable to the best in the world. High-yield varieties of seeds and chemical pesticides are used, and much of the production is highly mechanized. At first gfance, this rapid eqansion of the agridmraI frontier appears to be the golden thread of hope in the othenvise bleak economic tapestry of the Narthwes. We shall see that this economic dynamism is built on extremely fragile foundations that give little room for optimism in the medium to long ran. , soy and kidney beans were gown on a few thousand hectares in southern Salta and northeatern Tuwm8n. The bean farms were small and used traditional techniques. Beginning in the mid l%&, bean prices began rising steeply and bean eultivarion in the Wmbral a1 Chaco evanded rapidly, During the 197Cls, bean cultivation spread northward through elastern Salta and southward into Santiago del Estero and Gatamarca, h less than wently years, 1.7 million hectares (6,500 square miles) of land in the Umbra1 a1 Cham had been cleared and planted. The Umbral now produces about 5 percent of the national soy crop and most of the dried beans (Reboratti 1989a, 43). As the years passed, the newer farms tended to be far larger than thase: of the original calonists. The large operatians benefit from superior access to cheap credit and can produce the papemork that gives them government subsidies. This generates the funds to invest in the latest technolog, which puts them in an wen more advantageous position, The larger fslrms are also in a stronger position when selling their crop, By the late 1080s, 94 percent of the land was in Orms of 500 or more hectares. As the small farms were queezed out in the 1970s and 198&, yields per hectare doubled (Reboraai 1989a, 43,52). The large farms that now predominate are very capital intensive and use very little labr, a b u t twa days per hectare per year, contrasting sharpfy with the other erops of the Northwest, which are labor intensive (Manzanal and Rofrnan 29W, 183). The farms wuld use even less hbar if they chose, but labor is so cheap in the region that easity mechanized activities are performed manually. Large quantities of machinery were imported around 1980 when the peso was extremely overvalued, but s m e of it remains parked in barns; it is cheaper to hire manual labor and conserve the expensive machinery." All but the smallest farms use migrant labor for at least the land clearing and harvest operations. Many of the workers Iive in the towns and small cities scattered through the area or mme from the same sources used by the sugar, tabam, and cirrus farms.

There were three inportant fa~torsthat spurred the g o ~ of h bean pmduc~ionin the Umbral a1 Chaco. First, as mentioned above, bean prices rase to record IeveIs in the late 1960s and remained there in the hllawing deade, Secsond, rainfall in the Umbra] a1 Chaw has incresed aver the last quarter-century. Crap mltivatian in the area requires at least 7Wmn of rain annually. Over the cen~uries,the 7Wmmv"yearisohyet has drifted back and forth. Presently, it is as far east as ever remrded, and the amount of land with sufficient rainfall is at its histarial mdmurn (Jirnt5nez 1989,396). m e third factor has been the enormous subsidies fmrn the federal and pravineial gavernments (Reboratti 1989ap39). In 1972 provincial governments began ofiring tax breaks to enterprisesclearing land for agricultural purposes, md in 1980 the federal government began doing so as well. As of 1987, a b u t 250,OOQhectares in the Umbraf a1 Ghaco were approved for tax subsidies by the federal government under this program. Long-tern prospects for agriculture in the Umbral al Chaeo are prablematic. Afl three factors that wntribtlted to the twom are temporary. During the 198&, bean prices gaged, The price of dried beans between 1983 and 1985 wils less than half the peak level betvveen 1972 and 1974 (Manzanal and R o h a n 1989,153). The European Gornmunity has stopped imparting oil seeds and is now eporting them, Within South America, Brazil, Parapay, Urnpay, and ather regions in Argentina have been exporting increasing quantities of oil seeds, as are other eountxics around the world. The rapid grnwth in the demand for kgentine beans between I N S and 1985 is likely to have been a temporasy aberration. The easmard shift in the isohyet that made the boom possible will surely be reversed by the normal cycle of climate &awe, as it has repeatedty in the past. Even a slight drop in average rainfall will produ~ea major contraction in agriculture in the area. Year-to-year variation in rainfall is suhtantial. Partimlarly in the south, the growing seswn is short; an early frost means the crop is lost. The environment is hostile and the growers lose a crop every four years, an the average, to frost or drought (Reboratti 1989a, 44). And lststly, with the current liberalization af the eeenarmy, the government subsidies that stirnufated bean production have ended. n u s , the boom in the Umbra1 al C h m has fragile foundations, The prof'itabiliv of agrialture in the region is based an the availability of nearly free land, In an earlier epoch, loggers and ranchers mined the land. This reduced its value so that the bean Earmers could buy it for $25 or $30 per hectare. Bean prices are still high enough that the farmers can pay back their initial investment with two hawests. Neverthetess, the landmining practices of the late nineteenth and mentieth century continue." The land is cleared with pairs of giant earthmoving machines linked by chains that uproar all vegetation, Only an oaasional windbreak is left, The

highly diverse eeosystem is replaced try monocultivation, whi& encourages pests checked only by large doses of pesticides, Furthermore, the varieties of seeds used were devefaped for temperate zones and are not resiaant to the pests that abound in the semitropical climate; thus, the requisite amount of pesticide is hiaer here than elsewhere (Reboraai 1990, 155). Fertilizer is rarely used since it is cheaper to buy and clear new land, Afrer the land is cleared, it quick& loses its residual moisture, and fertilify as the crops deplete the wil; water and wind erosion take their toff, The beginning s f the frost-free period coincides with the be&nning of the seasonal rains. Ctlnsequentb, the initial preparation of the soil far planting takes plaw when the gound is dry; thus, wind erosion is intense. When the rains begin, hydraulic erosion is severe because the land has just been plowed, The: period of maximum rainfall mineides with the period of minimum plant wver. As the land deteriorates, crops that can gow in less fertile soij are planted, and finally the land is left in pasture or abandoned. Even with the present amount of rainfall, the land is cultivated for only six to eight years before it is ~orthless.'~When the isohyet moves back to the west, the land will. be withour any eover and the area will likety bewme a giant dust bowl, In 'fiicumBn, where bean cultivation began, 90 percent of the agrieultural land shows slight to mderate erasion and 10 percent, severe erosion; dried bean yields are substantiaIly lower than in areas that have just Eome under cultivation, In Salta, 1W,W heaares of agricultural (or former& agricultural) land show moderate erosion, dQ,Wsevere erosion, and 4,000 are eroded by deep ravines. The abuse of the sail was particularly acute in the early yearn. Mre recently, some producers have gracticed crop ratation and contour plowing." The eqansion of the agricultural frontier in the Unbral a1 C h m has probably passed or will soon pass its peak. With the present weather conditions, about half of the Iand in the Umbra1 af Chaw that wuld be mltkated hrzs already been cleared and planted. Not tiurprisingly, the best land was planted first, sa the agricultural barn, even if the weather holds, is more than half over (Rehratti 198(3a, 82). The growers think of the land as an infinite resaurce and treat it amrdingly (Reboratti 1985, 61). Clearly it is not. Conclusions

Despite the existence of agriculture in the region for many centuries, agricultural resources have always been and wntinue to be e~remelylimited. The degradation of these scarce resources is virtual& universal. One source estimates that 90 percent of the re@onfsagriculmral land has been degraded (Cil 1991, 128). In many areas, this degradation is severe or even inevemible. The poverty of the region means that the resources needed to

slow or r m r s e this degradation are absent, and the bankrupt federal and provincial governmentscannot help either. Thus, the region's resources are beaming even mare scarce. Once the raJraad desmyed the re@antsself-sufficiency, most of the region's wmmercial agficul~reexisted only with substantial afsistance fram the national government, Northwestern agrieulmre has produced mostly far the darnestie market behind enormous tariff walls and has enjoyed a variety of other subsidies as well, Nearly all of the agrimftural @Tortsof the re@on received until recently substantiat subsidies, some of which still persist. The present government has substantially reduced these benefits, prorfvcing severe difficulties for apiculture in rht: Northwest, Most of the land of the Northwest is awned in huge estates. Where there is adequate moisture, these empioy thousands of semnal workers. Mosr of the farmers in the region, however, awn tiny ptats of land that cannot even support them and their families, Thus, the maldistribution of the region's meager resources has generated widewead poverv. Notes 1. 'The hterior of Argentina is a jumbEe of regional economies. Different physiml geogaphies and different soeiwmnontic histories have produmd different patterns of land use and ewnonzic srgaaation. The Argentine intefior is conventionally dMded into four re@an+the Northwest, the Northea&, Qyo, and Patagonia-nd that is the approach to be used in this bwk Neverlihebss, the= re@ans are far h r r r homogeneous. Some i m p H a t e m n o d e a~ivities that are found in one region are also abed out in other regions as well, The boundaries of the provinerzs within the regiom &ss do not coineide with ewnomk boundaries. Using the cxrnventional approach thus unmaidably leads to some rewtition and a measure af disorcter in the expition. T'he dkision betvveen the; inkrior and the pantpas is a1m arbitrary and awkwad, Ody a tiny corner in the northeae of h Pampa gets more than 600 mm. of rain a year, the minimum needed t a p a w pampean mops. About half of the prow in= gets only 400 mm. and the western third, onfy 300 mm, (INLSEC 1989, 16). M a t of La Pampa is thus a d e s f i and more 1 i e neighboring w o and Patagonia than it is like the pilmpw, (Some studies group northern Patagonia and La Pampa into a f&b regon, axnahue, but mast do not,) Thuspone of tbe p r e s t and least dweloped provinms of Argentina is anventionally lumped together with the most dwefopd ones* The inclusion of h Pampa with the pampean region aixnast without exmptian nanaws the contrast beween the pampan region and the interior. Entre Riaisr,whib nomally grouped as part of the pampas, is also in an intermediate psitisn b e ~ e e nthe w r e pampan provinces and the interior, Entre Riw bar the same humid dirnate as the pampas, but its land is hilly and less fertile, Until rewntly, the provinm was phydcally isolated from the re% of the pampas and remained an mnornic backwater. As its name implies, the prwinm is bemeen R;va ~vexs. The eastern border is the Urnpay River, which divides Argentina from Urnpay, 'Re western border is the Paran$, a river so wide that one cannot see

fxom one ba& to the other. In the 1930s, ferries replaced the old steamboats and barges, but vehicles mufd wait in Xine for days to moss the river, In the early 1970s, a @me1 was built under the river and the provina's long iSCtXation ended. &spite the* difficukies, this book wig use the traditional dividon of the wuntry into five regions. sionatly, the pamwan re@on will be broken down h t o its mre (Buenos &re%, a r d o b a , and Santa Fe) and its p e ~ p h e r y(Entre Rim and La Pampa). 2. The comtitution, wfitten in 1853 and adaped h 1862, forbade provindal tadffs, In reality, many pravhces retained t a s s an interprmindd trade until the dd-twentieth ~ n t u f but ~ , theix b p r t a n w : began to decline as scmn as the new oomtitution was innpbmented, 3, k ~ v e from d unpublished data supplied by Ernestcl Ceno of the Funda66n del Tuwaabn. Some sugar hsls been gown along the ParanQ R v e r in western Gokenks, emtern Gfiam, and Misiones. Production in these regoas never eaptmed more than a few p r m n t of the nation& market, and almog d k p p a r e d in the 19530s. See alw Yanes and Gerber 1989,223; Santillkn and Ric-ci 1988,578 and Rutbdge 1987, 187, 4. BeCre the railroad, a b a n sugar brought 700 miles by oxcafl from Buencls Aires was c h e a p r in Santiago del G t e r o than sugar imprtad from neighboring Tueutnhn, only 100 miles away (Ruttedge 1%7, 157). S, It shautd be noted that one owner may have more than ane fam, This fact plapes all of the data on land tenure in Axgentina and as&oansiderable doubt on all statements abaut the &ew in the distrjbutbn of land ownemhip in. Argentina, statemen& about the bwline in this skew over time, or statements wmparing taad tenure jm one part of Argendna with another or amparing Argentina with other auntries,

6, In passing, it should be noted that until re~entXythe Cbaquelian Indians lived their lives little differently than their grandparents did a h a l f a n t a y earlier, Many still live h remote areas as hunters and gatherers, aaasiona1ly wargng 8%bawest bands. The military government p u r c d h n d s into the area in the late 11370s as part of their s h e m e t o Sewre the a u n t ~ y ' sborders, and this initiated a promss of agriwltural development, althaugh at a glacial pace (Dorfman 1988, 7). 7. Santamaria 1986, 8244; Greenberg 1985, 321-327, and 1987, 31Sff; and Mumis and Waisman 1969,349-350, 8, Set: Rutledge 1987, 184ff?; see also Rutledge 2975, 8%102; Rutledge 1977, 21SfC and Santantaria 1884, 97, 123-.124. 9. See Reboratti 19'76,246; and Rutledge 1987, 200,204. Thb expansran in the use of e~ra-ecanornjicinentives to r e m i t and disfigline labor had recent precedents in the Northwest, Forwd labor was the mainstay of the ewnoxllies of the intefiar until independena, Shar25 thereakr, the first Gngress in what was to bmrtte Argentina d e a e d an end to davery and foreed labor %mice from the Indians. The decree was pushed through the a n g r e s by liberals from Buenas Aires and was widely ignored in the more traditional interior. Slavery pemisted until the middle of the wntuv-it was only the children aE slaves who were freed, Formd labor mntinued thraugbout the nineteenth centuay m d into tbe mentietb, fn the: Northwest, as el%whert;; in Argentina where signifxcaint numbers of Indians lived in Europan oarnrnunitieq the conchavo or g w i b d e qstem remained, m m a n d s in the late 1890s for the r e p d of the coaclmvs system were heffeaive

( a b i e 1988, 92). In ncunrAn in 1864,64 permnt of all &mina$ eonviaions were sE p o n s fleeing their job without their emplayem' permimion, and by 1877' it was wen glegal to work without entbusimm (a dagana) (Santamaria 1986, 91). 10, b Pmettieri (1866, 102-1m) and Nelfi (If1881 for firsthand amuntf of worHng anditions in the eane fields, 11, Hui& m d Jambs 598% f79-.180; G&ga 1991, 185-287; and Rodriguez and Roddwez 1%1,88, 12. Mamanal and Rofman l%9, 123; and Baramt and Salmm 1985, 160. 13. D e ~ v e dfrom unpubl~beddata supplied by Ernesto Qmo of the Fundad6n del Tuwaa8n. 14. Rutledge 1987, 157; Ras 1977, 177;f i e d a d Rural &gentha 1981, 27, and 1 9 1 , 4; and Indkadores soekles-eco&micos, No. 16 (March 1994): 3. 15. Mamand and Rofman 1989,117; and Bwaeat and SaZaar 5989,165. 16, Part of the differenm h yields is explained by the geater use of Mgation in Sailta and Jujuy md their p r o h i q to the tropicrs. 17, Manzanal and Rofman 1%9,122; and FranjuX 1882, 177-178, 18. Dedved from Yanes and Gerber 1989,28,50; and U.S. Embav 1993c, 3,11, 17, 19, Marnand and Rofman 1%9, 1180; C;ttania and Grballa 1985, B-32; and FIEL 1989, 131-145. 20. B e m e n 8 permnt and 10 p r m n t of federai gwemment tax revenues by the 198014;came from tbe raix on cigarette%wXlich in 2979 amounted to $1 billion (Manzanal and Rofrnan 19&9#183). Sin= the subsidies that were given to the t o b a w gowe= were far less than the tobarn tax revenues, it mulet be arped that the tobarn grower was on balana penar~ed. This asunnes that the produwr caded inelastic the bulk o-E the t o b a m taxfsburden, an unaefy pasibility given the p ~ m demand fox tobarn. The abiliv to shift; the burden of the tobarn tax onto the mnsumer, together with the pratedion from fareign mmpetition that the government's s l i d e s provided, afmmt surely meant that the net impaa of government pXiq was p i t i v e . Even if the produmrs shouldered a part of the tobarn tax burden, it shaufd 'be kept in mind that t o b a w is a h a s t univemlly subject to heavy taxation, gven the desire of governments in many wuntfies to suppres the use of this toxic dmg and the esremely low p ~ m efastidw of its- demand. Mgentine tobaeeo does not a p p a r to be unusually disadvanQged by excise taes. 21. PAS, 1994b, 4; and b e n o s Airs HeraM, December 3, 1993, p, 1. 22. Marnand and Rofman 1989, 177; T m m n e and Lkanraga 1 9 0 , 87; and Gtania and Qrballo 1985, 16, 23, Mananal and Rofrnain 1989, 175; W e d a d Rural Argentina 1991, 44; Gwrngn 1987,32,1%9b, 32,1990a, 28, and 1990b, 28; Zavalia 1992,5; and unpublished data %-uppliedby the Foreign AgfialturaI %nric-c of the 'LT,$. Depaxtment of AMwlture, 24, Dedved from unpublished data for 1992 supplied by the Foreign Agricultural % w i of ~ the U,$, &partmeat of AgF;iculture, 25. Inheritance laws in Argentina require that the land be distributed among all of the heirs, legitimate as well as illegitimate, Children cannot be excluded exwpt thrau& a murf prmdrtre. The tendenq to fragment the land through inberitane is built into the law (Rugiero 1988, 35).

Land tenure in the Rio Dulce region is unusual for the Nofibwest becaum about 10 p r e n t af the land was o ~ g b a l bwttted by a mlony about meaty-five s @ven 25 heaares, Over the years, bowever, years ago. Each of LZOO f a ~ l i e was s weather, and vaxiations ~bdivisionof the land throu@ inheritanoe, the v q a ~ e of in luck a d sM1 have pradumd a; dist~butionof land that is. not very difEerent &am that of the wmaunding areas. 2%. Biaz AJejandro 19'743,2124,520; Mamlxal 191$0, 139; and b s u n i 1973, 9ff. 27. T&e subsidies of cotton cultivation will be d i m w d in Oapter 5 on the Nofibeast* where mast of the crap is produrnd. 28, Qtmm 19113,26,4!Je See a k Gutmm li)4rl,510-511; aad Garda 1W3,42, Far a d i ~ a t i n gV ~ W , see Huid a d Jambs 1989,205,2%222. 29. G a d &1993,a; a t @ n e a 19B, 2,25,6"1;nd Idk&m ec~~mico~~ociales, No. 10 (Sptember 19%): 3, 30. Gil1991,22&1B; Gambouleyran 1991,159; md Benenda and Fo& 1986, 12, 31, St=e flairgoltz 1980, 1983; Matemon 1988; Rebaratti 1985, LK) kdesma 1988, 206210; and Biumn 1988b, 203. 32. Re'boratti 1f)EZBa,22; Jim6nez 1989,197; XNDEC 1993,143; and Gmmrin 1985b, 29, 33. Mafllnez 1981, anexa 2; Yanes and Get'ber 1989,38; Ponte et al. 1972,317; and Reboratti 1989a, 25, 32. 34, GBerata 14188, 21EfE; N a k m n 1988, 162, 180; Diez et ail. 1988, 4 and Ad&mofi et al. 1989,27-30. 35. Reboratti 11)89a, 41; and Le6n, P n z d ~ n and , Reboraai 1985,411. 36. Reboratti 1%5, 61; Reboratti 1%9a, 71-75; k b n 1976, 41U17; P m d b 1988,M; N. bdesma 1988,210; and Z u w r d i et al. l%8, 225-229. 37. One swdy in Salta showed a 50 perant drop la organic matter a&er three to four years of bean wltivation and amther showed s of up to 73 wrmnt in nine to eleven years, A smdy in Santiago del mtera measured a 50 permnt drop in nitrogen arntent of the foil a&er eight years of mltivation. Furthemore, the Smaure of the sail sugers a grave dete~oxationafter a few years af altivation ( G s s and Mchelena 11388,23%241), 38. Ymes and Gerber 1989, 42; Reboratti 1989%63, 8-4; and Rumin 1988, 145,

The provinces of Mendttza, San Juan, and San Luis are together

known as Qya. The region is extremely arid, receiving less than 10 inches of rain in the average year. The eastern half is mostly a flat plain mvered with bmsh, although there are low mountains in narthern San h i s . The western edge rises to the cantinental divide and the border with Chile, urhere the Andes, and the Americas, reach their hi&est point, Betureen the h d e s and the plain are lower mountains, known as theprecctrdilera. Until the 1870s, near@all of the irrigated agrialture in &yo was around the ~o cities, Mendaza and San Juan, which lie at the base of the precordiIIera along rivers mrrying melt water from the h d e s , rbfter the Qmpaign of the Desert in the 1870s, the danger of Indian raids w s e d and a third oasis was developed at San Rafael, 100 miles south af Mendoza. Mendoza and San Juan were founded within ten yearr; of the first permanent settlement in what is now kgentina; San Luis was founded a generation latex, Until the late nineteenth centutry, the economy centexed on cattle. T'here was wme cattle breeding in Qyo, but most of the region's emnomy was oriented around the cattfe that were bred in Santa Fe and a r d o b a and fattened on irrigated pastufes in aye while en route to Chile, By the mid-nineteenth cenmry, 50,W head a year were ewsrted in this way (Swbie 1988, 104; Mateu and Gascrjn IW, 121-125). Irrigated land was also used to produce food for these largely self'.suffi"cientprctvinces, Grapes were grown and made into wine that was distilfed into aguardiente and eqorted to other parts of hgentina, Ghife, and Bolivia, Small amounts af wool, dried fmit, hides, and tallow were also e q ~ r t e d , The economy of Cuyo continued without much change for 360 years aher the kunding of the first settlements. During the dip in klivisn silver produaion in the ei&teenth cenmry, myo partook of the same staption that settled over the rest of Spanish South h e r i c a . Mter independence in 1810,the foss of the Bolivian market and the economic disorder produced by eontinuaus warhre among the remnants of the old vi~eroyal~y produced

even more hardship. In 1861 an earthquake destroyed every building in the city of Mendoza and killed about 6,000 people, WO-thirdsof the city's residents, Not long aftennrard, the cattle trade with ehile was banned and depression gipped the region. President Sarmiento, a native of San Juan, approved plans far a railroad to the regjon before he left office in 1874. When the railroad finally reached Mendoza ten years later, it produced an emnomic revolution, and &p was shaken out of its centuries of eeonamic torpor in the 188Qs, Grape cultivation and wine manufac~re-after unsuccessbf experiments with other crap+soon repla~edcattle as the core of the economy.

In Mendoza, acreage in vines tripled by 1893 and then increased s s o l d in the following t\;ventyyears (A. Morris l9@, 103). In San Juan and San Rafael, vineyards spread rapidty as well, although not; at the pace of Mendoza. On the eve of World War I, Cuyols output of wine exceeded that sf Chile and was double that of Galifornia, although there was still less acreaw in vineyards than in alfalfa paftures (Rock 1985, 180% Zamorano 1988a, 610). Except for severe difficaxlties during the Great Depression, grape and wine produetion mntinued to eqand until the late 1970s. At that time, Argentina was the world's fifth largest wine producer (Foster 1888, 31). About a third of kgentinab irrigated land w;rs vineyard, 95 percent of which was found in G u y . In 1980, gapes and wine amunted for 17 pereent af the value of agricultural goods produced in kgentina, eompared with 63 percent for sugar and 10 percent for wheat (Huici and Jambs 29851, 237, 239). Grapes and wine amunted for three-quarters of agricultural production in Mendoza and San Juan, one-third of gross provincial product in h/fendoza, and an even higher share in San Juan (ManzanaI and Rofman 1989, 186).

T h i s dramatic q a n s i o n in grape and wine production was made pass&le not just by the railroad and the Campaign of the Desert, but alw by awessive support from the national pvernment, The most important federal assistance was a tariff on the import of wine. The railroad, of wurse, dranaticaly lowered the cast of shipping wine from Cuyo to the principal market, Buenos Ajeres. Mendoza, however, was almost 700 miles away from Buenas Ai'res, and European wine wuld still undersell wine from aye since transport by sea was so much cheaper than by land. The federal government kept increasing the tariff on wine until it offered protection from European imports. The wine tariff wrts 30 percent in 1876 and 461 percent in 1878; it was raised again ta 58 percent by 1882, 66 pereent by

1909, and finally reached 80 percent in 1914.' Evidence of the effectiveness of the protection afforded wine is the growth in wine imports that followed the recent reduction of tariffs (LosAndes, November 22, 1W2, p, 6). For the several decades befare 1991, a variety of measures in addition to the tariff insrjlred that virtually no wine could be imported into kgentina? There were quotas on wine imports. Moreover, wine cauld not be imported from countries in which sugar was ever added to grape juice to increae the atcohoiic content of the wine, even if the particular wine sent to Argentina did not use the technique. Since sugar is added to at least some wr'ne in most countries, this ef'fectively prohibited most wine imports. Furthermore, ovfne could not be inprted in bulk and mked with local wine. 'Wine with an dcaholic content less than that found in Argentine wine could not be imported; since Argentine wine was among the strongest in the world not fortified with sugar, very little breign wine could pass this hurdle, Wine produced from hybrid varieties of grapes could not be imported. Wine with the same brand name as an Plrgentine brand could not be imported. Since 1991, the trade regime has been liberalized, but it 3s still difficult to import foreign wine, Wine pays a 10 percent tariff plus another 10 perGent "statistics" tax (a tariff by another name), The wine importer must also pay the 26 or 27 percent domestic value-added tax, plus high-quality wines must pay an additional 10 percent 1 ry tariff, The few perGent paid to the customs broker brings the total to nearly 60 percent, Furthemore, the first twr> restrictions mentioned abovethhe most onerous o n e e a r e still in force, Argentina has still not opened its wine market to international competition. 'Xke Eederal gavernment also extended tax breaks-the first one in IWl-to grape growers and wine producers, 16fiese inctuded tax reductions to encourage bcrttfing in a y 0 rather rhan shipping the wine in bulk, railr fargveness for expansion of agricuffural land in arid regions, and tariff reductions on the impon of machinery.) The federal government has also subsidized drilling of wells for irrigation water (af which there are now aver 20,W) and the constmetion and operation of eleetrieal power generation and transmission to the pumps for these wells (Chambouleyron 1991, 156). Some of these subsidies were aclditive, and in the early 197&, one muld receive tax breaks frsm the federal government of up to 175 permnt of the value of some investments (Baldrich 191, 149). In addition, the wine industry received low interest rate loans from several different propams and tax breaks ta enesurage shipping fresh grapes and raisins (Bafdrieh 1991, 1.48-148). The federal government also subsidized the building and operation af the railroads that brought the wine to market and has subsidized the truiMing af dams and canals used for irtigation, alrhough this latter subsidy has been less rhan in other parts of hgentina where agrieultvre is irrigated (amisi6n de Tierras hidas 29"1, 22-22). In San Juan, the wine industry was allowed to defer value-added tax payments, an interest-free loan from the government.

Guyo's sine is like other products of the interior of hgentina in that the combination of tariff protection and subsidies produeed an excess supply, The first ctisis of overproduction o a r r e d in 1901, and the federal government" response was to eliminate a tax on wine ( G a I l o and Zapata 1986, 13%140), In 191&1915, another crisis hit the industry, and the provincial pvemment bought and destroyed over 10 million ltiters of wine and eliminated 16,500hectares of vines, The provinces, however, prwed powerless by themselves to deal with the catastrophic drop in wine cansurnption awasioned by the Great Depression and the coincident success of the temperance movement. T%enational government established the Junta Reguladora de Viiios (Wine Regulating ammitree), which used federal hnds to buy gapes, wine, and vineyards ta take them off the market. In 1959, the Junta was replaced by the Xnstituto Nacionlal de Vitiviniwlmra (National Wine Fmduction Xnsti-~ute). The Xnstituto, like the Junta before it, replated the production of grapes and wine in minute detail. The Instimto told the growers when and how much they could plant, when they could harvest, what price they could receive, and to whom they muld sell their grapes. Wine manufacarers were similarly regulated. The Xnstituto alxl attempted to %sure quality, csnduct research in wine production, and encourage diversification. Government intervention in the industry was thus high even by Argentine standards. Wine producers and their advocates often complained about the ill effects of heay-handed federal regulation, bat this arose in an attempt to deal with the avergroduction that resulted from the protective tariff and subsidies (for emmple, Juri [11992], Zapata and h c a f1987f).. Protection of the wine industry, of course, brou@t substantial benefits ta Cuyo at the expense of consumers and t q a y e r s on the pampats, fn 1991, the government" liberali a i o n of the economy ended this detailed regulation of wine production in Atgentina. The Insrimtots role is now restricted to a few qualiv control meaures, Xts role has perhaps been reduced too far: the incidence of wine poisoning from improper practiws within the wineries has mushroomed since the deregulation. Provincial pernments in Guyo, beginning in the 18&, pursued an extremely aggressive: and ima@native:mmpaign to promote grape cultivation and wine production in the region." Much effort went into creating the juridicrrl and regutatory law that supported the inc-lustry, Defining praperq rights in irrigation warer and setting up the meGttanism to allocate those ri@ts were Eundamental to the growth of the industry. The budgetary implication of this sort of activiv-which is what ecrnwrns us here-was minimat, Other activities of the provincial governments, however, were more expensive, The building and maintenance of the extensive irrigation facilities required a considerable outlay by the gclvernment that was not covered by the fees charged far the water and pernment land sales (Supplee 1988,477), In the early years, the provinces offered tax breaks to

those who planted new vineyards. Moreover, between 1954 and 15191, the province af Mendoza owned and operated the winery Ciol, one of the largest in the cauntry. The goal of the enterprise was to stabilize the market and in particular ta defend the interests of the small and medium produars. By the late 19W, Giol had spent sa much money buying gapes and wine for destmction to prop up the price that irs net worth W~ZSnegative (Bafdn'eh 15)91,155). San Juan set up a similar operation h a w as CAVIC, In various ways, provincial government supiport of the wine industry contributed to the budgetary deficits of these provinces, The Eederal government's willingnesb;to sub;sidiz;e provincial budgets through federal revenue sharing or to take aver the debts of Ciol and other vintners fed ta a transfer of resources from the pampas (which @aerates most of the nation's taes) to the interior (Baldrich 1991, 152).

Grape cultivation is I a b r intensive, requiring even more labor per he~tarethan sugar cane (Manzanal and Rofman 1989, 183). W e n the railroad rewhed a y o in the I8&, ;a key cunstraint an the eqansion of grape and wine production was the lack of labor. The few cn'oIIo ran& hands in the area did not make good vineyard workers since they were accustomed to a very different kind of work and pace af life. Furthermore, gowing grapes requires considerable: skiif, and inattention easily mins the m p . Sa the slaves or semi-slaves who worked the cane plantations at the time were afw unsuitable. The laber bo#lent;tck was ended by bringing immigrants "Erom Europe who had aquired the skills and temperament to grow grapes in the old country.' Wages were goad enough in the early clieades that a hard-working and lucky family could save enough money in a single harvest ta buy a tiny parcel of land. Unlike in most of the Northwest, land w;ls available far sale in small lots. The foss af the ai2ean market and the campetition from pampean beef brought in on the new railroad devastated the carrle economy. The eri;ol/~land owners were strapped far cash, and many sold their Iand ta the eager immigrants, most of whom could afEord only small parcels. The provincial governments also wld land to finance their development prajects (Supplee 1988, 475477). "I'hus, from the beginning of the wine boom, rninifindi~splayed an inpartant role in &rapecultivation in C u p . As in most of the PJorthwest, most of the land of Cuyo was handed out in huge parcels in the sixteenth cenmry, and land tenure remains highly skevved. In Mendoza, for example, 72 percent af the agietllturaf land is in fams of $,Wor more hectares (Gobierno de Mendaza 1992, If). All of these really large hrms, however, are cattle ranches. Irrigated farmland, and in particular, vine land, is mostty held in very small parcels. Out of 2 0 , m vineyards, only 90 oust over 0.4 percent) have 100 or more hectares,

and together they a w u n t for 1 2 percent of vine lands in the province, In San Juan, there were only 4 vineyards with more than 2UO hectares cowering only 2 pereent of the land devoted to grapes. A 100 haare: wheat farm on the pampas is mnsidered small and can barev produ~eenough inicome to support a farnity; but 109 hedares of irrigated vineyard can generate a very substantial inwme. Until the last decade, the m a j o r i ~of the minifindr'of in aye were min Mendoza, far examfarmed by sharecroppers, called controtistas. LR 1 ple, they were about M-thirds of the grape powers (A, Morris 1%9, 309). They now operate only h t 5 pemnt of the vineyaxds in the province (Gobierno de Mendom 15)92, 19). m e r e are several eqlanations for the dedine. The Feat advantage of the ~ontratistais that during the early years, wfien the vines are not yet mamre and yields are little or nothing, the labr>r costs arc: also zero, Diversification away from grapes to annual craps such as alfalfa has dimuraged the use of cotzlrafktls. Moreover, provincial labor laws sought to protect the contrarkta but, in doing so, raised the cost of using tenants and made operating the vineyard with wage workers mare attractive. Analfy, hi&er wages for those who worked the vineyards made mechanizing certain taskemost of the minifindios of C u p still use animal traction for plawing-mare mst-effective. Since mechanization is w b a r d on small parcels of land, many owners gc~trid of their conmtkfas and consalidated their holdings (A, Morris 1969, 109; Zamorana 1988a, 62%). Despite the decline in the share of the contratbta, the minqutzdio still predominates in the vineyards of a y o . Growers in Mendoza with 5 or fewer he~raresoperate 64 percent of the farms and have 20 percent of the acreage in vines. Those with 10 or fewer hectares have 83 percent of the farms and 39 percent of the land. In San fuan, small Earms are even more prominent, There, those with up to 10 hectares have 137 percent of the farms and 44 percent of the vine lande6 The smaller nzinifindios use only family labr, while the larger mrizifirndbs require some wage labor at harvest time, On the larger farms, many migant wrkers supplement the k w permanent wage workers at times of peak labor demand, especially the hawest. These seasonal workers come from the minibndios that are toa small to fully o m p y their owners, from the Iandless wage workers in the province, from the nei&troring provinces of 'ta Rioja and Gtarnarca, and from Bolivia and Chile (Reboratti 198%, 136). Mast of the klivians (and probably the Chileans, too) have taken up permanent, if perhaps illegal? rresidence in (Sabalain and Rebaratri 1982, 161-162).

T%e diwssion so far has centered on the three major owes of Mendoza;, San Rafael, and San fuan, but there are other minor oases scattered

a b u t the region. For example, tiny bits af land are cultivated along the Rio Mendom bemeen the h d e s and the precordillera at Uspaflata and Patrerillos. San Luis has several oases as well, M o g a in San Juan is an example of what life is like in many of these impoverished oases (hdrada 1979). Origndly, the town's farmers fattened the wttle on their way to Chile with irrkated alfalfa, More recently their a s h crop has been alfalfa grown far seed. They dso raise sheep and goats for leather, wol, and meat. The provincial water authoriv directs warer flow so that the town receives water once or twice a week through the irrigation canal. Most of the water is lost before it arrives due to evaporation or infiltration through the porous floor of the: unlined canal. When there are heav rains, the banb of the irrigation canal are breached and sometimes no water is remived for weeks at a time, The irrigation water is very salv-mare than twice the recommended m ~ m u mfor irrigation. The sparse and salfy water leads to poor crop yields. The irrigation canal afso bring the town's drinking water, and serious gastraintestinaf disease is rife. Other endemic dkeases are ChagasVisease, hepatitiis, tubermfosis, syphilis, and a variety of parasites, mere are about: forty mnchos or simple huts of mu$ and thatch in the village, On the average, ten people five in each rancho. There is no electricity, no mnning water, no nail service, no newspaper, no bus sewiw, no municipal authority, and one mass each year when the priest comes, Ninety percent of the population is illiterate. E x h year for many years, two or three families have left in sear~hof a better life elsewhere. Thus, the poverw of the smaller oases of Guyo is far more abysmaf than in the major oases. Fmtoraf adivities in aye are even more primitive than in the Northwest bemuse of the extreme aridity of the re@on. Perhaps the poorest of the poor in Cuyo are the ranchers and shepherdsscattered about the deserts of Mendoza, San Juan, and western San Luis, As in the Northwest, overpastun'ng by ranchers and shepherds and indisriminate wodmtting have left the land exposed to wind and water erosion. More than half of the province of Mendoza, a third af San Juan, and two-fifths of San Luis are affected by moderate to severe levels of erosion? In San Luis, for example, there are 230,000 hectares of land destroyed by pilies and IZQ,Whectares of shifting, wind-Mown sand duns. n i s degradation of the environment has increased the poverty of pastoralists in the re@on. Although myo hais been one of the most proweraus parts of the interior of hgentina throughout most of this cenmry, one finds substantial abject povere in the region. Prabfems af Demand and Supply

In the last fifteen years, grape and wine production in myo has suffered a devastating drop in output and profitability. Betuleen 1980 and

1985, the share of grapes and wine in national agricul~ratoutput fell from 17 perent to 9.4 percent (Huici and Jambs 1989, 237). Jts share af gross provincial product in Mendoza fell from one-third to 8 percent between 1979 and 1983 (Manzanal and Rofman 1989, 186), Between the peak in 1979 and the nadir in 1989, ineome of the wine-producing sector fell by nearly W percent and by 1991 w a still only 40 pewent of the peak (Juri 15?512,29), Grape pmduction in Mendoza fell by 61) percent b e ~ e e n1976 and 1993 (Gobierno de Mendoza 1992,70), mere are WO wrts af problems that afflict Qyo, the first having to do with the demand and the second with suppfy, Demand for wine in hgentina has fallen shaqly sin= the late 2970s. With the fall in per capita inmme since 1975, demand, which is incane elastic, has sagged. Noremr, the tastes of the Argentine wnsumer, as in the United States and Europe, have changed as the emphasis on health and fitness has gown. Consumers increasingly prefer fruit juice, soda, or beer instead of wine. Beer consulmption per apita doubled in rhe 19&0s; beer and soft drink consumption have both doubled since: 1990 (Chniz, Movenber 28,1993, Ewnomia, p, 21). Bemeen 1970 and 1%2, wine consumption per capita in Argentina fell by almost 50 percent? Furthermore, the Argentine population is growing very slowly because of a low birthrate and net emigration. The growing number of consumers has only partially oflset decfining per capita consumption. n u s , consumption of wine fell by 30 peree-nt between 1977 and 1992. The rate of dedine has, if anything, amlerated in the 19510s, despite the improvement in the national emnomy (Crwer 1993, cuadro 21). In late 1392, the wine factories in Mendoza and San Juan were operating at 22 percent of capacity (Crecer 1993, cuadros 20 and 2 9 ,

aye is also facing suppty problems that result from the deterioration of its agricultural resource base? One problem is depletion and contaminaand tion of the aquifers that lie beneath the region. Between the 11980, almost 20,000wells were drilled. There was no surplus water fiom the rivers that flowed out of the mountains, W the new wells pem"lifed an expansion of irrigated acreage. Nearly half the irrigated land in Mendoza uses well water to supplement the irregular flow of water from the rivers, and one-sixth of the irrigated land uses well water exclusively (Berra and Braun 1988, 124). The rivers that bring water down from the mountains carry a small amount of salt, Before the modern era, most of this water-and the salt with it-would flow out into the basin to the east of the mountains, bat now vir~allyall of the flw is used for irrigation at the western edge of the basin. The water is spread on the fields and is aborbed by the plants or

evaporates, leaving the salt behind. Some of this salt remains on the surface, destroying the fertility of the land. The rest of the salt percolates into the aquifer below. All of the aquifers near the oases of Cuyo have experienced this problem, but in some, the salt contamination is severe. In parts of Mendoza, wells must go far below 600 feet to find potable water. In other places, water that is not too salty to use for drinking or irrigation cannot be found at any depth (Ghiarnbuleyron 1991, 157; Barnes 1988, 260). The aquifers are also contaminated by industrial eMuent from factories and petroleum refineries near the city of Mendoza and by pesticide and fertilizer runoff from the irrigated farms throughout the region. During the 1970s, when wine production was at its peak, water pumped out of the aquifers exceeded what was added nahtrally. Aquifen are in some sense renewable remurees, but in &yo they renew themselves at a glacial pace because of the aridity of the region. Irrigated acreage had thus expanded beyond the long-term carrying capacity of the environment. Should agricul~ralproduction ever return to the levels enjoyed one or N o decades ago, the shrinking aquifers would again place a brake on development in the area. Irrigating with river water also brings dangers (Hansis 1977,369-371; A, Morris 1969,101ff). Land irrigated for an e ~ e n d e dperiod, even under the best of circumstances, tends to lose its fertility. Salt builds up in the soil and organic matter is depleted. The poorly struchlred irrigation systems of Cuyo have greatly exacerbated these common problems. Most of the dams in the region are simple low barrage dams that merely divert the flow of rker water into the canal newark and do not have a reservoir to store water. Thus, the vagaries of nature determine the amount and timing of irrigation, Moreover, subidizing the water eneourages its excessive use, h eqensi.vesystem of drainage anals muld rernwe the exeess water, but most of the irrigated land in Guyo does not have them. Too much water applied to the fields causes a viiriety of problems, Waterlogging leads to the decay of the vines' roots. In recent yearn, as wells have pumped less water from subterranean aquifers, the water table has risen and the problem of waterlogging has worsened, In some seas, farmem have abandoned their wat.erlogeb fieMs. h exwssive amount af water also heightens erosion, leads to the buildup of clayey silt at the foot of furrows, and =uses salinization of the sail. Eveciallly at the eastern margin of the mltivated area, saline layem and salt efflorescenwsabound. Salinization has led t s declining fertility in much of the region's soifs and even abandanment of many fields. Eighty percent of the irrigated land in San Juan is affeGted by salinization and 57 pereent in Mendoza (Barnes, et al. 1988, 259). mere is another way in whieh the irription system is poorly designed. The irrigation canals lie above the fields, and the water flows downhill between the EULrrows, Since the fields are irrigated by graviq, the Itirrrows

must slope downward and mntour plowing cannot be used, mus, fields inigated by gravity are under a high risk of erosion. (Well water is usually sprayed an the land, thereby avoiding the warft problems associated with flood irrigation.) Most of the a n t precipitation in the region o m r s in torrexltiaf summer rains. The rain then is p;u;;ldoicalfy unwelcome in this desert region since these deluges sweep away soil h r n the irrigated fields chat are unpmtected by mvering vegetation, Even before cultivation began in the region, the soil was f r d l e , with littfe organic material to bind it together. Deades of continuous use have redu~edthe wntent of organic material still flrrther, making the fields even more suseptible to erosion. Wind erodon is a serious problem in the arid winter. In ddition, chemiml fertilizers, pesticides, industrial emuent, and sewage have contaminated not only aquifers but surface warem as well. mus, the fields are being irrigated with a variev of tose substances, In the late 19W, domegic animals died from drinking water from one of the most contaminated irrigation canals. The discharge of organic wastes with a high biologca) aqgen demand inta the irrigation neturork has led to algal cantamination of irrigation water. Moreover, the buildup of nitrogen and phosphorous h s enwuraged eutrophication of reservoirs, As one example, algae have shaply reduced the carrying capacity of the Carrim1 reservoir on the Rh Tunuydn in Mendaza (Charnboufeyron 1991, 155-158). The problems of salinization, contamination, silting, wterloging, and erosion have prlejudied irrigated land in aye, Considerable investment: in new varieties of gapes, pesticides, and other modern technologies and the withdrawal from use af the least productive land (a 40 percent reduaion in vine land acreage bemeen the historic peak in 1977 and 1W in Mendoza) have offset at feast some of this enviranmentaf damage. If the problem of the lack of demand for Cup's wine could be salved, there are mme w~lysin which agriculmral production wuId be increased. About half of the irrigation water is lost thrau@ infiltration, percolation, or evaporation in the unlined and unmered canals before it ever reaches the fields." Lining even the main canals that are still unlined would increase water flow and permit an e q a n i o n of acreae. Better cultivation techniques could also increase the producti~ecapacity of the land. Construction of more hi@ dams that would even out the water flow would reduce the pmbIem of satinization, water loang, and silting. Irrigation by spraying instead of Baoding wuld alw help, Some tributaries of the rivers that irrigate the oases of Cuyo have a much higher salt content than others (for example, the Rio Salado, which empties into the Rio atuel), If the flow from the salty rbers muld be diverted, then the salt eontent of the irrigation water muld be reduced, What makes all of this difficult is the eeanomic crisis in which wine production naw finds itself. Law or negalive profitatzility for fifteen years has hurt the growershability to invest in new technologies. This is partim-

larty tme of the mirtijirnd&ras, who used a far more primitive technolo~ before the crisis began in the mid-1970s and have fallen fijrrther behind since, In addition, the collapse of the regional economy has left the provincial governments strapped for cash and unable to Eund the eqenske additions to the infrastmmre that could increase agricultural productivity, At any rate, evanding productiviv would only lead to still greater overproduction?"

manding eqrports would help relieve the difficulties imposed by the depressed domestic dernand for wine, but there are few gounds for optimism on this score. Wine exports grew rapidly in the mid-1970s but fell by more than half in 1979 with the disastrously anti-export polides of Martinez de Hoz. For the n m ten yeas, wine exports varied between $4 million and $7 million annually, but then began to rise. By 1992, wine worth $21 million was exported, the largest amount ever.'2 Nevertheless, this was still only 4 percent of Argentine wine production and half the value of garlic exports from Mendorta. Wine suffers from the same bias against exports that afflicts the rest of the Argentine economy. The frequent ovewaluation of the currency, until recently the hi&est rate of sustained inflation in the world, which made predicting prices so difficult, the notoriously inefficient railroads and ports, and a plethora of regulations and t a e s that obstruct foreign trade make the country unusually isolated for its level of development. The present government is making efforts to change all of this, but aside from ending inflation, progress has been slow." m a r t s of wine face difficulties that other products do not (Huici and Jambs 1989, 245). There is substantial year-to-year variation in wine production depending on the snowfall in the h $ e s and thus the flow of water in the rivers that irrigate the oases. In some years, a late frost has damaged all or part of the nop (A. Morris 1%9,99-101). The most damaging frost in a half-century, followed by hail and torrential rain, affected much of the province of Mendoza in late 1992 (Los Andes, November 27, 1992, p. 8). All of this makes it very difficult to guarantee distributors a given quantity of wine for export. The substantial year-to-year variation in prices means that wine exports may be profitable in one year but unprofitable the nes. Given the highly differentiated nature of the product, brand recognition is necessary for building sales. To be a successful wine exporter, a consistent quantity of wine must be delivered year after year, a difficult task given Cuya's fickle weatber. Moreover, Argentine wine is disadvantaged by high transportation costs. Even Valparaiso, a i l e , is closer to New York than Buenos Ares. No other mdar center of wine praductisn in the world is SS0 miles from the

priwipal port it uses to shjp its product. mentina cannot eqeet to have reliable use of the much shorter route over the Andes through Chile since Argentine wine eqorts compete with Gfiile's, The WO muntries are conaantly e m h i d in one trade dispute afier another, and obstnrction of the movement of goods across the barder is the usual state. Furthermore, hgentina produces mostfy inexpensive table wines, in part because this was encsouraged by government realatisn. The eheapef the wine, the greater the share of the transport cost in the price of the wine, since high-quality wines weigh the saw as table wines. Furthermore, the international wine market is extremely competitive. The cauntries that cctnsume wine are also the produeem of wine. mus, wine imports usually campete with national production. Sine each country wishes to protect its own producers, the wine trade is oktructed by a wide variety of repiations and tariffs. Argentina faces the same wmpetitian that many other producers from Chile to Hungary meet in the international wine market, but hgentine wine carries an array of burdens that other muntries" .wines do not bear, The grrape growers mutd sell their fruit to be eaten fresh, bv-t wine gapes do nut make good table grapes, Almost none of the varieties of gapes must appropriate for eating fresh are @own in kgentina, Evert of fresh grapes from Chile has grown rapidly in recent years, but Argentina exports almost none, Xndteed, kgentina imports fresh gapes from both Chile and Brazil.L4A principal obstacle to the eqort of fresh grapes is the presence af the Mediterranean fmit fly in Mendoza, a pest already eliminated in mile, Mendaza also has hi&er I a b r casts than Chile and must import the packing materials that Chile itself manufacmres, Besides selling gapes fresh or making them into wine or raisins, grapes are dehydrated into a sticw paste, much of which is everted, mile buy8 a cansiderablt: share of this, rektydrates it, makes it into wine, and eqorts it under Ghiiean iabefs, During the 19m,eqarts of gape pas& hovered around $5 million annually, but during the 1 averaged over $30 million per year, considerably larger than wine exports (Crecer 1993, cuadro 24). Dlvemtp&m

Away from Wine

Sin= the gapevine is a perennial plant with a fifteen-year useh1 life span, it represents a considerable investment, mlfing up vines, then, means throwing away that investment. For the most part, other crops that serve as appropriate alternatives to gapes in Guya are also perennials, such as peaches, plums, apricots, cherries, pears, and olives. Since it takes severaf years before the new crop generates any income, diversification has been sfsw. Furthermore, Mendoza is not well suited to orchard crops, Yields in the pear and apple orchards of the province are substantially lower than

those in the Alto Valle region of Patagonia:' With the decline in grape production, orchard crops have posted a small gain; production aver the last sweral years is 38 percent ahead of the late 197& (UniSn GomereIaI 1993, 65). In San Rafael, in addition ta fruit, tomatoes are gown and processed in local plants, In the Mendoza area, spinach is grown and dehydrated for use in soups. Other crops are squash, melon, peppers, seed potatoes, garlic, and celery (Zamorano 1988a, 623). Vegetable production in C u p in the last fe-w years is 20 percent below the lwels attain& in the late 1971)s (UniQnComemid 1993,165). Grapes still a m u n t for over "70 percent of the d u e of a~iculturalprductian in Mendoa (and an even larger share in San Juan), not very different from what it was in the mid-1970s. Thus, diversification away from grapes has proceeded gliacially. Both demand and suppIy cclnsiderations pose abstacles to diversification away from wine. -or& of fmits and vegetables from Mendam felf sharply in the early 1980s and have only partially re~vered.'~The domestie market cannot abmrb much eqansion of production due to slow p a w h in the kgentine population and ineome. On the suppfy side, the deteriaration of the soil, the decline in the amount and qualiv of irrigation water, and the great distance ffom the market are serious obstacles to the expansion of apicuXture in the region, wen if markets w t d be found.

The conclusions that can be drawn from the preceding discussion bear considerable resemblance to those of the preceding chapter an the Morthwest. Agricultural resources are limited and dwindling, Agiculmre originaflly developed by means of its inlegation with the emnomy of anather cou~tfy,in this case, Chile. When this link wm severed more than a cenfuxy ago, substantial eeonornic grawth omrred, but it was rnostlty baed on subsidies from the wnsumers and t q a w r s of the pampa. The shrinking domestic market, eornbined with the lack of viable ewort alternatives, the e~otogicaldisaster that a century of abuse has wrought, and the fading abilities of the national government to subsidize the region have left WOin crisis. Perhaps the crisis in aye is nearing an end. During the 19&, the province underwent a drastk restnrcturing that may have prepared the ecanomy for recovery. The Menern-Cavallo plan may now have produced the stabiIiv at the national IeveI that Cuyo needs in order to prosper. But grov~rhwit1 undoubtedly be slow and painful. Tfie region's principal product, wine, can never expect a buoyant domestic or international market. Other crops face import obtacfes on both the supply and demand sides of the market, Mineral resources in the region are modea. Manufacturing is at a geat distance from suppliers and astomers, The recent g r o ~ hin S u p may help; but @en Cup" distanee from the industrialized tourism in C

muntries where most of the world's taurists live, mere than very modest powth eannot be expected. The decline may have ended in Cup, but t h e eoming years will at best bring slow reavery.

l,., Supplee 1%8, ?6?"1;Rock 1985,150; and D f a Afejandro 19"TQ, 290. m i l e that the Radiajs w r e in p e r during the 1920s, effaive p r o w i o n far h e (h as a percentage of aE sugar) may bave decremd, fn 1W6, legktation bad itn estimated vdue of the h p m d item. With haation, the a a a l t a B rate fell, sin* the esthated value was fsed. The tariff was 28 p r a n t of the a h p f i e d w h e by 1927. However, the p m b 1922 mft3 illf)29, EEeetive protection wasl probably mare t h m doubb the a&uaX tariff and probabw not very dserent from what it had been earIrier h the mnfury, The p x a p r t k a of the muntry's h p f i bill ping ta d e fell from 3.2 prwnt in 1909 to 0.6 prmnt: in 11927; appmntly the t&E on wine was effdive in b l w b g hprts even d h n g the Radical ye- ( D k Mejandra 1970, 290,2"38). 2, The foBowing is b w d on m intedew h gem& geneml benera1 manager) of the Unidn Csmerdal e Isdustrid de Mendam (Mendoza Chamber of @mmerm). 3, hiva, pp.3, 13; Zapata, p.71; and Mamanal and R a h a n , p.208. 4. SuppXee 1988, 12; S a b i e 1988, 119-123; and A. M o ~ 1969,103. s 5, At the same time that Italian, and Spanish immigrants c m e ta a y 0 to grow g a p s , the pampas remived a wave af nniganls Erono these countries, who brought with them a t a t e for k n e e Little wine had been eomumed in Argentina prior to this tim-the eriollo papulation preferred agwrdienre. 6, f i & e d &am C r w r 19B, wadras 34, 35, Depite tbe current 6 g i s in tfie wine industry, tihese proprtions are vimaHy idential to t h o s a decade earlier (Zamorano 1988a, 621)* The r n i n i f i d k ~has not bwn sh&en out of the mmket, "I Berra and Braun 1988,1%129; Braun 1988; and Peiia Zubiate and d%Ni~art

1988,153.

8, Grlotto 1992, 20; and C r e a r 1993, cuadro 22. Indeed, per a p i t a wine mnsumption fell every year exwpt one bemeen 1977 and 1992 (the last year for wblch data are available). The only exaption was 1990, the year after the hyprinffatian. atefy, data an average yields manat tell us much about the deterisration af the soil, Higher-quaEv grapes (for the better wines) have mu& lower yields than do m m m n grapes for table wines. Arpntinr: grapr: yields are among the ~ & ia ~the world, t but this only means that hgentine vhtners produa mostly table wine (Ras 1977, 177). Sin= 19LU3, despite mueh yew-to-yar variation, there has been no h a e a s e in yields (Kuici and Jaicobs 1989,240-241; Gobierno de Mendoza 199-2, 70). This sability, howevef; mems that the dedine in yields due to a drop in soil fertiliv and an inmeas in the propnion of high-qualiv v a ~ e t i mof g r a p s has been o f f ~ by t an inmeas in produdivify due to teehnalogial impravemerits*

10. A, Mofis 1969, 114. Of mu=, reduc=i~ginfiltration and permlatian might haeasc= the depletion of the aquifers in the area.

d to the federal government 11. In the late 1970%provin&aI governments p vine mltkation that would p r o j m to repair and expand the ~ g a t i a nsyste fiave led to an inmeaw in the suppf-y of $rams that was wventen t h e s as Iarge as the projded bmease in demand by the year 2006. The demand proijedions w r e in themsekes wildly optsistic, aaumbg that demand would eontbue to p a w at the pace set in the early 1978s (hfact, demand fell) cuad that Argentina" share of the world mmket would remain constant fit feU) (Qmisida. de Tiemas Aridas 1978, 97, 102). 12. Hui& astd Jambs 1%9,249, md unpublished data suppEed by the Office: of of the Brotrincr: of Mendoza. arwed that the p h d p a l obstacle to expoflbg wine and mic in&ability and an werralued p m (Zapata and Juri mic plan of the prGgnt gove nt may be providing the stab39 that was missing in the past. The cast, however, is a p m that is even more avenralued than usual. Others have 4x1complained about v&ous reslations that have ossmed the industry, mast of which have now been itbolisbed (for =ample, see Juri 1982, 2%30). As arwed above, these replations for the mast part a r w to deal with the crve.~produaion sianed by subsidies given to wine and gape produdion, The dimaion presented here show that neither an advem nracrmcon a ~ environment c nor e x m ~ i v ereplation are the principal problems f a ~ n gaya's agricultural products. 14. M e h o 1988, 2, 4; Zapata md Suri 1988, 28; Zapata and Tarnha 11187,28; and Indicadsm eco&miio-sociafes, No. 13 (June 1993): 8. 15, Indieahres econrf,rnico-socklaf,No, 18 (%ptembex 19%): 8, and No. 12 (Mmch 19s): 8. 16. By one estinnate, the drop was nearly '70 preent bemmn 1979 and 1985 (2;apaQ and Juri 31989,27). This n u b e r should be treated 4 t h great aution, dnce e x p ~ e r sare not required to Eist the pravhdal, soure of the produa when they expofi their goods.

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T The Northeast of Argentina is made up of the provinces of arrientes, Misiones, Cham, and Eormasa. "IXe earliest European settlement in the Northeast was the city of Corrientes, founded in 1588 in the fir& wave of Spanish settlement in the Southern Cone. It was a d e e p river port, a way station on the route from &~nci6n to the Atlantic. mere W= vexy little trafGc an the river wen after h e n o s Aires was permitted by Spain to trade with the rest of the world in 1776. mus, the c i ~ role k as entrepbt never brouet mu& prosperity, A maze of streams, rivers, lakes, and swamps a t off the c i of~COrrientes from the hinterland that it claimed. mus, from the bednning the province of Qrrientes had no ecanornic coherence; it was and is a province that Eaces outward on the rivers that bound i t After the ,the elites of the Northwest formation of the hgentine nation in the 1 and eut a deal with Duenos Atres that brought them a certain measure of prosperitiy, The provinw of arrientw, whose emnomy cenrered an cattte breeding, could not offer b e n o s Aires anphing that it did not already have. Soan the railroads replaced the river bats, and the commercial city of Corrientes slumped into ecxlnomic smpor. The pravince's demography reflees its importance in the national eeonamy, In 1869, Gorrientes had 7.4 percent of the cauntry's population, but now has only 2.4 percent. In the seventeenth cenmry the Jesuits founded a number of missions among the Guaranf Indians in what is now Misiones (hence its name), Corrientes, wuthern Brazil, and eastern Paraguay, At their peak, the missions of Misiones had a b u t 40,W inhabitants, and those of arrientes about 12,000.' In 1767, the Jesuits were forced by the church, under pressure from Portuguese slavers, to ahandon their missions, A few were able to survive without protection fxorn the Society of Jesus, but in the areas where the fizdians were formerly hunters and gatherer-as in Misionethey melted back into the forest or were draged away into slavecy, The cities h i l t by the Jesuits soon lay in mim. Mter independence from Spain in 1810, Brazil, Paraguay, Corrientes, Entre Rbs, Santa Fe, and Buenos

Ares quarreld over Misiones. A steady stream of invasions, massacres, and smkings left the area unpopulated except for a handful of widely scattered Guarani, Only after the War of the Triple Aflianee ended in 1870 did Brail and Paraguay concede the territory to Argentina, but the region remained until the end of the Gentury largely undeveloped and without effective civil authority, During the first half of the twentieth cenmry, the province was settled by immigrants from other parts of hgentina and from Europe (Bolsi 1980,62).

Across the Paranli River in the provinces of Cham and Formosa, there were no Enroperin settlements of any kind until the iate nineteenth century. The area had been a part of Paraguay until the War of the Triple Atlianee, when Argentina took the area as a prize of war. The Second Campaign of the Desert in the early 1880s was kgentinak first red attempt to msert wvereignty over the scattered groups of hunters and gathererswho popufated the region, Two of the forts established by the army became the provincid capitals of Cham and Farmosa, ?"he Indians of the region were not definitively suMued until the wmpaign of 1912-1912. With the end of the threat from hostile Indians, settlement proceeded rapidly. Zxlging mnpanies deforested the area, making way far mttan farmers and cattle breeders. In addition to dissimilar histories, the different part%of the Northeast have eontratiny ghysicd geographies. a n t r a l Grrientef is parr savannah, part marshland, and is mostly covered with enormous cattle esfa~cks.A few thousand farms lie along the rivers that are the eastern and weslern borders: of the province, Misiones is afsa hunded by rivers on either side, but the interior of the province is made up of low, forested mountains, Mast of the land is divided into tiny farms and large estates. Mong the Paranzi River in C h a a and Formosa, the land was originally farested, and cattle breeding is now the principd activiq. The central third of the tiwo provinces was settled by wlonists an miniamre cotton farms. The western third of the two provinces is arid bush populated by hunters and gatherers and by ranchers using primitive, land-eaensive techniquef, The Northeast thus is compased of several sharply differentiated emlogical zones. The different parts of the region have diffrerent histories, economic strucmres, ethnic and racial backgrounds, languages, and cultures. The subeeonomies within the region have almost nathing to da with each other but instead are linked to Buenos Ar"res.

For nearly three centuries after its founding, the Gity of arrientes was the only settlement in the Northeast (discounting the Jesuit missions that came and went). Af independence from Spain in 1810, the city of Carrientes had half the province's popu(ation of just under 10,000 inhabitants,

C&Ie and Sheep

M i l e the city of Corrientes stagnated in the nineteenth wntury, the papulation of the rest of the province: was gr~wingrapidly, reaching 75,000 by mid wntury. m e source of this growth was the cattle that w r e hunted down for their hides. The cattle that were found close to the rivers where transport was heaper were wanted for their meat, which was salted, dried, and safd to feed slaves in Brmit and the Gribbean, The soif ww not a fertile as on the pampas and the wbtropid weather fostered disease among the cattle. The refined breeds of cattle that were introduced around the end of the nineteenth century on the parnplils to the south did not. thrive in the warmer weather of Corrientes. As late as 1937, 70 perccnt of cattle in Corxienfes were still the native eklio breeds, Mareaver, the prohsian of marshlands and watercourses made transport within the province costly, and the great distance: from the market in Buenos &res made it difficult to compete with more favorably situated producers, Cattle ranching in Gorrientes remained trapfled in backwardness. Between 1830 and 1890, the cattle herd grew from about 200,000 to 2 million and is now about 4 million head." Corrientes has far a century been a major producrer of wool, but the sheep herd has declined sharply in recent years. Belt;veen 1930 and 1970, there were on the average 3 million sheep; during the 1970s a b u t 2 million, and now only 1.4 million. Parrtoraf activities remain the backbone of the Correntine economy. Despite using over W percent of the province's agriculmral land, cattle and sheep generate less than half of the gross agric u l ~ r aproduct.) l

The eqansion of crop land in Grrientes has moved at a snail's pace, In 1914 only 1percent af the land was cultivated, and now only 4 percent. 'The most impartant crop early in the cenmry was corn grown for subsistence or the local market.' A small amount of sugar cane was also grown. Later, cotton, tobacco, linseed, rice, and citrus fruit became important crops, especially in the southwest, where 90 percent of the province's crop land is found. Along the northeastern border with Misiones, the physical environment and consequently the crops (such as yerba matC, tea, tobacco, and tung) are the same as in Misiones. Most of the province is not suitable for growing crops. Almost three-fifths of the province is subject to frequent flooding, and most of the province suffers from a high water table, which encourages water logging of the soil (Eswbar and Capurrs 1988, 81, 83). Once one moves very far Eram the Paran6 or Umguay rivers into the interior of Corrientes, the fertility of the soil declines and ranching predominates. There is also a substantial amount of tree farming in Corrientes. The province now has about '120,000 hectares in pulpwoad tree farms, about 17 percent of the reforested land in the eountry (derived from h d r a d e 1989:

287). The trees are grown for the paper industry in the Nofiheast, Trees, of wurse, take decades ta mature and require little Iabor. Priccs for putpwood are low compared with wood suitable for construction or furniture.' mus, pulpwood farming iti an extremely h-intensity use of the land. The large amount of tree faming in the province is another indication of the pauciv of the province's agriculmrail resources.

By mid-twentieth century, the most important crop in arrientes was tobarn, generating 20 perwnt of the gross agriculmral produet of the province (Manzanat and Rofrnan 19ef9,458). The province was the most important producer of tobarn in Grgentina, amunting for about half the crop* For geographical reasons, the kind of tobaceo grown there is almost exclusively dark led. As cansumers increasinggy preferred light leaf burley and virginia varieties, Grrentine dark leaf &rowersfaced slumping demand. By the 1980s, they were producing only oneeighth of the national hamest, and by 1993 only 4 percent? Between 1970 and 1986, tobacu, production in the provinw declined by one-third, and it fell by more than half after 1986, Each year, returns dwindle and acreage dedines as demand far dark leaf tobacco cantinues its downward eourse, The enarmous subsidies of the tobarn industry dimssed in Chapter 4 were begun in the late 1960s in an effort to address not so mueh the crids of the t a b a w industry in general but the crisis of the tob the Northeast specifically. mrrentine tobarn growers have received a disproportionate share of the subsidies from the Fondo Especial del "Cobam (FEq. In 4987, they reeeived 37 percent of funds paid out in tobarno price supports by the federal government? Despite these subsidies, their s i ~ a t i o n has wntinued to deteriorate, Wween 1991 and 1B4, the federal gavernment witfrheld part of the hnds from the FET as part of its austerity program,

Citrus fruit has now replaced tobacco as the most ianportant crop in the province and now amunts fbr 25 perGent of gros agriricufturat produet. In recent years, production has been growing 4 or 5 pereent annual&, but this rate of gr0cvt.h does nat wem mstainable (Lamrte et al. 1991,145; Cattaneo 1993,13). As disassed in Chapter 4, the domestic market cannot be eveeted to g o w very much, and there are other citrus h i t producers in the Northwest and Entre Rios with whom arrientes must compete, Most of the dtms from Conrientes is shipped fresh, but much of the fresh fruit is afflicted by ~anerosisand cannot be ewarted. The citms graves in Corrientes have sustained a moderate amount of soil degradation fmm erosion and ovemse of pesticides and chemical

fertilizers? So much nitrogen fertilizer has been used that the lakes fi-om which the growers derive their irrigation water face the danger of eutrophication (Lacorte et al. 1991,146). There are sizable areas within the province to which the cittus growers could move should productivity falter in the present orchards. A tree must be several years old before it can bear fruit, so starting over with new orchards will be an expensive proposition. Nevertheless, the principal problem appears to be one of demand and not supply.

Carrientes bas been the country%second largest (after Entre Rios) rice producer for many decades and now produces over a third of the national halvest? Another 7 percent is also grown in the rest of the Northeast. With the help of tariff protection, subsidies, and tax breaks, rice cultivation developed into a modern, highly capitalized activity. Rice is an import substi~tein Argentina, and rice cultivation was insignificant until policies supporting import substitution were implemented in the 1930s.'' In the early 197&, the Junta Nacional de Granos (National Grain Board) f k d the price of rice and bought up any surpluses that the market would not absorb. Xn the late 197Qs,the military government withdrew from fgng the prim of rice; but by 1980 began once again giving asktance, The JNC gave a loan to the growers after their crop was delivered to the mill. The effect was to advance cash to the growers without forcing them to sell immediatdy at a disadvantageous price. Since the growers were told before sowing the amount of their loan, they knew in advance the minimum price of their crop. Provincial governments offered special lines of credit for the rice growers, which led to excessive levels of debt later dimunted by the federal wvernment. Far severali years in the mid-19%, by means of the Plan Alimentario Ha@ional(National Food Plan), the minimum price af rice was again f"ixed by the government. Rice growers could also take advantage of programs offering tax breaks far capital investment in agriculture, Since rict: eulrivation is more capital intensive than most forms of agriculture in Argentina, rim hrmers benefited disproportionately. These tariffs and subidies have been mcially important in pmtecting Northeastern rice production from foreign competition, since rice cultivation there is sa wstly. For Argentine rice growers taken together, yields in the fate 1960s were only two-thirds of the average of the f i e leading rice-producing countries (Ras 1977, 172-173, 176). In the 1970s, yields actually declined, only regaining their earlier level by the 1980s:' By 1993, Argentine yields were only 55 percent of those in the top five countries.12 Thus, kgentine rice is evensive. Rice from Gorrientes is still more expensive; there, yields merap 70 or 80 percent of those in Entre Rios, where half the Argentine crop is grown." Rice wltivation in Corrientes is more susceptible to flood and

drought than in the r e a of Argentina and uses much less fertilizer and pesticide, Furthermore, much of tbe machinery used in Correntine rim cultivation is obsolete. The pr0duetivit.y of the soil after two years af rim mltivation is seriausfy camprQmised,and the land is abancjoned after three years. "I%ereare different opinions a b u t whether riw growers in Corrientes can continue their nomadic e~stence.One source a r p e s that Corrientes has an enormous amount of low land near the rivers that is appropriate for rice cultivation, only about 2 pereent of which is now being used (Lacarte et al. 1991,147). h o t h e r source, however, says that in the medium tern they will run out of apprapriae land (ManzanaI and Rofrnan 1989,101). The export market for rice is unstabte and explains most of the variation in production; during the 19W, eqorts ranged Erom almost nothing to 40 permnt of the hamest. w a r t s of rice reaehed their peak in 1131CI and have trendcd dournward s i n e then. The international price of rice has also fallen--by 20 percent b e ~ e e n1985 and 1993." Information on exports of rice by province of origin is not available. Apparently, most eqorted rice comes from Entrc: Rios, where high-quality, long grain rice is grown and where produdion has been uowing rapidly in recent years. Correntine rice is of lower quality, and most of it is short pain, making it diffiwlt to place in. international markets (Manzanal and Rofnnan 1989, 100). Befween 1989 and XW3, Carrentine rice production averaged WO-thixds of the peak level achieved in the early 1980s.'' In 1994, rice growers' formnes took a sharp mm for the better, Br the end of the year, the world price of rice doubled as world rice stocks fell tn their lowest level in wenty years. Rim gowers in arrientes, enwuraged by a strong market, responded by planting more aicreage. Despite this improvement, Gorrentine rice growers face unfavorable prospects in the medium to long term, Given the high cost of production, the volatile natrrre of the externaIt market coupled with the presen.tliberalization policies of the government, a possible:shortage of fertile land, and the low and stable domestic demand, rice mltivatian in the Northeast cannot expect much growth in the long run.'6 Mar and h n d T ~ ~ u r g

The care, both economically and geogaphically, of arrientes is ranehing, whereas farn~ingis relegated to the frinss of the province. Most of the province is divided into large cattle estaneias, Large estates of 5,000 or more hectares cover 43 pereent of the agrieulturaf land, The majority of the farms are very mall, too small to fully support a family. nree-fifths of the farms have 25 or fewer hectares, and together these mlin@r~zd&tasown 1.5 percent of rhe agricultural land. This skew in the distribution of land is not very different from what is found in the Northwest.'' The large e-vtcias require very little labor, An estanGia of 5*Whectares typically has 3,m ar 4,m hectares of pastures and 1500 head of

cattle. A foreman and WO peons are required to work the a n & , with a fevv extra hands taken on during b u ~ ytimes m t s i 1985,25-26). With few activities other than cattle ranching, the central part of Grrientes remains very sparsely populated. As long as the atancias persist, there is little hope af an increase: in population and development af other sorts of economic activities, agricultural or otherwise. Nevertheless, it is difficult to imagine what else muld be done with the land other than cattle ranching, given its physical isolation and unproductke soils. Athough most farms that grow crops in Grrientes are small, there are mrne large ones. Most of the rice farms are large, modern, capital-intensive operations, since qensive pumps and canals are required that the minifindkta cannot afford. There are about 270 r h growexs in arrientes, and the average rim farm is 200 hectares. The largest is 1,300, heGtares and there are only a handful with fewer than 20 (Manzanal and Rofman 1989, 500). In Ehe far northeast along the border with Misiones are =me modern tea and yerba mate plantations, Some of the citms farms are fairly large. Despite the existence af some large farms, crop cultivation in Corrientes is avewhelming characterized by its small wte. A few of the small farms began as colonies, In the half-century after 18&0, aboM WO dozen were organized by the government, cavering 90,000 hectares, or a b u t I percent of the province's usable land (Rofman et al. 1987, 39). Some of these wlonies began with farms so small that they muld not at the outset support a family. Most of the rest have been suwivided by inheritance so that they have become minifindios. The majority of the smaller farmers, however, do not own their land. The ~ i c arninifindhta f in Garrientesg r m a small amount of tobarn or cotton, plus subsistence crops. The: 1a;rt;eraf the mrizifindios might pasture a few animals and grow citms h i t as well. In 1980, almost all of the tobacca farms (85 perant) had 3 or fewer hectares in tobarn. QnEy 5 percent had mare than 5 hectares (Manzanal and Rofman 1989, 174). Nmost 80 percent of tobarn growers did not own their land, and the smaller the hrm, the more likely that it was not owned (Manzanal 1986, $85). Some tenants paid a cash rent and others worked for shares. Many af the smallest paid their rent in labor sexlriees on the farm or ranch of the awner, a precapitalist form of land tenure, In the 'fate 1970s, the military government declared war on the minifindtfas of Corrientes. Modernization, the military believed, required the elimination of the smallest milzifundios bemuse t h y were so inefficient fan i w e treated in depth in Ghapter 8). The tobarn producerskorgaizations (the Liigas Agrarias) were repressed, as were rural pries& sympathetic to them. Hoping to bolster the middle-size farms, the military strengthened the organization of the medjum and large growers, the Asociaeibn de Plantadores del Tabam (Rofman et al. 1987,250). Tobacco production dropped by half, and many small producers went bankrupt (Refman et al. 1987,252).

There were sharp declines in the number of awners, w h tenants, and sharecroppers, but a shaq increase in the number who paid with fabor sewice. They increased by wer one-third bemeen 1974 and 1980, By the latter date, 44 per~entof tobarn hrmers in Corrientes paid this precapitalist form of rent, and they harvested 30 percent of the crop. n e y tended to have smaller families; others with more mouths to Eeed were mare likely to go bank5, 470). The military government's plan to rupt (Manzanal 19&, 4 modernize arrentine tobaeco mltivation thus bacMred. The rninifindktas af Corrientes have m t been able to maintain their inwmes by shifting from tobam to mtton since wtton prices have fallen even more precipitously than tobarn prices. Some $rowers have begun gowing citms and subsisten= crops like eorn, cassava, and sweet potatoes, but even with the: lower prices of t a b a m and eotton, these two crops generate a Feater cash flow per hecfare than dternatk crops, thus discouraging diversificatione Misianes

T'he victors in the War of the Triple Alliance, kgentina and Brazil, divided eastern Paraway between themselves but eould not agee on the emct borders, Misbnes was practically an internationalizedterritorywithout any real governmental authoriv until 1895, when the U.S. government arbitrated an agreement that fixed the boundaries. Long before this ageement, Misiones, like most of the rest: af the country, was canred into giant estates owned by a few families. In 1881, on the eve of the federat gavernment's eEfort to organize the territariat government of Misiones, the government sf arr-xiente-which had cfaimed dominion over the region-ald most of Misiones ta private spectllators, In the space of one week, twenq-nine individuals purchrrsed over 2 million hectares. The largest tract was over frQI),OOQ hectares (abut 2,200 square miles, roughly 2U percent of the prwince and an area the size of Delaware), 'The average was 70,000 hectares. Corrientesthought it was selling the entire province, but there were no maps or suweys of the area, The provinct: mrned out to be wider than was beliwed at the time of the sale. Land afong the rivers was sold, but the central region passed into federal hands (Bolsi, 1985, 77; Echeverria 1986, 30).

Xn spite of the near absence of civil authority, the population of Misiones grew from 18900in X879 to 46,OQOin 1895 (T3sIsi 19S, 78,80). The principal economic activities were loging and hancssting wild yerba mat6 leaves to be brewed into a potent tea that was and is the national bwerage: of Argentina, Brazil immediate@began settling the land it had seized from Paraguay with ~ I o n i s t who s gathered the wild yerba leavea For the rest of the nineteenth Genmry and early ~ e n t i e t century, h Brazilian yerba dominated the Argentine market, and consequently yerba production in Misianes

grew slowly, Argentine produetion was alsa disa&antaged by the unstable property rights inherent in the lack of civil authoriv. Overhawestingof the wild trees prejudiced their yield (Bolsi 19S, 80). Furthermore, the transportation infrastmctcltre was woehlly underdeveloped. Bundles of leaves had to be carried down from the mountains on the backs of mules or porters and then sent down the rivers during the r a i y s e w n when rafts could clear the rapids, Woodeuttem and leaf harvesters were recmited from Paraguay, from Brazil, and from among the few Suarani Indians who had survived, The same sort of physical mercion and forced labor that W% used in the Gane fields of the Northwest at the time w a prwticed in Misiones: "Thelot of the mall permanent labor for= was virn;taI imprisonment on the plantations, They were aften held in tutelage by overseers and suffocated by debts to campany stores, under oumard conditionswhich most observersfound indistinguishable from slavery."" The penalty for attempting to escape from a yerba mat4 plantation was execution. The families of the workers disintegrated; alwholisrn and prostitution were rife. These mnditions persisted until the reforms of the Perrin era, in the 1($40s. ni.e Rise of Yerb~ Mutk

As soon as the aFhitration agreement that fked the bordem of Misiones was aapptoved, the national government began encouraging colonimtion and the cultivation of yerba mate (Rebratti 1987, 93). The suwess of official colonization encouraged private land owners ta sell land to colonists. The eultivatian of yerba mat&began to replace the gathering of leaves from wild trees, By 1920, however, there were still only 5,W hectares in yerba orchards. The f92& brought a revolution to Misiones, In 1923, the federal government approved a tariff on imported yerba that dominated the market until 1991, when it was abolished.'' In 1926, the government began an aarefsive wfanization program in which the settlers were given free land if they planted yerba mat6 trees on at least 50-75 percent of the land they received (Ekzfsi 1985, 84). The result was a spectamlar increase in yerba productian. In 1927, 10 million trees were planted, and until 1935, 2-8 million were planted each year. Bemeen 1921) and 1937, yerba production increased over thirfyfald. In the late 1 9 2 0 Argentina ~~ grew less than a fifth of the yerba mat6 it m n m e d ; by the late it prodwed WO-thirds (Dhz Neandro 1970,514). Uerba mat6 cultivation still had its problems, The transport infiastmcture remained inzldequate, the government was slow to grant clear title of property to the colonists, and the Brazilian government encouraged dumping (fJoIsi 1985, &S), The huge increase in kgentine production, together with the continued competition from Brazil, led to the first crisis of ovewroduc-

tion. In 1935, a quarter of the kgentine crop could not be sold, so the government created the amisicin Reguladora de la f roduccittn y Comercio de la Yerba Mat4 (GRYM, the Regulatory Cammission for the Production and Sale of Yerba Mat&)to deal with the crisis.% The commission prohibited the planting of more yerba mat6 trees through the imposition of a punitive tax and established a system of quatas that regulated how much each grcrwer w a permitted to sell. CRYM also fked the prim of yerba and gave cash subidies to gowers to make up the difference befween the official and market prices. A variety of credits were offered to the yerba mat&growers and millers. n e s e subsidies were financed by a tax (2G3O percent in the early years) on all yerba mat&,but the benefits went only to the domestic producers, XR effect, this W ~ Sa di~gtli~ed tariff, The tax was not ad vaforem but was a wrtain nrtnzber of wntavos per kilagram. The inflation of the Pedn era eroded the real value of the tax, and hence the subsidy to the growers, so that by the early 1950s it had dwindled to almost nothing. The quotas that were impased in 1937 were not changed until 1952. Even though the domestic market for yerba mat6 w;ls growing, the supply was acmally shrinking as the eGsting trees aged and new pfantings were prohibited. This pnerated the highest ever gross income per hectare of yerba mat6 (Baracat, farthceming, 10). Seeing a new crisis looming in 1953, the: Peronist government again allowed the pfanting of new trees, but only by r n i n i f i n d k ~with 5 or fewer hectares in yerba mate, The trees take so long to mature and there was so much red tape in getting approval to plant, that the shortages persisted. Su substantial imports were permitted, and in 11957 controls on pfanting new trees were removed. Moreover, per capita consumption of yerba mat6 plunged, falling by half beween 1951 and 1970:' Supply quickly overtook the shrinking demand, so new plantings were prahibited on the larger estates in X962 and quotas reimposed in 1%4, Xn l%, the overhang of ammulated stocks vva so great that the hafvest was completely prohibited and imparts virtually ended. The ewnomy of the province wits so badly off that nearly 10 percent sf the population emigrated from the province in the decaele. M e n the military government seized control of the cauntry in 1976, it took eantrol of CRYM, The directors of the oqanization who hacl been representatives of the industry were pushed aside and the militaryk intervenor tmk charge, Gntrols on planting that had been imposed in 1964 were liberalized, although not completely eliminated.= The militaly, in its effort to modernize agriculture, reversed the previous practicf: of favoring the minijirndias. The smallest practically disappeared, and there was a shav drop in those with S or fewer hectares. After demomacy returned in 5983, the Radical governmentpursued turo csnflicting goals, first to wade another crisis of overproduction and second to prop up the impoverished small powers, It immediately authorized a 20 percent exgansian in yerba mat6 acreage, with preference given to small or

The Northeast

107

new growers. Subsequently, it restricted new plantings and gave cash subsidies (financed since 1980 from general revenues, not from a tax on yerba rnatb)? Menem's efforts to liberalize the economy led to the abolition of CRYM by presidential decree in November 1991. The commission simply burned all of its records and closed its doors. There are no longer any controls on prices, subsidies to producers, or quotas for production or export. Growers now cannot cover their costs. The provincial government is seeking ways to help farmers diversify, and in 1993 farmers began harvesting early because of their financial crisis. Between 1992 and 1993, the acreage harvested declined by one-eighth? A decline of this magnitude for a perennial crop is not inconsequential. Despite the difficulties faced by the yerba mat6 industry over the last half-century, the crop is still the most important in Misiones. (It is also a leading crop in neighboring Corrientes, which has 10 percent of the national harvest.) In 1980, yerba mat6 cultivation and processing accounted for 60 percent of gross agricultural product (and 10 percent of gross provincial product) in Misiones and 7 percent in Corrientes (Manzanal and Rofman 1989, 214). Given the growth in tobacco production in recent years, yerba mat6's share has surely slipped, but yerba orchards still occupy the large majority of agricultural land in the province. Yerba Mate' and the Minifundio

Misiones presents the same contrast as the rest of the interior, a few huge estates and thousands of small farms. The proportion of farms in the province that are minifindios is roughly the same as in Tucumgn or La Rioja and only slightly less than in Corrientes and Formosa (Rofman 1985, 118). What distinguishes Misiones, and to a lesser degree the rest of the Northeast, from most of the Northwest is that many settlers began as colonists with 25 or 50 hectares of land. The end result, however, is not too different from what one finds elsewhere. Even if the first colonist could make a modest living on the original piece of land, the next generation could not. If the land was divided among the heirs, then the separate parcels of land were too small to support a family except in poverty. If the land was not subdivided, then the colonies began expelling emigrants almost as soon as they were founded. There has also been much squatting outside of colonization schemes. Most of the squatters occupied small patches of land." From the beginnings of yerba cultivation until the late 1970s, the smallest minifindios increased as a proportion of total yerba farms. In 1920, 44 percent of the yerba mat6 farms had 10 or fewer hectares, and the average was 21 hectares. By the end of the yerba mat6 boom a quarter century later, after subdivision of the land through inheritance and spontaneous settling by squatters on miniature plots, the average yerba farm was only 7 hectares

( h l s i 1985,8%,87). In the early 197Qs, 83 percent of yerba mat6 farms had 10 or fewer hectares, The misis in the yerba mat6 industry after 1976, mupled with the palides of the military government that were hostile to the nziinifidio~,led to a dramatic drop in their number, fn 1972, there were nearly 9,000 yerba mat6 farm with kwr than S hectares, but by 2986 only a quarter of that number remained.% Nevertheless, yerba mat6 growing is still dominated by miniJizndios. During the late 1986s, all h t 7 percent of yerba mat6 farms had fewer than 25 heaares, a size that will barely support a farnib. There were just fifty-one farms with more than 250 hectares (Manzanal and Rofman 1989,217). The yerba mat6 harvest requires many temporary wage mrkers (Fiorentino 1973, 47). Unlike the rest of Argentina, where minifin& are worked only with fannib labor, yerba matit farms as small as 5 hedares employ wage Iabr. The leaves must reach the drying ovens within menfyfour hours afier picking, but one person might take several weeks to harvest even a small archard, In order to economize an the expense of trucking the leaves to the drying ovens, all the crop is sent at am time, so wage labor must be hired to help with the hawest. Until a decade or two ago, most of these workers were braceros from P a r a p q , bat their numbers have declined dramaticail& in recent years (Rehoratti 1989b, 132). hcals who find w q e work harvesting other craps in the area and warking as vvoodcutters, as well as mivtx'findktas who are not f;u'ilyompied on their own land, are now the principal banrest warkers in the yerba mat&orchards,

The supply af yerba mat6 is very unresponsive to variations in its price sinee it takes at least five years &er planting before a tree can be hawested, Tke trees last indefinitely; cenmry-ofd plants are still praducing today (Luxner 1991, 43). Thus, supply is e~remetyprice inelastk in the short run. Fawd with a price inelastic demand that is not ameliorated (at least in recent decades) by signifimnt e q a r b or imports, the market suffers erratic price Buc~atians. The bureaucratical)y rigid GRYM has been unable to help. Qf far greater impofi is the overpraductian that constantly haunts the industry. Until 1970, the downward trend in per capita csnsumption of yerba mat4 was more than offset by population growth. Since that time, per capita consumption has been stable, and production since 1973 has exhibited no trendan Prices, however, have fallen. Between 1984 and 1992, prices averaged 25 percent lower than in the first four years of the 198h. A small part of the crop is eqorted to Unrguay and to countries where hgentine eqatriates have carried a twte for the product, mast especially Syria, Chile, Lehanon, and the United States also import significant quantities of mat& from Argentina (I, er 1991, 42). e p o r t s have grown in recent years, from 2 percent of the crop in 1977 to 7 percent in 1990.28

Exparts now receive a subsidy of 7.5 percent. Brazil remains a potent competitor, especially if MERCOSUR will not provide special protection for Argentine yerba mat&. Accordingly, exports of yerba mat&are unlikely to lead to prosperity in Misiones. Moreover, the negative income elasticity of demand that protects yerba mat6 when the economy is dedining will work against it should prosperity return to Argentina. Thus, domestic demand is unlikely to grow in the fumre. TMB~

When the yerba mat6 market collapsed in the 1930s and new planting was prohibited in 1936, colonists began searching for alternatives. In 1938,

the cultivation of hlng began, and within ten years, over 50,000hectares of tung orchards were planted. When latex-based paints were developed after Warld War n, the demand for tung oil (used in oil-basecf paints) saged, and growth in tung production ceased. Since 1980, low prices have depressed production to about 40,000 hectares (Bolsi 1985, 95; Lacorte et al. 1991, 137). Misiones produces almost all of the countlyfsNng oil, and almost all of the oil is exported. The demand for tung oil has been stagnant for forty years. Technological change is also absent; yields per hectare in the late 1970s were virtually the same as they were in the early 1940s at the beginning of the tung boom (Banm de Anhlisis y Computacidn 1982,528). China is the wodd's principal producer and sells mng oil for 25 percent less than Argentina In 1992, output of Argentine tung oil fell by 40 percent; many growcrs stopped harvesting, and some even uprooted their trees. The government responded to the collapse in tung prices with a S percent export subsidy, Ironically, prices reached a record high in 1992,just as Argentine production fell. The recent rise in prices--a result of China's erratic marketing practio @+may prove to be temporary, At any rate, it takes st=veralyears to bring a tung orchard into production, so gtowers are unlikely to eqand acreage immediatejy. The fumre of tung is thus murky.

Just as the tung boom leveled off in the late 1940s, the mltivation of tea took off, As early as 1924, the federal government had distributed seed and sponsored demonstration fields (Stewart 1960, 267ff). Nevertheless, it was not until the restriction of tea imports during World War I1 that interest in tea grew. The national Wvernment orfered subsicfized credit (sametines at negative real interest rates) to tea growers and operators of tea-drying plants. In 1952, the national government prohibited the import of tea, the domestic price jumped, and acreage soared. By 1955, there were over 30,W hectares of tea bushes in Misianes. The domestic market for tea was soon

saturated and tea acreage declined, Rising tea eqorts in the IgEiOs, however, revived the industry, and production then elcpanded to about 4.Q,m hectares by 1970, where it has remained." In 1959 kgentine tea growers began exporting their surplus. During ,tea exports g r w from 3,000 to 19,000 tons, during the 1970s to 3 3 * W tons, and reaehed a peak of 45,000 tons by the mid-l98l)s. Sinw then, exports have varied between 30,000 and 46,000 tons (FM 1993, 7; Quimga forthcoming, 17). During this same period, Argentina has etcported a b u t 80 percent of its harvest and amunted for a h t 3 or 4 percent of the world market (P& NisEonm 1988, 2S29). Tea exports now receive a 5 percent subsidy, Tea exports from Argentina grew in spite of a precipitous drop in the world price of tea. In 1955, tea prices began a twenty-year plunge, falling to about 40 percent of their peak level by 1975 (PAX, Misiones 1988, 29). Since then prices have remained weak with the exeption of t?ivapricc spikes in 1977 and 19M fFAS 1993,l; Baracat 5987,32). kgentine tea production was able to survive the drastic drop in tea prices by a eempensating inaease in productivity. The harvesting of tea is now totally mechanized, using machinery developed almost entirely in Argentina.= As a result of this mechanization and the use of fertilizer, yields per hectare doubled from the early 1960s to the early 198Qs (Quiroga forthmming, 35-363. Dufing this period of falling tea prices, income per hectare of tea, althsugh highly variable, showed no downward trend, Mechanimtian, therefore, did not bring prosperify but merely offset declining tea prices. Tea cultivation in kgentina suffem from a variety af handicaps. Unlike aye, where the immigrants knew how to grow grapes and produce wlne when they arrived, none of the immigrants to Misiones came Erom estabhlshed tea-growing areas (Stewart 1960,271-273). Lack of knowledge a b u t proper cultivation techniques has created great difficulties, Most of the tea in Nisiones is grown on small farms and minifindios (75 percent of the p w e r s have Eewer than 5 hectares), which are far less productive than the largc: estates. kgentine tea is handicaipped by high labor eusts (six to ten times that of hgentinab competitors) and emlogical condidons less apt far gowing tea than cauntries such as India, Sri Lanka, and Kenya. During the 19&0sthere was an -art tart, Prices are extremeXy unstable seaonaiiy, leading to uncertainty and elevated risk for the growers?' Mechanized hamesting, combined with poor culthat-ianpractices, produces louv-guality tea, Argentina has found markets for its low-grade tea in newly developing csuntries in PLsia and Atiica and in the United States, where the tea is used as raw material in soft drink manufacture. Several other wuntries, xzot;nt>lyChina and Kenya, have been rapidly increasing their evort of tea in the last few years, and abundant qllantities of low-grade tea have depressed its price. Deteriorating profits for Argentine tea &rowers have prevented necessary investments and lowered still hrther the quality of

the tea produced?"~ the Argentine tea industry now finds itself in a very difficult situation with little prospect for substantial growth. Misioncs now produ~es29 percent of the wuntryk tob as much as Jujuy. Today, more than half the farms i tobarn. Most have less than 1 hectare, but nearly 1100 have 13 ares in tobarn, Unlike in arrientes, the smaller farms are ov usually operated by their owners rather than by tenants." As in Corrientes, the tobacco growers in Misiones have been disproportionately favored by subsidies from the FET fFern%ndez-Pat19%, 91). Raditionally, most of the small farms produced dark leaf tobacco, while the large estates grew light leaf burley. Since the mid-1980s, however, the production of burley tobacco by small growers has increased rapidly. The tobawo is grown under contract for export by Philip Morris and is the highest quality produced in Argentina. As in the Northwest, the price of the product, the price of inputs, and cultivation practices are rigidly controlled by the contractor. boom in burley t a b a m in Misiones may be over. During the early 1 ofit margins narrowed as the world market for tobaceo weakened, The situation was exacerbated by the overvalued peso, the rising costs of inputs, and new restrictions on imports into the United States. Exports of burley tobarn were forwast to be 30 perwnt less in 1994 than two years earlier urithout any change in domestic cansumption. This has produced great hardship, especially among small farmers. Alternatives to tobacco growing were increasingly less attractive, so the number of tobacu, farmers increased in the ear& 19% at the v e q time when profits from t o b a w were dedining. By 1994, however, tobarn became so unprofit-able t h a acreage planted dropped by one-third from the previous year." In the long term, the most impartant difficulty facing t o h m growers in Misiones is their hi@ cast and low productiviv. Of the welve l a r ~ s t growers of burley tobacco in the world, Argentina ranks tenth in yields per hectare. Yields are just over half the average of the five mast efficient countries." Thus, profit margins in Misiones tobacco ~ltivationare razor thin despite the substantial subsidies described in Chapter 4. The government's effort to end these subsidies thus casts its shadow over the province;.. Forestry is also a major rural activity in Misiones. Between 1870 and 1925, it rivaled yerba mat6 in importance and has continued to be a prominent industry, Nearly 90 percent of the province was originally forested; more than half has now been cut over (hdrade 1989,296). h g i n g and yerba mate cultivation grew up hand in hand since the yerba mat6 orchards were planted on land cfeared by the lagers.

Today, there is mare reforested areage in Misiones than in any other provinceabut 250,W hectares, or more than one-quarter of the reforested land in the county (Andrade 1989,287). Most of the reforestation is for the purpose of producing pulpwood to feed the growing paper industry in the province. As already argued, pulpwood farming is an esremely lowintenriity use of the land. Land used for reforestation sells for 16-15 percent of the price of land suitable for yerba mat6 eukivation, refle~tingcommensurately lower profitability.% These meager profits in pulpwood farming would be still lovver without generous support from the federal government. This has taken the farm of substantial subidies to the paper indust~yin Midones, indirectly favoring pulpwood farmers by providing them with a market for their trees. In 1977, moreover, the federal government began direay sultrsidizing those who reforested Iand and within a decade had subGdized the planting of over 200,000 hectilres. Between 1984 and 1987, these subsidies amounted to almost $100 million (Soloaga 1991, 215). Most of the ~ellulosepaste (used in making paper) exported from Argentina eomes from Misiones. Since f 986, it has been the province's most important eqort. The overvalued peso and the end to the subsidies of forestry and paper produets have wreaked havoc on the industry. w a r t of czellulose paste fell by half b e ~ e e n19510 and 15291 and has remained at that level ever sin=. World pulp prkes hit a record low in 1993, although they rebounded samewhat the followingyear (N;ew York Times, March. 3,1985, p. D5). In ear@1995, a majlos paper and cellulose paste manufacturer in the province defaulted on its loans, emerbating the crisis of investor confidence that was playing havoc with the muntryk balanw of paymen&. By f 9 3 , the government had resorted to impart quotas to protect Argentine paper producers and pulpwood growers. Printing industry officials expected major dismption in the industry because of the governmcntfsefforts to support the inefficient paper industry in kgentina.f7

Agriculture in Misiones has mined the soil's fertilify. A b u t 800,080 O perwnt of the province-have been cut over, put to agricultural purposes, and then abandoned. m i s compares with fewer than 350,m hectares that are presently under cultivation. Monoeultivation of the sail has accelerated the deterioration of the sails (Maller 1984,40). The large share of farms that are minifundios is also a problem sin= the minifindkfa,barely able to put food on the table, cannot affod to take measures that would slow or stop the deterioration of the land's fertility. About a quarter of the wltivated land is farmed by squatters who are illegal immigrants from Brazil. Withaut clear title to the land, they have little incentive to husband its longterm fertility. mey use dash and burn wltivation praetiws that leave the soil barren in fwo years (Pignotti 1994, 4).

The physical geography of Misiones encourages extensive soil erosion. Unlike most of the rest of the interior, rainbll is ample; parts of the province can even be described as rain forest. There are frequent periods of drought, even in the rainy season, that can last up to thirty days. Cementation of the soil o m r s during the periodic droughts, and erosion is accelerated when the torrential rain retvrns (Eidt 1971, 14). Moreover, the steep terrain, the eaensive logging in the area, and the low organic content of the red, clayey soil promote erosion (Lamrte et al. 1991, 137-140). Twenty percent of the arable land in the province has been moderately or intensely eroded (Gsa et d . 19&8,133). The region's stream and r+ers have been contaminated by pollutants from agricultural and industrial sources. The soil is naturally acidic and not very fertile. Large amounts of agrochemicals are needed to overcome the inadequaciesof the soil but also lead to contamination of the region's water courses. Furthermore,yerba mat6 and tobacco are major users of pesticides, which have also contaminated Ioal ground waters. Xndu~rialeffluent is additionally a major source of water pollution in the area. The little industry in the province is mostly devoted to the processing of agricultural products. The most important of these produce paper, cellulose paste, and sugar, and they discharge an enormous quantity of effluent into local rivers, many of which have become bad& polluted, The Uruguay River along the eastern border of Misiones, far example, is now almost devoid of fish because of the pollution from industrial and agricul~ralsources (Lamrte et al. 1991,139). Misiones is one of the poorest provinces in Argentina. In 1980, gross product per capita in Misiones was 57 percent of the national average (Manzanal and R o h a n 1989, 18). Only four pravinws had a lower per capita gross product, Bemeen the early 1060s and the early 198Os, agieul~ral produetion in Misiones grew a pakty 14 percenr (even though the amount of cultivated land grew by 18 percent), far slower than the rate of population growth (Nanzanal and Rafman 1989,29). Since the ear@19&Qs,the prow economy inee's agriculture has stagnated, This brief survey of the province@s show that it is unlikely that Misiones can quickly rise out of its poverty. Chaco and Fornoss

The poorest and least developed part of the Northeast lies in the prow i n e s of G h m and Formosa. Frrrmosa has the lowest per capita product of any province in Argentina, and Cham is fourth from the bottom. Per capita income in both provinces has declined in recent years.% The two provinces lie on a gently sloping plain. In the east, there are 5&7O inclles of rain in an average year, but fewer than 20 inches in the extreme west. The eastern half of the region was heavily forested ori@naily and is now devoted to hrms and cattle ranches. The mast arid regions to the west are known as El Impenetrable, a thick, interwined bramble of

vegetation that stretches for miles with onfy an occasional tree, Virmillly no rain falls in the dry season and the land becomes a desert. The rainy seaon csincides with the snow melt in the h d e s , so the fXat land Boods and the region becomes a wamp. The land is so flat and the river beds, therefsre, so ill-defined that rivers can shifr their courje by as much as 50 miles. m i s is one of the most inhospitable plwes on earth. h in Misioneq the Qrrentine elite eaended its domination over the new territories of G h m and Formosa as they were incorporated into the kgentine nation, Initially, the federal government attempted to calrrnize the re@on,which was still populated mostly with Indians, but very fwr of the wlonizing efforts were effective. After 1891, the federal government sold land without any obligation to colonize, Wealthy arrentines and law*ng wmpanies bm@t huge tracts of the best land along the Paran4 River (Carrera 1983,1&11; see also Miranda 1955). Within ten years, mare than 2 million hectares of land (?,Q00 square miles) of land had been sold, and before the land sales were aver, 15 million hectares had been sold. The land was sold in parcels that ranged between 8,WO and 1,870,000 hectares (or 6,600 square miles, an area 30 percent larger than Connecticut) (Bolsi 2985, 44).

After the army's initial attempt to pacify the region in the early l m s , economic deveXopment began. At first, virmaily the only emnomic activity in the region wm loging. The furests along the Paran&River in the east were largely composed of quebraeho wlorado, from which tannin was extracted. The logs were initially eported to Europe to be processed. After 1890, tannin esrwtion hctories were built near the loging operations and the tannin was eworted, Most of the fogging was carried out by a singe company, The Forestal Land, Timber and Railway Go. Ltd., or simply La Forestal, the same company that l a s e d off Catamarca about the same time. When logging activity reached its peak in the 1930s, La Forestal owned 2.3 million hectarcsof land in the Northeast (an afca the size of Massachuserts), leased much more, and owned 7W kilometersof railroad tracks and fourteen tannin extraction factories, almost half of those in the eountry ( k l s i 1985, 6)As in Nisiones, Salta, Jujuy, and Turnman, Indians were impressed into service to work as w o b t t e r s (and on the single sugar plantation in Clraw) (Qrrera 1983, 10-11). The best land along the riwrs had been taken by whites, sa the Indians were cut off from fishing. The land w m loged wer, so no game remained far hunting. Withaut their traditional snuxces of had, the Indians had little choice but to work for the whites. Other workers in the logging operations migrated temporarijy or permanently from nearby Santiago del Estero and Corrientes. Working and jiving conditions for the

woodcutters or the workers in the tannin factorieswere comparable to those of the yerba mat6 workers in Misianes or the sugar workers in Tucumgn (Panettieri l%, 102). By the 19&, l a e n g operations had tapered off. The forests in the eastern part of the redon were largely gone. To the west, there were fwer quebraeho trees and so tannin production hindfed. Firwood, fence posts, and railroad ties were still pradueed at a prodi@aus rate, but at a slower paw than before. w a r t t a e s were imposed an tannin in an attempt to encourage the domesticmanufacmre of leather, and Perlcin's l a b r laws drove up the wage bill, Other sources of tannin (such as the Nrican mimosa) were eating away at Argentina's share of the market, Chromium salts were replacing tannin, and synthetia were repising feather, thus reducing the demmd far tannin. The peak in tannin eqorts w;ls in 1921; by the mid19&, only 12 percent of that amount was exported. h n u a l production of woad in C h m during the last half of the 1980s was 40 pement less than during the previous fifteen years." The deforestation of Chaw and Formosa did not newssarily leave the land rea* for other uscts. Suders sprouted from the stumps that were left when the forests were cut over, producing after a few years a virtually impenetrable thicket stretching far endless miles. One eould walk under the branches in a natural quebracho forest, but the togged over forests are for pastoral or agriculmral activities. Giant nearly impossible to -fait bufldazers must now be used ta clear the land.

In the sixteenth mnt.ury, cattle ~ n c k ins eastern Salta began expanding into what is now the far west of Chaw and Formosa, h u n d the end of the nineteenth cent-ury, they were joined by many small herders earning from Santiago del Estera, where losing bad so changed the climate that the natural gasmres had failed ( a r r e r a 1983,12), In the 1ZOs and 193&, the catton barn drew many of these small ranchers into farming, but. hundreds of them remain. They have very small herds (a few -re head), which are gazed on federal land (Borrini and Shaller 1981,19ff). Nevertheless, most of the cattle in the west are still on the few huge e-ncias owned by Salteiios. The carrying capaciv of the land was already reached by World War I, and the total herd has hanged little since that time. Cattle rancfiing in western Cham and Formosa is merely an mensisn of the same activity in the Northwest, selling to the same market and using the same techniques in the same physical environment. Not surprisingly, the environmental degradathn that has plagued ranching in the Northwest is likewise found in the adjacent parts of the Northeast. Overgrazing and the indiscriminate use of fire have pradueed widespread desertification. The native pashtres are badly eroded or have been repla~edby plants that cows

cannot eat. Fulfy one-third of the prwince of Gham and half the province af Formosa is namral pasture that has been degraded to a moderate or intense degree." Cattle ranching in eastern Gham and Formosa has a very different history. Gttle were introctuwd inta the area by the army, which maintained herds to feed its soldiers (Nedtdermann 1983,264). When losing arrived, cattle and oxen were raised by the lo@ng companies to feed their workers and to use: as drafi animals. Gradually, cattle breeding in the defarested eastern Cham achieved a life of its awn. The: cattle were marketed in Santa Fe and Entre Rios, either for local e~nsumptionor to be everted as tinned or salted beef. Mast of the cattle ranches were and mntinue to be small or mectium size, Cattle ran&ing does not use the land intensively and employs very few wrkers. The population of the wuntryside in the eastwn Chaw has declined as cattle breeding has replaced lagging (BoXsi 1985,56). Xn the 1 s t two or three decades, cattle ranching in eastern Ghaeo has became an appendage of the pampas and has aquired the same modern practices that characterize parnpean cattle raising, Refined breeds (largely G e h ) have largely replaced the c~olloanimals. Some aE the cattle are fattened far slaughter in Cham, and others are trucked to the pampas to tie fattened (Rofman, et al. 1987,64, Baraeat and Mariaeh 198%27). By Warid War I, there were wer a half-million head of cattle and sheep in Chaca and Formosa (Neddermann 19B, 2611). By 1988, the region had 2.7 million cattle, virmally the same as in 1947, mere are alw roughly 300,W goats and sheep in the two provinces, In the last five years, the cattle herd has grclwn by 40 percent, while other agrimlmral activities in the region stagnated. Ranching is thus the only sector of the two pravinces' economy that has recently enjoyed any substantial growth."

During the f %h,agriculture began sfovvly spreading on the defbrested land in the interstices bemeen the cattle ranches and the loging operations (Bmniard 1975-1978, 64ff). The most important crop from the beginning W% cotton. Earlier attempts to promote catton production in the area had failed, The indigenous population had been the only available source af field hands, and they had proved unsatisfacto~y(Guy 1993,475477), Ely the 1920s, however, families began settling in the regon and gowing cotton on smaIl farms with the wtive enwuragement of the national government. 'Ibe Junta Nacional del Afgodcin (Natianal Cotton Board), organized in 1923, assisted the growth of cottan cultivation by encouragiw European irnmigrants to move to the Chaco, giving them seeds, disseminating information throu* agrieulturaf hHetins, and bringing in technicians to give advice (arrera 1983, 14). A new railroad built througfI the area $ave cotton farmers a m s s to the market. Furthermore, the boll weevil was attacking the

crop in the United States, the world" largest supplier, and the world price of cotton was rising.. mree-quarters of the crop was eqorted in the 1 x 0 s (Baracat and Qbrera 1988, 23)" a t t o n withation really took off as a consequence of the mantry's turn toward import sabstifution industrialization in the 193Qs. In the quarter century after 1930, the number of cotton spindles increaed from 52,W to near@ 1 million while per capita cottan fiber consumption inereas4 over elevenfald (kchetti 1972, W ) .The pr?'eeof cotton rose steadily for wen@ years, Cotton production in the 1930s ww three and a half times what it had been in the 1920s (Baramt and Cabrera 1988,24). In the 11"34s, when s garments by the war and the: country was cut off from imports of t e ~ i l eand then by the United States-led b p t t , textiles were the centerpieee of the IS1 stratea, a t t o n cultivation pew by 75 percent in the 1940s and by 50 percent in the 195%. By the end of the l%&,Argentina was imporring only I percent af the cotton text-iles it mnsumed, down from 92 pereent in the late 1920s (DhAfejandro 1970,514). Cotton reached the peak of prusperity at mid century, d e n it was grown on 36,000 farms csvering SO peacent of the crop land in @ham and hrmasa (Lacarte et al. 191,142; Bolsi 1985, SS), As IS1 ran its wurse, the domestic market became saturated and the ewansion of the tesile industry slowed, The late 1960s were especially bad yem, just as with sugar and yerba matb. Most cotton farmers ran tosses and many switched to other craps, a t t o n mltivation has been in dmost canstant cisis since then. At present, there are only half as many cotron farms as there were four decades ago." The Argentine cotton boom was originally centered in Chaw and Formosa, and in the mid-l98h the two provinces still amunted far nearly three-quarters of the national hamest. a t t o n is still the most important crop in both provinces, amunting far WO-thirdsof the crop land in Chaco in 1WI and, until recently, an even larger share in Formosa. W e n the cotton b o r n took off in the 192Qs, local and national taws forbade Indians from working outside the terrkory where they lived so that they muld be used as harvest wor)cers (Garrera 1983,12). As losing operations peaked and M i n e d , those who could no longer find w r k as woodcutters or lahrers in the tannin earaction factories in the area settled on srnzlltl plots of land in the mtton belt of Ghaw and Formosa, Afrer logging and overgrazing had produced desertification in the western Chaco, many cattle herders left their failed pasfures and b e a n e seasonal cotton workers (Carrera 1983,13). Settlerswere attracted from other parts of hgenrina, especially Corrientes, Santa Fe, and Santiaga del ktero, Xn addition, in the 1920s and 1930s, at the height of the maon boom, about 20,000 European colanists gttled in the region. The paverv af many of the cottan farmers disallowed the purchase af any land, f nstead, they settled on federal land, and most still do not have

clear title (Grrera 1983, 106105). Without much cqital, they could only farm small plots of land, ansequentiy, most of the cotton farms were from the beginning very mall. Subdivision of the land through inheritance has hrther fragmented land swnership in the region, In Formosa, 80 percent of cotton farms have fewer than 2Q hectares; this is nearly doubfe the propsrtion in 1947, In Gm, the distribution of farms by size is somewhat less skewed; a b u t 50 perwnt af the 16,400 gawers have 20 or h e r hectares but farm only 11 percent of the land sown in cotton? Argentine Gotton until the late 1970s w a protected from international competition. In the early 197&, the domestk price of mtton w;ls onequarter higher than the world price.@ Both the provincial and national governmentssuhidized catton eqorts. By some mechanism, domesticusers of Eotton (spinning mills) got the catton they needed, and the rest was eqarted. The gavernment owned and subsidized a b u t WO-thirdsof the Gotton gins. Provincial authorities organized marketing to stabilize prices and offered credits to small farmers (Rofman et al. 1987, 2MlFf). The government's attitude toward cotton took a 180 degee mm in 1976. The military privatized the @ns fsr which buyers muld be found and stopped subidizing the rest; it dismantled the provincial commissions that had subidized the mritifindktas, The priw of eotton fell withaut these artificial supports and in the late 19&0s averaged about 20 percent af its peak in the early 1970s. The government's objective was to insert kgentine cotton production into the wrtd market; weeding out the inefficient mir-ri&nd&tas was the method. The government outlawed their organization and persecuted its leaders. It gave clear titte to medium and large farms an federal land but attempted to ewe) mi~ifclndktas(Rofman et al. 1987,279242). T%e ineorne of catton farmers felt drastically and many switched to other craps or left the land. Despite these efforts, the minifin& continues to characterize cstton production in the region, and the dramatically lower productiviv of the minifindkta continues to plague the crop and the region.

Western Cham and Farmosa are too arid for cotton, and the east is too humid-aufurnn rains ruin the wtton after it has bloomed-m all of the wtton is grwn in the middle third of the region. The cotton belt stretches from the b r d e r with Paraguay in the north, thmgh krmosa and Cbaco, and into northern Santa Fe and eastern Santiago del Estero, Even in the a t t o n belt, the climate is hostile to cotton production, 'There is a sharp year-to-year variation in rainfall, The growing season is too short: early planting is threatened by frost, but a late harvest is threatened by the mmmnal rains, The rains during the harvest soften the ground and make mechanization of harvesting difflieult. A frequent northerly wind dries the land,

and torrential rains in the summer lead to erosion. One-fifth af Qaco and wo-fifths of Formosa have been eroded to a moderate or intense degree." Sinee the land is so flat, flooding is mmmon. Railroads and highways acst as dikes &at do not permit flood waters to drain and thus erneerbate the sirnation, A quarter of the province of ehm is subjea to frequent flooding and an even p a t e r proportion in Formosa, In one particularly bad year (1984-1985), nearly 60 percent of Chaco was inundated.* After forty or fifty years of cultivation, the fertility of the soil has been depleted, The loss of organic material in the sail is on the order of 50 percent and reached 80 percent in some areas as early as two decades ago. Safinizatian and alkafinization or contamination of the soil by arsenic is frequent. Cotton mltkration requires heay use of pesticides, and the region's water courses are polluted by apimltural ntnoff. Inappropriate teehnipes used in working the land have contributed to the deterioration of the soil." The bsll weeviI arrived in Axgentina in 1993, The insect devastated crops in neiaboring Paraguay and Brttajl, and the practices that would slow or stop its advance are not being used in Argentina." The hostile physical environment, the degradation of the sail, the lack af equipment, fertilizer, and pesticides, the ehronic shortage and consequent high cast of harvest labor, s u f f o ~ i n glevels of debt, and obwlete machinery have made cotton production in Argentina costly and unproductive. From the time of the cotton boom in the 1939s to 1965, cotton yields in kgentina did not ehange, although they daubled in the United States and more than doubled in BraiI f&rmddez et al. INS, 2). By the end of the 1 were among the lowest of the world's major cotton producers and a third of the yield of the mod productive grower (Ras 1977,178). By the late IWQr;, yields were less than 10 perwnt higher than they had been forty years earlier. Since then, new varieties of cotton devefsped by the national government agricultural eaension sewice (INTA) produced bath higher yields and better quality cotton?' Yields have increased by about 30 percent since the fate 197&, but Argentina has fallen even further behind its eamgetitors since the average yields worldwide increased by 40 percent. In 1993, yields in Argenrina were less than one-quarter of those in the most productive country and only 70 percent of the world average." me market for kgentine eatton gives little reason far optimism. Since 1%Q,there has been no trend in the hmestic demand for cottan?' Nevertheless, domestic dernand is qclicafly unsthle; dothing is a semi-durable good, and its purchase can be postponed during a recession. T%e stop-go character of the krgentine eeonoIlly thus generates substantial ye?ar-to-year variation in domesticdemand. The poor quality of Chaquefian catton makes it difficrult to evert, World cottan prices are exrremely unstable. Access to international markets is cantrolled by the multifiber ageement of the major importers. In the last two decades, exports have ranged between nothing and 64.perwnt of the crop and have averaged 43 percent.

During the late 1 9 8 0 ~cotton ~ cultivation began ta recover from the disastrous years under thepceso, but diffialt times returned in the early , The international priw of a t t o n fell by 2 5 percent befvveen 1985 and 1993, Moreover, the ovefvalued peso distxrurees cotton exparts and encouraps imports, Ben;veen 1W and 1991, imports of cloirfi and garments tripled and were expected to double again in 1992." This has had a drastic impact on the cotton gfowers of the interior, The area gown in cotton fell by 40 percent in mac0 and by 8nD p e r m t in Formosa beween 1992 and 1993, At the same time, eqorts of eotton from the WOprovinces fell by 64 percent?' Terrible weather battered the region in 1992 and 1993. Summer floods destrayed 40 percent of the 15193 crop in Chaco, and winter drought prejudiced planting for the 1994 harvest.% The gavemment has responded to the crisis in a var3ety of ways. h export tax was eliminated in I991 and a $47 million subsidy was given to cotton farmers; in 1992, a 5 percent export subsidy was initiated (US. E m b s y 1993b, IQ), In October 1993, in an effort to stem the tide of imported garments, the government departed from its efforts to liberalize the economy and inaeased the tariff on garments (BuenosAires Hererld, October 26, 1993, p. 3). These madest measures can have little effect, gben the scope of the crisis, The 1M-1994 crop may imprwe somewhat over the previous year as international prices have firmed and the weather has improved." Although production is expected ta rise, it will still be substantially lower than in the previous six years. Times will wntinue to be hard for the eottcrn gfovers of hgentina, especialb the minifindisi-ars.

W e n cotton prices sfumped in the 19608, many cotton growers turned to other crops, especially in Ctraco, Since then, the persisknt eottan crisis

has continued to fom still more farmers to abandon eotton. This process awelerated in the I . By 1993,cotton covered only two-fifths of Cham's crap land and only one-quarter of Formosa's, In Gham, soy, sorghum, corn, and sunflower replaced eotton. IR f;Orm~m,mrn w a the most imprtant substit-ute. Since eotton cultivation is far more t a b r intensive than the erops it replaces, the region has bewme a great eqeller of population. In the 1960s alone, nearly a quarter af the paptrlatt'on of Chaco emigrated, and many more have left since. The emnomy of a m and Formosa presents shamp eontrsts. Cattle breeding in the eastern C=haec,has prospered, The larger farms that survived the transition from a t t o n did well enoua until 1991, when the ovemalued pew depressed agriculture throughout the eountfy. On the other hand, those with small farms or ranehes have been suffering for decades.

Conclusion Our sunrey of the Northeast of Argentina has produced results similar to those unmvcred in the chapters on the Northwest and a y o 1 Most of the Northeast is not ;zs arid as the other two regions, but the agiatlt-ural potential of the region is nonetheless quite limited. The resources of the region have been mined. Once the forests were gone, most of the region's rcsourecs were devoted to the production of goods far the pmteeted domestic market, Given the physical geography and eeonomic bachardnem of the region, high-quality, low-cost crops cannot generally be produced. External markets for these crops are, at any rate, highly competitive. With stagnant domestic demand, a hostile external market, and, in some mes, a ravaged environment, prospects for the region are as grim as they are for the other ~o regjons studied.

1. Rock 1985,s 1, Other murws say 30,000 and 130,000 inhabitan@ althau@ the latter must be a ~sprjint(Bobi 1985,75; Bruniwd and Bolsi 1988, 538). 2, Bolsi 1985, 10; fNDEC 1993, 16, 18; and Bntniard and Balsi 1%8, 541, 3, Balsi 1985,10,21; INDEG 1993,16, 18; Bmniard and flolisi 1988,511; Federa* dt5n Lanera 1992, 17; and Manzanal and Rafman 1989,U. 4, Mmanal and Rohan 1989,1744;Wofman et al*1%7, 44; and Rambez 1383, 139E. 5, Pulp wood sells far $ 2 4 a ton in tbe Norfheast, Wmd for other p u w s s gws for $ 6 3 2 a ton (&om unpublished data supplied by Paiblo Navajas, a prominent bwinemmztn speeiaking in products of the Narffieast), 6. Mammal 1984,459; and U.S Embassy 19133c, 3, 11,25. 7. HOWthey got this much is obscure, Amrding to f i p p s et al. (1991, 1681, the priw s u p p m far light leaf tobarn in 1985 were larger than far dark leaf tobarn. afientes, which go- only dark leaf tobarn and produmd 14.5 p m n t of the aatianal mop, somebow gat 37 perant af the subsi*, Salta, with 27 permnt af the national crop and a larger per kilogram subsidy b w u w it produws only light leaf mbaw, rmived only 13 permat of the hnds (FernBrzdez-Pal 1986, 91). 8. About 8 percent of the pravinm hais been eroded to a moderate or mere ar and a p u n o 1988,713). 9. Idic&rm econbmico-socicrh, No. 12 (March 1993): 30, 10, Dim Alejandro 1970, 224, 303, 514,520; and A/fartzanal and Rahan 1989, 110-112. 11. Sdedad Rural Argentina 1971,2?; 1981,23; and 1991,35. 12. Brived from unpublished data supplied by the Fareign Agricultural Servia, U.S. Department of Agriculture, Argentina ranks fomeenth in yields per fieaare among the fom-WOmmt bpoflant xite-growing wuntries, M& of them muntries, l Among the $men largest temprab hwever, are hpverhhed, t r a p i ~muntries. zone rice produmrs, Argentina ra& eleventh, 1%yields wre only 70 permrrt of those of rice growers just amass the river from Argentina h Urnpay.

13. Marnand and Rofman 1989,9%101; and I d i c d m econcintico-sockla,No. 12 (March 1993): 30. 14, Xdie&m eeorufmico-sochh, No. 7 (Demmber 1991): 29, and (Jdy4eptember 1983): 53. 15. Indichrm ~!~on6mico--soekla~ No. 12 (March 1W3): 7,30, and No. 16 (March 1994): 3, 7. l & a t t o n is another matjar mop h a ~ e a t e s ,Lt is mostly of land, o b n by ~ n a n fame= t who g m subsisten= mop su and meet patatws, and n a b ather a s h mops sUGh W f ~ b a m Sin. Goden@sgram o n about 3 permnt of the nationd hawest of wtton a d two-tkds is grown in other pam of the Noflbeast, a d b w i o a of the crop wiH be p ~ p x r e d until later. 17. The &ew h the size distfibutioa of f'ams in C l o ~ e n k slies bemeen that of Sdta and %mm&n ( R a h a n et 191, 1987,82; Yaaes and Gerber 1989,38). 18. Rwk 1385, 404, %e also Reboratti 1987, 92; Rwk 1985, 180; ehwem'a 1986, 3S35; and Panettieri 1g66, 102. 19. Rwk 1985, 205-206, The histoxy of the tariff on yerba mat6 is samewhat o b a r e , but tbe 1923 tarlff w w apparently the first. In 1927, the rate on the aaual value of prmssed yerba mat6 (not the artifxdal value in the statute bash) was 25 perant, but the wverely undemdued peso meant that the rate of egedtive protection was prhaps more than tvviee that amount (Dim Nejandro 1970,291,298). At some t h e in the 6 s t few decades of this antury, the tarit%was redumd, altbugb not efiminawd, as a way of plaating Brazil, which had just agrwd to bilateral trade preferenws with the United States, The reduction in tarigs may ar may not have been t e m p r q (Bobi 1985,84). 20, %e Balsi f985,86; Fioreatina 1W3,75ni,fippes and Libsnatti 1991,217-218; Baramt f a r t h m ~ n g6-9; % a d &heverda 1985,&7E 21. B&olorn6 1982, 31; see also Baracat f"ortbcadng$table A-2.. 22, Mamanaf and Rofman 1989,223; and Qvallo and Zapata 1986,142. 23. Mmanal and R o h a n 1988, 215-216; E p p s and Libonatti 1991,216222; and Baramt foflhmming, 14-15. 24. Indicdorrs ecodmieo-smklaf, No, 9 (July 1992): 1,6; No. 12 (March 1993): 1-2; md No. 13 (June 1993): 3, 11. 25. Reboratti 1992, 7; and 1987, 99. Many of the quatters f""htmwsen tierpm pbblicaswor "mpantes de hedo'" were and are Paraguayans or Brmilians who carnot be given title to the land bemuw of their nationaitiy, En the border areas of Argentina, citkns of nei&boring wuntries are treated by the law as potentid enetnies. 26. Marnand and Rofman 1989,215,217. The data for 2986 w r e for all yerba mat6 grwers, not just those in Mlsiones, but most of the yerba Earns and almmt all of thc: minifindt;os are in Wsiones. 27, Based on unpublished data supplied by the C R m . 28. Mamanal and Rafman 1989,214,225; and unpublished data supplied by Pablo Navajas. 29. Quiroga fodhcoming, 23, 29, 31-32; Bolsi 1985, 95; beoar; 1991, 137; and Jndicadores ecodmico-gociakes,No. 12 (March 1993): 11, 30. Baracat and Quiraga 1986b, 28. 'This has been smmparried by a marked decline in the quality of the tea (Quiroga forthwrning 35).

31. U.S. Embaw 1993a, 4; Quiroga forthmming, 12,19,25; Baracat 1987,33, and 198fib, 31; and PAL Misiones 1988, 29,31. 32, Quiraga forfhmming, cktff; FAS 1993a, f3; Baracat 1985a, 30; and U.S. Embassy 2993a, 6, 33, 13.8E m b a q 191)3c, 11-12; MarrzanaX and Rofman 19853,173,177;and W p p s et al. 1991, 170, 34, FAS 1994b, 27; and U.S. E m b q 2993c, 12-13.1&ke&res sachla-econbmi cos, No. 16 (March 1994); 10, and No, 12 (March 1993): 8, s h the daEne as wmewhat smaller. &e a a p t e r 4 for an esended d R of t k world tobarn market. 35. De~ved&om unpublished data on produdion and aaeage hmested for 19% supplied by the Foreip Agriwlwrali &rvicc=.of the U.S, Depaflmen;t: of A ~ d t u r e , Misiones paws over 70 p r w n t of the burley tobacco prod~mdin Argentina; Rsxxmiin, mo& of the rest (U.S E m b w 1993c, 11). of the 36. UmrZe 1991, 139, One author economy of the interior in general &m% but gives only 1990,262). One is the expansion of lepme and a r e a a a m , who= w e h e w s have been dim=& eaenskelty in Chapter 4, The other is reforestation in Misiones, It is clear that this is a sc=rious~ s r e a d i n gof the situatian there. Far from being an example of dynamism, reforestation in Msiones is only m&ng the best af a diffrcltlt situation. 37. Buenos Aires Heralrk, September 9, 1993, p, 5, and July 11, 1993, p, 2. ;rsnd Besil and Gefnran 1986,33. * and Bess and Gelman 1986,32. 19W, 9&96; and Elmers et al. 1988,211. 41. XNDEC 1983, 18, 19; INDEC 2984, %S; and unpublished data supplied by INDEC based on, the Qnw Nacional Agopmari;o 1988. (52.. hcbetti and St&len 1974, 155; and Idieadom eeodmico-soeiales, No. 13 (June 1993): 27,315. 43, R o b a n et al. 1987, 25; and lrnricadores eco&mim-ssc&le~~No. 13 (June 1993): 33. 44. Archetti and St5len 19'75,218, and 1974,167. H m the hi@er domestic price ether by tarifi, quota, or mme other End of market rest~ction-is unclear. n e r e were exprl: subsidies IbeWeen l967 md 1975 and beween 1977 and 15180. There were exprt t a e s in. 1976197bslad after 1%0 ( h s i l and Gelxnaa foflheoming9 1615). There may have been e v r t subsidies ar tmes in other yeas as well, but X a n find na sour= that claims to give a wmplete amunt. 45, Barbona et al. 1%8, 96; L. bdesma 1988, 84; and Elolsi 1985, 64, 46, Manzaaal and Rofman 1989, 72; Barbona et al. 1988,547; and Walwhbufler 1990, 95. 47. Arehetti and StiEjlen f 974, 160; heorte et al. 1991, 143; Barbona et al. 1988, 97; and L, hdesma 1988,88. Amass the river in a ~ e n t e sFotton , produelion has led to similar eavkonmental degradation (bcorfe et al. 1W1, 147). 48, Argentine a t t o n Chamber 1992; and I d i e d o r m eeo&mico-soeial~s,No. 13 (June 19523): 2. 49. Besil and Gelman foflhmrning, 12, 16; and lndicadoreg ec-Bnbmico-soekles, No. 13 (June 1993): 35. It is I&ely that yields also rose becauw the least productive growers were dropping out of the market.

v&

SO. Indr"c&ries econBmico-sociialm, No, 13 (June 1993): 25,29. 51. Baraat and Qbrera 1088,24, a t t o n mnsumption per capita decgned afiex 1955,when the national gwennment rwersed Peronist. pradiw and pumued polides that bweased the hequafiq in tbe distfibution af hwme. Sin= tke population was fising, tatat mnmmption remained unchanged (Brademfin and S I a w 198,226). 52. .fndc&ra (July&ptembt=r 1992): 53; and Ckrin, May 10,1992, b n o m i i i ,

p. 2, 53, I&c&m eeodmico-socklef, No, 13 (June 19B): 34, and No. 16 (March 1994): 9697, 54, N o ~ d e e ~ t m&amber , 31, 1992, p. 46, and Auast 30,1993, p. 3%and El r i i a d , Jmuary 123, 2993, p, 15, 55. %ereta&%de Agfialtura 195)3,4; md PAS 1994a, 27,

Patagonia The cold, wind-swept desert that covers the southern quarter of Argentina is known as Patagonia. It is composed of the provinws of Rh Negro, Neuqudn, mubut, Santa Gruz, and Tiara del Fuego. Xt has an area aboul the size of California and Oregon combined and rises frorn the Atlantic Ocean on the east to the continental divide along the spine of the Andes that separates hgentina frorn Chile. The eastern edge of Patagonia is extremely arid. The central plateau has more rainfall but is still desert, A narrow strip along the eastern sfapes of the h d e s receives enough precigr'tation to support eeensive vegetation, wen rain forests, and there is some lagging in this area. Several rivers cross the desert, brin@ngwater from the mountains to the sea, Only in northern Patagonia is the dimate warm enough for gowing crops. Mong the Rib mubut, the Rh alorado (the northern boundary of Patagonia), and the Rio Mego and its tributaries, there Is irrigated agrimlture. Today, h i t cultivation occupies most of this irrigated land, In the rest of Patagonia, there are virhally no agricuitural activiries other than sfreep ranching. The region has three-fifihs the nation's sheep and produces over 80 percent of the apples and pears grown in Argentina, 20 percent of the fresh tomatoes, 75 percent of the processed tonatoes, and 5 percent of the wine (Enanzanal and Rofman 1989, 125; INTA 1986, 118).

The b r i y Years

Like most af the Northeast, Patagonia was not incorporated into Argentina until the late nineteenth century, Before mid century, those who lived in the Southern Clone or in the rest of the world did not generally regard Pafagonia as part of Argentina (WilIiarns 1958,122). Aimost ;as soon m the new republic was organized in 1862, hgentina announced its daim to the territory, which was almost withorn human habitation, and quickly mouned efforts to populate the region. The state-building process i b e ~ e e n 1860 and 1885 that led ta the unification of the pampas with the Narthwest,

the invasion of Paraway to establish sovereignty over the Cham and Misiones, and the various campaigns against hostile pampean Xndians also produced an eEfort to incorporate Patagonia into the new nation. Like the Northwest and Cuyo, Patagonia began its histoty (aside from a handfit1 of Welsh colonies dating from the 1 8 m ) with huge bloch of property given to the soldiers who canquered the land. At the conclusion of the Campaigns of the Desert in the early 18W, the government paid some of its officers with grants of land in Patagonia. Four and a half mitlion hectares (an area the size of Switzerland) were divided among 541 soldiers (an average of over 8,000 hectares each). The Indians who suwived the army's campaigns were fierded into reservations in the far west of northern Patagonia, where they, like their counterparts in the United States, remain the poarest of the poor. The government also gave or sold land to settlers who would farm irrigated land in the region, but most of this land has been divided aver the years into tiny minifin& or has been gathered into large estates operated as agr&usinesses. Thus, the stmcmre af land tenure in Patagonia-a Eew huge estates and many tiny minifindios-resembles that of the rest of the interior of hgentina.

In 1865, the hgentine government sponsored a colony of Welsh settlers along the Rio Chubut in central Patagonia.' The first colonists almost failed; they had been told that the climate in Chubut would be just like the old country, and it took xrne time for then to realize that they cvould have to irrigate their crops and then to build the necessary irrigation canals, The colony began with 153 souls, but within turenty years, 1,200 lived in the lower valley. Settlers pushed west and began farming ahng the upper valley in the last decades of the century. A disastrous flood in 18W nearly destroyed the calonies, and Booding has continued to be a problem for the region. The last goup of Wlsh settlers arrived in 1911-the s m e year as the railroad -and the colony numbered over 20,000. In 1933, the population reached 55,000, and by 1960 almost 1SQ,W, Already in 1902,the first group of several hundred emigrant of the first colonists-left Chufout to settle in Canada (Wifliams 1968, 140; Rebaratti 1989a, 6-7). The land has wntinued ta expel population ever since. The expansion of crop land on the pampas produced wheat that undemld what could be grrown under irrigation in Chubut, Subdivision of the land through inheritance produced inviably small farms, By the midmentieth century, the fertiliq of the soil had deteriorated from a decrease in organic matter, satinization, and water logging, leading to widespread abandonment of crop land. Many of those who left the land settled in other parts af Patagonia or in the cities that sprang up in the area, but the land itseff could support only a fraction of the descendants of the original settlers,

Presently, very little is grown in the area. The remnants of the original calony do a bit of tmck farming for the Iocaf market and serve tea to the tourists who come to see a nearby penpin colony.

In the early 38W, irripted agiculture began in the Alto Valfe in northern Patagonia near an army post founded during the Campaign of the Desert? The soldiers stationed there were for many years the principal market for the local Earmen (Manzanal and VapnamQ 1986,21-29). Later, a b r d e r dispute with Chile prompted the federal government to buiM a railroad to the area. Mter the arrival of the railroad in 1899, the principal crop becstme alfalfit, most of which was q o r t e d to Europe. In the IWOs, when 30,M)O hectares w r e already under irrigation, fruit production supplanted atfalfa as the most important crop, The railrod company p1;lyed a cmcial role in encouraging h i t culthation (for emmple, by establishing an eqerimental station) to build a market for its services. Government encouragement of import substifution also provided benefits to the nascent h i t industry in the Mto Valley (Diaz Nejandro 1970, 303). In the N t o Valte, the land was distributed in a variew of w;tys (Manzanal and Vapnarsw 1986,21-B). The government gave ar sold land in small pareels with deed restrictions preventing its acquisition by absentee owners. Larer, it sold land cheaply to those who agreed to support the local agicutturaiX eoaperatke, Other colonies were established under private auspices, For example, an army general purchaed 5,W hectares fxom the government, built an irrigation canal, and parceied off the Iand to his relatives, the canal builder, and settlers, Xnl other parts of the Mto ValEe, absentee owners aquired most of the land, selling much of it in small parcels to poor farmers an instalfment. Still fater, the railroad sold lots of 5-20 hectares in an attempt to encourage intensive agriwlture (Tappat6 et al. forthcoming 3). Most of the irrigated Xand af the Nto Valte was initially divided into medium size family hrms (ZNT& &g), As the decades passed, these farms tended to disappear, replaced by either minifin& or large farms. Many settlers sold part of their land when they rewived clear title to defray the costs of equipment and Iand preparation. The land was also subdivided through inheritance. Fragmentation of the !and took a big jump in the 1930s when alfalfa dedined in importanee and h i t orhards came ta predominate, Farmers ssld part of their land to finance the planting of new orchards or merely to sunrive the long years before the h i t trees began bearing. f irnultaneously, the more prosperous gowers and investors from outside the region aquired land either from the government or from unsumessfu't farmers. Mter mid eenmry, vertically integated agibusinesses purchased large amounts of crop land.) Until the mid-1970s when prices of fruit, grapes, and tomatoes collapsed, an orchard or vineyard of S-20 heaares

(depending on the crop and the yield) was needed to support a family. Now more land jZs required and thus more farms are considered mi~zifinciios (Manzanal and Rofman 1989,128). Of the more than 7,000 farms in the Afto Valle area, a b u t 70 percent have 10 or fewer hectares (excluding gardens of less than 1 hectare), a b u t wen& split bemeen those with fewer than 5 hectares and those with more; over 90 percent have fewer than 20 hectares (INTA 1986,9; Manzanal and Vapnarsky 1986,54). mere are only about nine farms with more than 200 hectares, which together farm only 2 percent of the land.' Thus, the overwhelming majority of irrigated farms in the Aito Valle are minifi~dios,The government%effarts ta keep the land from falling into the hands of a few have apparent& met with some success, Indeed, the problem is now the opposite: tea many, inviably mall Ectrms. Other areas of Patepnia emulated the Alto Valle, The lower valley of the Rio Negro was colonized in the first decade of this cenmry, and in the following decade the first crops were grwn in the Iower R h alorado. On& in the 29SOs did ealonization of the upper Rio Golorildo begin. Despite a substantial investmenr in a dam and a 22 kilameter canal, few settlers have been attrwted to the area. Presently, there are 95,000 hectares af irrigated land in the Rlta Valle area, although a b u t 15,W hectares have been abandoned (INTA 1986, S). The rest of Patagania has only h u t 3 0 , m irrigated hectares (INTA 1986, 73). Patterns of land tenure and the m e s af crops produmd in these areas are broad5 similar. fn naflhern Patagonia as a whole, 153 percent of the irrigated land is devoted to h i t orchards (mostly apple), 12 percent to grapevines, 12 percent to pascure, 3 percent to tomatoes, and the rest to a variety of other crops (INTA 1986,82). Much of the fruit is shipped fresh, but a substantial partion is pracessed into juice and jams, Almost all of the grapes and tomatoes are macle into wine and processed tomato praduets, A family can easily wark a small farm of 5 or 10 irrigated hectares, but the larger agerations require additional Iabr at picking time. Some seasonal workers m n e from Patagonia itself, but mast mme from Ghile (Relsoratti 198%, 134). Many of these Chileans, who cannot legally own Iand in this "fmntier" region, live more or less pernanentty in the area. The national gavernment has heavily subsidized irrigated agriculture in Patagania. In the late nineteenth cenhlry, substantial subsidies were given to the railroad to the Alto Valle, without which agxiculture in the region could not have eisted. The government also gave away land for little or nothing and built most of the irrigation systems in the region, setting water user fees below the Eull eeonomic cost of the projects (Cornisicin de Gerra Aridas 1978,21-2;2). Fram the 15130s on, the government's enwuragement of import substimtion produmd benefits for the #nit industry in Patagonia (Dia Alejandro 1970, 224, 303). On top of the usual subidies ta import substitute industries, a menu of tax breaks in the late 1950s was designed

specifially to benefit Patagonia, although these subsidies were soon withdrawn, The federal pvernment began again in the early 1970s to subsidize investment in the region throu* a variety of tax breaks and credit subsidies. Highly capitalised h i t , grape, and tomato processing industries have received substantial benefits from these programs? Sheep and G a t s

The other agriGulmraI activiv that takes plrace in Patagonia is pastoral. Aftes the a m p a i m of the Desert ended the threal of Indian raids in the early 188b3randem began mssing the Rio Colorado with their flocks and

the federal government began gEving away and selling land in the region. The economy of the pampas had come dive WO deeades earlier, and the h a m centered an sheep breeding. By 1880 tkere were over 50 million sheep an the pampas. The wheat born fotfowed, and by the turn of the wntury the cattle born had begun. Wheat and cattle steadily pushed the sheep southward off the pampas and into Patagonia, In 1895 in Buenos fires Pxovinw alone there were 56 nillion sheep; by 1916, fewer than onethird of that number remained (Rock 1985, 134, 169). I3y 1895, there were just under 2 million sheep in Patapnia, and by 1937, there were abow 17 million. The sheep herd stabilized at this Iwel until 1984, when an unusually harsh winter killed 4 million sheep. The decline in the earrying capacify of the land meant that sheep herders eould not subsequently rebuild their flocks after that disastrous winter! The 1991 eruption of Mt. Hudson blanketed subst-antialparts of Patagonia in volcanic ash, The mrket for wool callapsed, and the Patapnia sheep herd is now down to I1 million (TmEC 2993, 19). In recent decades there has been a sharp increaise in the numbep of cattle in the far northern part of Fatagonim; by f V7, there were nearly a half-million head (XMTA 1986,68), mere are also a large nurnber of angora goats. The sheep ranches of Batagonia produce high-cast, low-quality wool (Niinzanal and R o h a n 1989, 142). The sheep are poorly nourished, and the breeds are not the highest qualiy. The animals have an unusualty high parmite load by international standards (StilIwaaon farthcarning, &apt. 5). Poorly trained workers and mdimentary practices are normal, The clipping is incompetentiy done, reducing the qualiw of the wool and iquring the animals. The sheep are often sheared on open ground so that the moI is contaminated, n e r e is insufficient use of veterinary services, which leads to early mortality and law rates of reproduction (Mkndez Gsariego 1991, 108). TR cOntraSt to other aigriculturai activities of the Argentine interior, wool production has borne substantial taxes and received few subsidies.' The Pemnist government in the late 1940s imposed export taxes on wo-ol. With the exaption of only two years, these taxes persisted until 1992.

Furthermore, wool eqorters have vpicalIy been forced to use official exchange rates rather than the more fworable free market rate. The mmbination of the ~o imposed a significant east on the hgentine wool producer during most years. The effective tax rate on woo1 equrts reached a peak of 84 perent in 1952 and averaged over one-third befween 1945 and 1986. Bemeen 1987 and 1991, it averaged 14 percent. Subsidies to wool production in Patagonia offset at least some of these tmes. During the 1970s and 1980s, the government paid a subsidy to the shepherd for each kilogram of wool sold whenever prices w r e particular& tow, In 1980, for emmple, the subsidy amounted to 30 percent of the market price. During five of the subsequent six hawests, a subsidy was paid (Mananal and Rofm 1989,149). The region has also benefited from special tax breaks @yen to Patagonian industry, including waol spinning. Gaods shipped through Bataganian parts also receive favorable tax treatment. The US. government imposed a 7 percent tariff on Argentine wool in retaliation for this tax subsidy. b r r d Te~ure,hlior, and $!;keep

Sheep herding in a desert requires a vast eqanse of land (2 or 2.5 hectares per animal), so Patagonian sheep ranches are far larger than fmit orchards or vineyards in the region, In 1975, there were 89 sheep esfaneks with 10,000 or mare animals (MCndez Caariego lW1, 104-106). This implies estancks of 2 0 , W or more hectares. Some have as many as 200,aKf hectares, or 700 quare miles (Landrixini 1986, W), There were anather 54"jrstancks with S, 10,000sheep and 10,W or mare hectares, These large eftancbs together had more than a third of the sheep in Patagonia. At the other extreme are WO-thirdsto three-quartets (rfepending an which soutee one believes) of the 1 0 , W sheep herders in Patagonia, who have less than 1,W animals (MCndez Casariega 1991, 106; h d r d s et al. 1981, 34). Between those who can barely suwive tending a few hundred sheep or goats and the great estancks with more than 10,000 animals, there are several thousand family herders who, at least until the last fifteen years, maid earn a modest though threadbare eGstence. The number of sheep needed to support a family has grown as the price of wool has fallen, Traditianally, a herd of less than 2,W sheep was small enougfi so that the shepherd would be considered a minifirndrta; 80 or 85 percent of shepherds were found in this category (Mendez Gasariego lW1, 105-106). Nowt amrding to the government" Plan de Reactivicacihn Emn6mica del Sector Agropectrario de Ia Patagonia, a family needs 7,000 sheep to support itself (hdrCs et al. 1981,34). Well over 90 percent of Patagclnian shepherds have Eewer than this many animals Minifindrras are even more dominant in goat herding than in sheep herding (Bendini and Tsakougmakos 1988, 129; Bresiin 1989,41), In west'

ern hTeuqu&nand Rio Nego provinces, there are a couple thausand herders, re sf Indians, criollos, and Ghileans, who raise goats for their wol. They produce 80 percent of the angora wool crop in Argentilia. All of them are nomadic peasants who winter on the plains and take their flocks to high pasfure in the h d e s during the s u m e r , Sheep herding does not require much labor, The sheep wander over the land most of the year without any attention. At shearing time, large mmbers of wry poorly paid workers are hired, Fifw workers can operate an est~lnciawith a warter-million head aE sheep (Capitmelli 1988,724).

Patagonia is an eeologial disaster zone. Part of the immediate problem is the eruption of the Mt.. Hudson volano in 1991, The ash blew m s s central and northern Patagonia, causing widespread havac, Clouds of ash darkened the sky as far soutfi and east as the Falkland Islands and as far north as central Buenos fires Province. In the worst hit area in northern Santa Gmz Province, the ash was a foot deep, blocking highwys and damming streams. Water holes were fouled, so animals died of thirst. Even wrse w;as the blinding of the animals by abrasive ash, More than a million sheep died in the first WO weeks. 33e ash continues to abrade away the animals' teeth, so that the sheep are still diying from stafvation years after the eruption. Mt. Hudson brought devastation to parts of Patagonia ftom which there can be no recoveq. Ecobgical disaster in Patagonia did not begin with Mt. Hudsan, Xrrigated agriculture in aye and the Northwest has problems that are esentiafly the same as those found in Patagclnia: salinization, atkatinization, and water loging caused by poor drainage in the inadequate&desiwed irrigation systems and ovenrse of water that is heavily subsidized; lass of organic matter (there was not much to begin with), nitragen, and minerals in eantinuausly farmed sails; pollution of ground waters by industrial effluent or agriculmral runoff; and erosion of topsoil (INTA 19M, 8%91; Manzanal and Rofman 1989, 137). When the rivers are dammed, silt settles out of the water, which now moves more sfowly, In a few deeades, the reservoirs behind the dams become wamps, not lakes, and their usehlness ends. Withctut the silt? the clarified water transmits sunfight more effectively? producing an alarming proliferation of aquatic plants in the irrigation canals. Unless they are continuvusIy cleared of weed+a time-consuming task--the canals become closed, causing dams to break, fields to flaad, and water to be last (Tappath 1985, 1W). Some of these problems caul$ have been mlwd or at least postpan& with better irrigation techniques (a more careful merering of the water applied to each field), but the damage is now done. The cost of repairing the land is prohibitive, and in same cases the damage is irreversible at any mst.

Added to these problems, which are eommon to most: irrigated agriculmre in Argentina, is wind erosion. The westerIy winds in Patagonia are strong and almost continuous. Some parts of the region register average winds of 17 kilometers per hour and only nine calm days a year (Reboratti 1982, 4). The relentless wind produces wind erosion, which is a greater problem than hydraulk erosion. Wind bre&s are poorly desiped and offer less than optimal protection (INTA 1986, 129). The climate is hostile for other r e w n s as well. I'Ie growing season is &oft and late frosts can damage the fmit. n e r e is almost no rain in the summer, so the water supply depends on the modall in the h d e s in the previaus winter. Since this is highv variable, there are wild wings in the amount of water for irrigation, In 19%, far example, apple yields klI by 4Q perGent and apricot yields by S5 percent beause of adverse climatic anditians (Idicadoms [Jub-September 1991j: 103). In the Chubut valley, the decfining productivity of the soil led to widespread abandonment of the land that began decades ago, and there are now few crops grow in the area. To the north in the Rio Negro and Rio Galorado valleys, where the dimare is not as harsh and irrigated agriclllture is more recent, rhe situation is not as severe, Even here, though, 12 percent of the irrigated land has been completeiy abandoned and another 28 percent is m t culthated (fMTA 1985,8,82). In Patagonia as a whole, 12 percent of the irrigated land is used far pztsturing cattle, one of the few growth xtivities in the region, In a country where there are tens of millions of cattle an some of the mast fertile, rain-fed pastures in the world, s u i n g animals on inigated land in a mId desert waufd appear to make little sense. In sam areas, however, the land has so deteriorated that it annot be profitably used for anything else. Yields in the dominant crop, apples, are stagnant and in other crops are growing only slowly?

m e proMem for irrigated agriwlture in Patagonia is not just suppty but also demand. Exports of kgentint: fruit grew steadiv until the fate The eeonomic policies of Marthez de Wsz led to an enormously ovewalued peso, which impeded exports, and to an increase in the real rate of interest, which raised costs .for the fieavify capitalized h i t industry (Niquel1991- 15)92,59-60; Nanzanal and b f m a n 1989,134). Eqorts fell sharp& but did not recover when the policies of the miBtar)l government were reversed after 1983. Falling prices for fruit and mmpetition from other wuntries have produced a prolonged lack of profitability in Patagonia fruit orchards. B e ~ e e nthe early 1. and early 198@, the farm gate price of apples in Azgentina fell by almoa 60 percent, and the price of pears by 45 percent (INTA 1986,21). In the first half of the 1980s, exports of apples averaged

only 60 percent of the peak level in the late 1970s and have continued to fall, In 1977, Argentina amunted for half of the southern hemisphere's muntersemonal export of fmit to the northern hemisphere. By the mid1981ssits share had fallen to 11 percent. South Africa, New Zealand, and Gfiite began exporting suhtantial quantities of fruit in the early 1970s, and they quicMy earne to dominate market, Their success was based on rapidly rising productivity, gains in fruit quality, and aggressive sales programs? Sin= the I94s, the largest single market for Patagonian h i t has been Brazil, In 1972, however, it launched a hewily subsidized propam to produce its swn apples. Between 1985 and 193Q, BraiX imposed quotas on the import of Argentine fruit." If MERCOSUR ever succeeds, Argentine mmpetition would probably wipe out the Brazilian apple industry. It is likely, however, that the common market will be implemented in such a way as to prevent just such a result. Not only can Argentina expect continued difficulties in selling its h i t to Brazil, it is pctssl"ble that Brasif. will begin to compete with Argentina in third coumry markets. The crisis confronting the grape and tomato producers of Patagonia is demand for wine similar to the one faGed by fmit growers, The fall i described in Chapter 5 has affected Patagonia even more severely than Cuyo. Since the weather is less hospitable to grape cultivation in Patagonia and the vintners US(: a more antiquated technolog, they have lost market share to Cuyo, Aereage in vines fell by more than half during the 1980s, and the number of vintners by mo-thirds f INTA 19%, 1051). Tamato production has also =fired, Growers achieve yields that are a third of those found in other muntries with similar ecofagiertl eharacteristia and just over half the yields in the tomato fields of Salta and Jujuy. Tomato acreage fell considerably in the last decade (INTA 1986, f 28; Yanes and Qerber 1989,42). The difficulties of fruit, grape, and tomato altivation become cumulative." As profitability declines for extended periods and as many growers and processors slip into the red, the ability to make new investments falls. Machinery becomes worn out and obsolete but Gannot be replaced. Obsolete mrieties or law-quality trees or vines are not replaced for the lack of invefrcrnent finds. Growers stop fertilizing their orctuards for tack of hnds, and the Eertility of the foil declines, Control of diseases and pests declines as pesticides are not used or used too sparingly. The pruning and training of the trees are neglected, Cmwrrjl annot afford to uproot old orehards with ineffident arrangement of trees (in 1982,79 pereent of the apple trees) in favor of a more madern system (Novara 19S, 20). Thus, yields stagnate, fmit quality deteriorates, and the downward spiral continues.

The emlogical problems facing pastoral activities in Patagonia are even mare severe than those mnhnting crop cultivation, The problems of

desefiifiwtion and erosion caused by overpasfuring in the rest of the interior are found in Patapnia as well. The climate of Patagonia, hawever, is far more severe and the ecology more delicate; the problem of enviranmental d e ~ a d a i o nis canslequentlywrse, A third of Patagonia has been subjected to severe levels of environmentaldegrildation (Mkndez Casariego 1991,107). Before the Europeans brought cattle, sheep, and goats to the region, the only nxminant that lived in Patagonia was the p a n m , a relative of the llama. Cuanaco graze by biting off vegetation, whereas sheep and p a t s pull up the plant by the roots. The panam's padded feet do not compact the soil as do the hooves of domesticated animals (Carrea 1991). And there were not very many gumam, mus, the animals brought by humans have creared an ecolagical nightmare. Indeed, the first crisis brou&t on by overpasmring was in the six-year period centertl-don 1910, only ten or fifteen years after sfieep b w n rnovlng southward off the pampas, T'he hilure of natural pastures led to a disastrous 45 permnt dmp in the number of sheep in the northern part of Patagonia, and the sheep herd in that region has never regained its peak level of 1W8 (INTA 1986,68), By the 19&, erosion and desertificationwere recognized as severe in many parts of Patagonia. By the l%@, authorities were speaking af the alarming advance of erosion and a 5 percent excess of animals over the carrying capwiry of the land, In some parts of Patagonia, the wind blew away the land, along with all of the covering vegetation, and drifting sand buried farmhouses (Nkndez Casariego IW1, 107; Auer and Qppannini 1957,113). Forq years later, no solution has been found, and the process of desertification continues a p m , In some areas, the environmental damage is clearly irrevexsl"b1e (Landriscini 19%, 97). 'The problem has been particularly severe in-Chubutand Santa Cmz provinws. Now,in these very s a w areas, Mt. Hudson has reduced the arrying capacity of the land still hrther. The Patagonian sheep herd is now one-third lower than its peak a half =nary ago, and desertification caused by overpasturing is the principal cause (Tucker 1994, 7). Not only has the number of sheep declined, but so has their quality, 'The wool is of inferior qualiq and does not earn a goad ptice in internatianal markets ( h i g o 1965, 37). The quality of the meat is so poor that little can be marketed. Withaut income ffom neat sales, shepherds are pressured to increase their flocks to generate more income, mus, ovefpasmring is a selfireinforcing process ( h i g o 1965, 46). Reducing ovevasmring would produce substantial increases in yields per animal but not proportional to the drop in the number of animals, hence the overpasmring continues,

ampounding these environmental pmblems is a weak demand for wool, Most of the crop is exported, but the world demand for woof has

grown slowly in recent decdes and gobal wool consumption per czlpita has fallen (Federa~ibnLanera hgentina 19&? 27). hgentina's share of the world wool market fell from 13 perwnt in the mid-1940s to B percent in the early 19m and again to 4 percent in the early Ebport prim8 drifted t began to shrink after downward through the 1980s.L2 The domestic f 976,when the military government reduced protective tariflfs for textiles and gament manufacmrers (Manzanal and R a h a n _2989,1&147). Peak woof production in kgentina was in 1946, and by the early l%@, production had fallen by a third (Banca de An&Ii(jisy Computacibn 1982,591). In 1991, after two decades of hard times, things got much worse for Patagsnian wool producers. For the previous twenty years, the government of Australia-the wxId"s largest wool produeer-had been buying large quantities of wool to support its price. Not surpri increae in Austrdian vvooX prsduetion. By the ear owned several billion dollars' worth of wol, equiwlent to a year's hawest, Unable to continue, the government began selling wool rather than buying, and the world price of woof plunged. By June 1993, the wrld price of wool had fallen more than 60 percent from its peak in 1988 and 1989. Goincidentally, the Argentine peso became sharply overvalued, adding further to the woes of wool exparters. Wool production fell by a third bemeen the 298& 89 hawest and the fW2-93 harvest.f"t is now less than half of the 1946 level and only four-fims of the 1914 level. 'Ke cost of raising sheep in Baagonia is four times their market price since so many herders are selling their animals and leaving the business (Nash 1994, 7). Presently, sheep ranching generatesat best $8worth of wool per hectare; the poorest ranches produce less than $1per hectare (Tucker 1994,7). The government has recent@ responded to the crisis, fn. 1992, the eqort tax on wool w s reduced to 4.5 percent and in the following year eliminated, In early 1 9 3 , the federal government announced a program. whereby the government wsuld pay almost all of the wages of up to four workers on each sheep ranch* By the end of the year, however, no one had rweived any cash. ]ER October, the government raised the tariff on imported garments (Bumos A k a Werald, Qetober 26, 1993,p. 3).

The forests along the slopes of the Andes in western Patagonia have been severely degraded by a century sf mismanagement or no management (Arias 1 W , 46). The best trees were taken by loggers, who left only the poorest vecimens to resleed the forem. m i s produced reverse genetic selection and thus trees winerable to pests and useful only for firewood. Here, as elsewhere in Pahgonia, the gathering of firewood beyond the regenerative mpacity of the Iand hais reduced the forest wver and exgosed the Iand to wind and water erosion (Garriz 195)2,180), The degradation of

the forests threatens a reduction in rainfalf, This in turn has implications for the farmers downstream, who use the rivers flowing from the h d e s to irrigate their crops. In addition, extensive petroleum and natural gas exploration in some areas has further destroyed vegetation." As the protective cover of vegetation is removed by loggers, petroleum workers, and( grazing sheep, the ability of the land to absorb rainfall is redumd. Precipitation is infrequent, but when rain does fall it is often torrential and the degraded land is easiv eroded. The abuse of the environment thus exacerbates the silting of irrigation waters and flooding of irrigated crop land ( b i g o 35; fHTA 1986,88). The geater silt content of the river water accelerates the loss of reservoir capacity, prejudicing hydroelectricity generation and irrigated agriculture alike (Arias 1 0 1 , 46). An dditional problem has to do with the mntamination of the environment. Especially in the Alto Valle, industrial growth has led to the pollution of ground waters. Urban growth without proper attention to sewage or solid waste disposal has faufed the environment as well. Conclusions

This surrey of the agriwlmrd economy of Patagonia has produced conclusions that are similar to those found in the other regions in the interior of Argentina. The agricultural resources of this cold desert were vely neager to begin with and have fallen subtantially in value through ovenrse and abuse, The degadation of the environment in Patagonia is the worst in Argentina. The agriculhlral products of Patagonia are steadily losing pound in both domestic and e ~ e r n amarkets. t Prospects far a rwilval in the agricultural economy of Batagania are cansiderabb bleaker than In the rest of the interior. Impoverished rninifindkfas m&e up the overwhelming majotity of agrieulhlrafists in Patagonia and their plight grows worse year by year. Patagonia presents a facade of economic success. Its per capita income is about as high as anyhere in the interior. As Chapter 11 will shaw, Patagoniats prosperity is Eounded on enormous subsidies from the federal government, which are higher than in any other region in the country. Should these subsidies ever end, PatagoniaS emnsmy will collapse, Notes 1. WiUiam 1958,121-142. An earlier caIanhation attempt had failed (Qpitiinelli 1988, 699). 2. Tbe Alto Valle is the area. around the confluenw of the Rfas Linray and

Neuqukn, where t h q join t o nr&e the Rio Negro, 3. In the last two decades, the urban middle dw of no@bem Patagarria has acquired small orchards, which are used as investments. Abaut half the f a m s are pations (INTA 1%6,8). Unless they v v o k owned by urban residents with other the orchards themslv.veq they would have to hire tenants or contra&orzr. Neveahe-

less, Manzanal and VapnarsLy (1986, 51) state that most farmers are not tenants in the Alto Valle. 4. Compare this with Mendoza, where irrigated farms of this size control 12 percent of the land, and Tucumhn, where the figure is 25 percent. Some caution, of course, should be exercised in interpreting these data, given that one person or corporation can own many parcels of land. 5. Salinardi 1991a, 142; INTA 1986, 18; and Williams 1968, 142. 6. Amigo 1965, 38; and Manzanal and Rofman 1989, 140-141. 7. Federaci6n Lanera Argentina 1986, 61; and unpublished data supplied by Carlos Epper of the Federaci6n. 8. INTA 1986, 136137,141; Indicadores (July-September 1991): 103; and Bilder and Garriz 1992, 158. 9. Bilder and Garriz 1992, 158; Manzanal and Rofman 1989, 134-137; and Tappath 1985, 100. 10. Tappath et d.forthcoming, 12,15; Luque and Tappata 1985,27; Tappata and Jorge 1990,24; and Elena and Jorge forthcoming, 2-3. 11. Manzanal and Rofman 1989, 129, 138; INTA 1986, 100; Tappath 1985, 100; and Manzanal and Lindenboim 1985, 93. 12. Federaci6n Lanera Argentina 1986,59;Jndicadores econdmico-sociales,No. 15 (October 1993): 26; Indicadores (July-September 1991): 86-87, and (April-June 1992): 47; and Srodek 1990-1991, 15. 13. ~ m b i t oFimnciem (August 13, 1993): v; and Federacib Lanera Argentina 1992, 14, and 1986, 59. 14. Petroleum refining is also contributing to the pollution of coastal waters (Podesta 1994, 14).

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The Economic and Political Backwardness of the Interior

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The Economics of Backwardness The lack of rewurws in the interior of Argentina and the inequality in their distr&ution protfuce an economy ufith little potential for eeonamic progress. The scarciq af ecanamiealb usehl agricultural remrces documented in Part Two of this book and the lack of alternatives in mining or manufacturing together explain the low levef of per capita inurme. The inequality in the acces to these scarce agicultural resaurces ewlains the widespread existence of poverty. The analysis that follows builds on these two facts. This chapter will show that, in a varieq of ways, the poverty of those at the bottom of the social and economic pyramid makes the economic strucmres of the interior inefficient and btoeks ecanamic progress, m i s chapter has three sections. The first enmines the unproductiveness of the impoverished small farmers in the interior of kgentina. B e i r poverty makes them wnpmductive and their unprodwtivenessconfirms their paverq, The semnd section examines the demographic consequences of poverty and inequalicy in the inerior: the waves af migrants expelted from the redon because of its inability to support a larger population. This weakens the ability of the interior to develop. mird, the poverty of the interior translates into the fiscal poverty of the interior's governments. linadequate spending on infrastruemre constifutes a further obstacle to growth,

Until the 1W%, development emnomists were generally firm believers in the proposition that large farms were more efficient than small ones, The developmentstrategies advocated by most economists in the l%&and 1950s reflected this prefumption, favaring large fams over small farms. The conventional wisdom changed in the 19"I, and the belief that the smallest farms were the most efficient came to dominate development thinking. h avalanche of empirical s ~ d i e seemed s to support this belief.' Many development economists consequently endorsed policies favoring small farms.

After several decades of research and analysis of the issue, a fairty consistent picture of agiculare in developing countries has emerged, Scores of st.udies, each using different methodola@es and data, could hardly be eqeeted to produce entirely consistent results, but a consensus has emerged around the following propositkns. L a b r productivity (output per worker) is usually far lower on smaller farms than on larger ones, Furthermore, yields per acre for the same mop as well as profit rates tend to rise with the size of the farm. "he smallest. farms may even hiwe negatilre profit rates. Despite l m r labor praductiviq, profit rates, and yields, smaller farms tend to have bigher land praductivify (gasvalue of output per a ~ r ethan ) larger farmers. The apparent contradiction arises because smaI1 farms tend to have a higher share of their land cultivated than larger farms. Large farms are likely to have substantial amounts of land in pasture (especiiaily natural pasture) instead of fodder crops, in other low-intensity uses (such as tree farming), king fallow, or simply neglected. XR addition, the crops grown or methods employed on smafler farms often generate higher land productiviv. Small farms tend to specialize in labor-intensive, high-value craps such as cotton or tobam rather than in land-intensive, fow-value crops such as wheat or say. Moreover, if the small farmers raise livestock, they often use Iabr-intensive, land-saving methods, For these reasons, small farmers in most developing wntries tend to use their land more intensively than do large farmers and thus their land is more productive? The next step is to see whether these characterizations of n i r d World agriwlture in general apply to the kgentine interior.

Most studies of agricultural productivity use statistical analysis, some of it quite sophisticated, but systematic data that would sflaw such an examination of the krgentine c m are lacking. M a t follow is based on publications by and interviews with everts who have firsthad information about specific locales or crops. These agronomists, economists, geographers, business leaders, and anthropolo@sts are often able to make perceptive assessments of the situations with which they are familiar? What emerges from this survey is an unusually mnsistent piemre, The evidence presented in the previous four chapters shows that most of the land in the interior is held by a few wealthy landowners and that the l a w majoriv of agxicularalists have smaIl holdings on whieh they can barely sunrive, This poverty produces widespread hunger., In the Northwest and Nsrtheast, well over half of all families were chroniealIy malnourished in the early 1980s, and in Patagonia and Cuyo over one-third.' Poverty is far greater in the mral areas than in the cities and towns. Moreover, in the last decacfe, the economy of the interior has deferiorated sharply and pcrverty has increased.

Poverty and cRronic hunger are powerful instruments for foasing one's attention on the short run. Instead of planning for and investing in the fumre, the hungry bsus on how to get the neM mouthhl of food. n i s short time horizon has many consequences for agricul~rein the interior? means that they must m&mize their The poverty of the minifindk~c~s" short-mn inmme to sumhe? This forces them to use their land more intensive&-where conditions allow-than the large farmers, This is found especially in the Northeast, where one-quarter of the interior's population lives. There, rain-fed agicultzrre predominates. The small farms POW laborintensive, hi&-value crops since they generate the cash that allows the family to stay together, Moa of the 1argr;r farms in Chaca abandoned mtton cultivation, witching t.o sorghum or wybeans, after the price of cotton began dedining precipitous@fwo deades ago. m e w crops, however, generate W little cash per acre that a small farm that gaws them eannot support a family. The small farmers, therefore, hwe stayed with cotton. Xn Misiones and mrrientes, several hundred thousand hectares of land are now devoted to pulpwood tree farming2but only on large estates; mall Farmers m n o t wait decades without inmme befare harvesting the trees, In these prcrvinces, most of the tobacco is grown on very small farms.. mese labr-intensive craps (tobaces and cotton) tend to deplete the soil's fertility more rapidly than other maps, Besides growing labor-intensive crops, the impoverished minifirndktas use their land more intensively by falling to leave their land fallow or by not rotating it with another crop in order to maintain or restore it8 fertiligr. Tfie cotwn -er in the Gfiaco, for example, eould often double yields by simply rotating cottan with legumes but cannot af%jordta $row anphing but Gotton (Bermizdez et al. 1%5, 2). Each year, the fertility of the soil declines. Yields stagnate or fall, yet the small farmer has no ehoim but to cantinue in this downward spiral. It is true that the small farmers of the Northeast are using their land more intensively than large farme=, but at the same time they are using up their land more rapidb. Ecept in the humid areas of the Northeast, crop cultivation in the interior is dnost entirely irrigated. Irrigating land is epensive and thus little land is left idle. The expense of irrigation means that only high-vafue, labr-intensive crops are likely to make eeonomic sense for farms of any size, An exwgtion to this generalization is found in Guyo, where some large farm now graw tornafoes, spinach, or other vegetables, but most still produet: gapes, The rninijicdbtas, however, mnnot affbrd to pull up their gapevines to g a w annuals. Generally speaking, however, mall Earmers in the arid interior a n n a t wmpensate for their lower yields and labor pmductivit~c by using the land more intensively. Although small farmers in the arid interior usually do not use their land more intensively than the large farmers, they are still more abusive of the environment, Grwity-fed irrigation systems that let water Row from irriga-

tion wnals and down the hrrows tends to produce water fo&ng, silting, excesshe erosion, and salinization of the wit, which in turn lead to a decline in its feftiii~that is difficult or impossible to reverse. A suhtantiaf amount of irrigated land in kgentina has been abandoned because of these problems. They can be prevented or at least slowed by proper drainage or by sprayingwell water on the fields instead of using gravity-fed systems, Nevertheless, drainage canals, tube wells, pumps, and sprzlyers are eqensive investments beyond the financial capability of small farmers. Thus, the degradation of agricultural resources is faster on small farms in the parts of the Argentine interiar where irrigated crop cultivation prevails, In the arid interior, +euI~ral land that is not irrigated is for the m s t part used only for extremelyland-extensivecattle or sheep ranching, normalfy using unrefined, native breeds and primitive busbanding techniques. mese pastoral acthities have produced a widespread degradation of naturd pastures, deforestation,and desertification, Mark4 declines in the carrying capacity of the land were evident as early as the first decade of this cenh3ry and were widespread by ml'd cemry. Afthough there is only a Iittfe direct eviden~ethat small ranchers or shepherds abuse the environment more than the larger, it is likely that they do for two remns. First, many srnafl pastoralists have inseare title to their land or are squatters, Without an ownership stake in the land, they wuld be expected to have less interest in the longrun productivity of the land than do those with secure tide. Second, one can ohewe everywhere in Argentina (and in many parts of the world) that small agriculturalists, desperate beause of their poverty, are Eorced to ignore the long--run implications of their actions, including environmental degradation. An impwerished hrmer who can barev feed his or her family does not have the resources to invest in the latest agriwltural technologies and cannot eqeriment with new tdnologies because af the hi@ cost of faiture. In the Argentine context, most of these technologies are capital-intensive(mechani4 3 1 harvesters, mbe wells, pesticide sprayers, etc.), are too tkky for someone an the margin of s~~miivd, or require information a b u t their use ta which the mini&nd&ta does not have aecess b e m s e af illiteracy or bias in the provision of agricultural extension setvices. Thus, universally in Argentina, the mdlest farm do not use the latest techniques, Although small 1Farmers have a greater need for chemical fertifi~rthan large farmers, they use less of it since t h q cannot afford the cash outfay for the fertilizer or they cannot afford the equipment necessary to apply fertilizer to the fields (World Bank 1985, 150). Tens of thousands of farms still use animait traction to pull a plow and do not use pesticides. Many of the poorest minifirndistas cannot even afford draft animals to ptow their land or haul their crops (Rofman 1986,51), Instead, they use a simple hoe for cultivation; sam cannot even afford a hoe but instead use a digging stick?

The poverty of the minifundirla, the unprofitability of their farming operations, and their lack of collateral when they are tenants or squatters mean that they da not generally have w e s s to Formd credit markets. Since credit in the fsrnnd market is often subidized, the smdl farmer is at. a doubIe disadvantage,. Even wirhwt subsidies, formal credit is less expensive than informd credit because many small loans are typically more costly ta administer than a few large ones. The small loans available from inform1 sourws, however, are insufficient for major capital investments and serve only to help the minijcundrkfa finance consumption. At any rate, since the rate of rewrn on investment must exceed the a s t of Eunds, the hl'gh rates of interest that prevail in informal credit markets usudly predude the financing of investment. 'Xhe inability to invest translates into low productiviv. The poverty of the minifidhta leads to law autput prices in the marketpIace (Rsfman 1985,120). In part, this is due to market distortions such as the greater bargaining power of larger sellers. A part of the explanation for lovver prices, hovvever, is the higher transaction wsts entailed in dealing with many small growers instead of a few large ones. These diseconomies of scale in marketing, just like those in credit markets, reduce the efficiency of small farming below what it would athewise be. The paor underinvest not just in physical capital but in human capital as well, particularly education and preventive medical care. When the uneducated child reaches adulthood, the on& options are to remain on the Eamily farm eking out a living, to join the stream of unskilled farm wrkers, or to move to an urban slum. A / l a q of the paor are cktronicatly ill, which diminishes their physical and mental abilities. Nevertheless,they do not have the resaurces to invest in preventive medical care or wen proper treatment of disese and injury that would prevent their condition from worsening (Stillwasan fbrthmming, chap. 7). The poverty of the rninifindhfa pmduce&unger and ehroni~malnutrition. This redu~esthe produczitrity of the agridburalist directly because he or she does not have the energ to work diligently. A related problem is the widespread alcoholism among the rural poor, whih has obvious effects on productivity (Vessuri 1972,376). Minifind;ism are often, and in some areas, mostly tenants, squatters, or othedse do not have clear title to their Xand. The lack of undisputed ri&ts to land and its fruits diminishes the incentives to investment in the land. Tenants have at least some incentive to husband the fertility of the land that they rent, If the tenant abuses the land, the owner may seek a new tenant, fn a tightly knit rural community, the reputation of a tenant who does not properly care for the land may make it difficult for him or her to find other land to rent. Neverthelessis, transaction costs involved in the landlard-tenant relationship, especially those associated with monitoring the tenant's perfarmance, weaken the incentives of the tenant to think in terms of the long run, Owners who work their own land or directly liupervise their

fannily or hired hands simply has better inbrmatim about what can be done and what is being done to protect or enhance the land than most landl~rds can have a b u t their tenants. Moreover, contracts between sharecroppers and landmers in mentina are usual& verbal; thas, property rights are undear and diff'ieult to enforce, Tenants may not recebe the proceeds from the sale of the crop to which they are entitled or may be thrawn off the Iand altogether, further weakening the link between effort and reward and thereby reducing the incentive to work and invest (Vessuri 1973,Z-2%RoErnan 19&, 5&52). Furthermore, many min@ndttm are not tenants but simply squatters. The mrr:precarious their claim to the land they wark, the less their inwntive to think a b u t the Ionger term. Illegal squatting is a particularly serious probfem in Misiones. mere, squatters use dash and burn a&riculturd techniques, which denude the mountains and eqose them to the torrential rain, In as little as WOyears the land loses its ability to sustain apiculture and the squatter moves on to another site (Pignotti 1W4, 4). Many quatters in Misiones after a few years of illegal occupation would not agree to amept title to the land from the government, mey had sa &used the land that they did not want ownership of it, even when it cost them nothing (Eidt 1972, 211). The foregoing paragaphs eqlain the law productivity and bacbardness of the small farm s e m r in the Argentine interior. This depiction bears strong resemblance to the characterization of agriculture in the rest of the developing world with which this dimssion began, n e r e is, howwer, an important difference. Small farmers in the dewtoping world are often able to use their land intensively try having little idle land and growing labrintensive, high-value crops. Large farms often have substantial idle Iand and low-intensity activities, especially cattle breeding, fn contrast, mast crop culthation in the hgentine interior is irrigated, and both small and large irrigated farms use the land intensively, Only in the Northemt does one find a suhtantiat number of large farms specializing in low-intensity crops (such as wheat) alongide small farms gowing high-intensitycrops (eatton). Am, cattle ranching in the interior rarely uses land that is suitable far crops, In general, and in contrast to most of the developing wrld, small farms in the interior tend to have lower Iabor productivity, lower yields, lower profits, argd lower land productivity than large farms. Summary.measures suggest the gulf b e ~ e e the n small and large farms. In the pravinees where a third of farms are mi~ifindios(Buenas Ares, C6rdoba, Santa Fe, Jujuy, and Salta), output per labarer in the primary sector (almost aft agriculmre?) was dwMe what it was in the provinces where roughly two-thirds of hrms were min@ndios (Chaco, hrmosa, La Rioja, Misiones, Santiago del Etera, and San Juan) (Rofman 1985, 116). The following pages present the detailed information on which the foregoing generalizations are based. Each bit of informatbn presented

bebur tells us very little by itself. The seamless wnsistenq of the evidenee -although some of it standing alone is merely susestive-reinforms the conviction that the depiction offered here is an ameptable representation of the facts.

In Tucumh, 90 percent af the sugar powers are ~ni&dbtas. They have very little machinery, use little or no fertilizer, and use only family I a b r to cultivate the cane. Gnsequently, yields are very low, In Salta, no miPrif i d b s grow cane, and in Jujuy only a quarter of the cane fams arc: minifirdi~s. mere, the larger farms are mechanized and take advantage of modern agricultural technology?@In TucumBn, where the minifundios preaveraged 4Q tons of sugar per hectare; in dominate, yield in the early 1 Salta, where minifidios are absent*or in Jujuy, vvhere they produce onethird percent af the hawest, the average yield was 70 tons per hectare?' The maB citms g w e s in Tucuman have much lower produetivi~and lower quafity for their fruit than do the larger orchards (Truccone and Lizanags 90). Mast tobacco growers in the Northwest, as in most of Asgentina, are small, and yields vary little from one pert of the country to mather (Yanes and Cerber 1989, a),Tomatoes are large&grown on Qrge farms in the Northwest, and tomato yields are substantially higher there than in the Alto Valte area of Batagonia, where smaller farms predominate (Yanes and Cerber 1989,42: fNTA 1986, 117-1 18)In the irrigated fiejds of Cachi in Salta where peppers are gown, most fams are minrficndbs with 4 or fewer hectares; their yields rmge h r n 600 to 1,W kilograms per hectare, On the medium and large farms with mare than 30 hectares, yields range fmm 2,W to 3 , m kilograms per hectare. Furthermore, the small pepper farmers receive a lower price for their product since they are forced to sell immediately upon hawest, while the large operators can wait for prices to improve (Manzanal 5987,25,41,43). In the Umbra1 at Chaw, the small growers of dried beans have almost been forced out of the market by the larger, more efficient werations. Dried bean mftivation began in hgentina with farmers planting a hectare or two of the crap, Now9there me virtuaIly no bean farms with fewer than 100 heaares, Maremer, the small grawers receive fwer prices Eor their crops (Lebn, Pmdkin, and Reboratti 1985, 411-412). h the mna, the western highfands of Salta and Jujuy, the Indian cultivators typically have plots of one haif to three hectares. Mast of them do not use a plow or even a hoe but a digging stiGk (SantitlAn de h d r 6 s and Riai 1988,581), In the Rio Salado area of Santiago del Btero, cotton and tomatoes are grown on large modem farms, while rninifindios grow wtton and vegetables, Yields per hectare on the large farms were 4.7 times as much as on minifinh,and output per worker mare than six times as much, Work and share-

aopping contracts are usually verbal, and land titles are insecure for the minifir&kf~. Even mare important in blocking development are the marketing arrangements that leave the small grower impoverished. The minificndis&aalso lack inhrmation a b u t new agricultural techniques (Vessuri 11373, 13, 57, 2&2p8 M)*

bw-quality grapes used to make tab)@wine have higher yields; betterqualiv grapes have lower yields. Available data do not give yields by variety; thus data that give yields on different size farms are useles for our purposes sin= the most efficient farmers may have the lowest yields. mere is abundant qualitative evidence, however, that the tniniftrdios in a y a are unproductive (A, Monris 15)5(3,11&112; Flichman 1972,124). Lack of resources dimurages investing in more profitable varieties of grapes, pulling up the inefficiently arranged vines and replanting using a more efficient system, or switching to other crops. The older system of vine arrangement has hallf the yields of the new system that allows a more intensive use of the land and is more amenable to rnecfianizatian, The smaller parcels typically use the older sy~tem.'~Farms of up to 5 hectares usually use animal traction for plawing as do sane larger hrms, and only the largest farms use the latest technology (Manzanal and Rafman 19W, 194). A large proportion of minifundios in Guyo are operated by conmi&ias,a fyge of sharecropper,who are believed to have a shorter time horizon than owner-operators (A. Morris 2%9, 110). Most pastoralists in aye are squatters, One af the prablems associated with lack of clear title is competing claims to the land. In one valley in San Juan, for example, ranchersklaiirns to land exceed the amount of land in the valfey by 30 percent (Heredia et al. 1W2, anexa 5,44).

The technological dualism that characterizesagriculfure in the interior of kgentina is perhaps most extreme in Corrientes. Same crops are grrown on large, higMy capital-intensive estates using the latest technology. Some yerba mad, tea, and citms, and most of the rice is grown an large modern farms (Roban et al. 1987, 43). For other crops, the minifindios abound, Far example, 85 percem of the tobarn growers have no more than 3 hectares, on urhich they use an archaic form of produetion, Because of their povery, t h q are at an extreme disadvantage in the gaods and credit markers in which they participate. The minifindrj.fas are plundered ( " q ~ l b d o ~ of ") rheir m a n y by lack of ehaice in selling tobarn, hi@ prices of consumer goods, and usurious interest rates." Only 22 percent of tobacco growers in arrientes own their own land. Most arrentine tenant farmers are sharecroppers or pay their rem in fabor services. They rarely have written

contracts, rareIy understand the law that protects agrimftural tenants, and thus are subject to arbitrary treatment by their landlords (Manzanal 1986, &5, 467). Xn Misiones, the minifindkta~"with small yerba mate orchards have lower yields than the larger growers because they graw other crops (such as tea, htng, or subsistence hod) besides yerba; failure to specialize lowers their productivig, Furthermore, they use unproductive family labor and lack the resources to make investments that would maintain the quality of the trees and consequentlyyields (Manzanal and Rofman 1988,215). The best managed yerba mat6 lands can produce a b u t 14,OQOk i l w m s of green leaf per h e a r e each year, whereas the poorb managed farms can produce only 20 perwnt as much. About half of the harvest comes fPom flarms with the lower yield (bmrtc: 1991, 139). Average yield for the whole country is &us less than 5,OOQkilapamr; per hectare, barely a third of the top yield (dndicadores [July -September 1'391J: 101). During the 19W, the inability of the very mall yerba mat6 orchards to produce an income that wauld support a family led to the bankiuptcy of many. The orehards of 1 hectare or less practically disappeared, and those with 5 or fwer declined sharply (Manzana1 and Rofman 1989,216). Moreover, the small yerba mate grower reeeives a price that is lower than the large gxwer because of the greater market power of the larger gtowers (Manzanal and Rofman 198'3,218). Most of the tea growers in Misiones (75 pereent) have fewer than 5 hectares (US. Embassy 20%a, 4). Law yields and low labor productivify plape the small growers (Stewart ZW, 27&272). Mast of the smaIler farms grw other crops on their farms as weH. Thus, they have little interest in mastering the craft of tea growing, and their tea bushes receive insufficient attention. Indiscriminate picking, incompetent pruning, na pruning at all, and lack of shade trees all lead to Iow yields and poor quality, A poison required to control the abundant 1eaEmttingants is prohibitively eqensive far the smaller farms. In the Narthestern cotton fields, m s t of the growers are milzifindktas (SO pereent in Formosa and 50 percent in Chaca). mey have yields that are between 40 percent and 70 percent of the yields on larger farms." The causes of the lower labor and land productivity are the scarce use of artificial fertilizecs and pesticides, cheaper but poor-quaf ity seed, use of animal trao tion for plowing, monocultivation, which exhausts the soil, precarious tenancy, and the use of children (family members) as labor.'' It costs mice as much per heaare to hire harvest hands to pick Gatton by hand as it does to contract for the mechanimf harvesting of the cotton, but the smalj farms usually hamsr by hand (Ferr&1993, 12), Although the cotton exhausts the soil, the cotton powers cannot switch to other crops bemuse they generate a lower cash flow (Vessuri 1972, 370). Their poverty prevents them from purchasing machinery, obtaining credit, and using better technology, so they steadily fall behind those with larger farms (Brodersohn and Slutzky 1978,

221). The small powers receive prices that are 20 percent lower than what the larger gowers receiw, thus their ability to invest in their operations is inhibited:' The boI1 weevil, which has just b e p n to threaten a t t o n production in hgentina, will be a greater hrden for the miirifindios than for the larger farms (Argentine Cotton Chamber 1992, 14). In Matto Grosso state in Brazil, where the pest arrived in 1983, the small minifindias have virtual& disappeared. The weevil has spread into nei&t.rbringParaguay, which is doing vimalty nothing to stop the plague that is now moving southward into Arge;ntina. Two weevils can produw 3 million dewndants in four generations; during much of their life cycle, they stay in the Gottan ball, proteded from pesticides. EradiGating the pest requiresrepeated (up to forty) applications and precisely timed doses of a powerf;ul poison. The intensive use of pesticides raises the wst of growing mtton by 30 perwnt,. The mini&dkfag are already at the margin of survival and thus eannot affsrd the pesticide and the machinery needed far its application. Some small farmers in the Northeast suffer an esra burden that derives from their c u l ~ r a heritage. l In Formasa, many Indians are minifindbtas. meir ancestors learned a bit of agriculmre from the h c a invaders m years ago and a bit more from the Spanish, but those who were not impressed into sewice haweriting cane in the Northwest or Gotton in the Chaco remained principally hunters and wtherers until the 1970s. f;or hunters and gatherers, "[nfature is the provider: the future depends on reading the natural world eareltirlly, nat a n the systematic planning of one's wark. . . . S u ~ ha ml.ture does not mnceive of the idea, for emmple, that a crap can be ruined if you leave the fields for a week, that there are such things as mpitalization, or credit to be repaid. The future is really not in one's hands" "orfman 1988,

v*

The minifundios of Patagonia that grow fruit or vegetables are far less produGtive than the Iarger operations. T%eyhave a low and inacfequate level of mechanization, lack a system far protecting against fate frosts, and have vines or trees of advanwd age and thus low yields (ManzanaX and Rofinan 1989,128). Tfie rninifindktas do not know how to properly apply pesticides and feflifizers, thus making their use more c o ~ l y( I W A 1986, 102). What machinery they do have is often obsolete. Nearly half the fruit acreage in the Alto Valle uses obsolete and unproductive arrangements of vines or fruit trees in their fields (Miquel199f-1992, S9), The traditional systems achieve yields that are only 60 percent aE the yields of the modern systems, Butling up the trees or vines arranged in the old patterns and replanting with a mare efkdbe layout means years withour any in~orneuntil the plants bear h i t . T h s , the small growers cannot afford to abandon the traditional patterns

"

(Manzanaf and Rofman 19811,128-129). The large apple orehards using the modern layouts plus other modern tecfrnolo@esthat the minrfirn&~sdo not generally employ have yields exweding 50 tons per hectare; this is three times the average for all Argentine apple growers during the 1980s." The small pourers earn lower priws for their h i t , Vertically integrated enterpfigs own most of the large orchards; for them, the safe of the fruit is merev an awmnting transaction (Landriscini 1985, W). The process is cumulative, The unproductive minifirndt'os earn little profit and so are unable to invest in the more efficient techniques or even proper&pmne and train the trees.. The breach between the small and larger f a i t powerswidened subtantially during the last miXitary gavernment in the late 197&. The ovenralued pem and the zero ar negiative real rates of interest favored importing madern machinery far h i t cultivation and processing, These favorable financiai conditions coincided with a drop in eqorts and the farm gate price of the fruit. The small growers; faced with uncertainty a b u t the future of the market, cauld not take the risk of borrowing large sums to import the nahinery needed for modernisation, but the large growers took &vantage of the situation (Manzanal and Liindenb i m 1985,72), The same situation prevaifs for other agriculturalists in Patagonia, The smaller vineyards are the least p r o d ~ i v eand so unprofitable that many have was4 cctltivation (fNTA 1986,IW). Most of the tomato growers have femr than 20 hectares and achieve fiefds that are half of those on the Iarge farms of Salta and Jujuy and a third of those in similar ewIa@cal areas in developed wuntries (TNTA 19M,118; Yanes and Cerber 19@, 42). The small tomato farms are unmechanized, do not rotate their mops with alfalfa to improve yields, and earn lower prices far their produas (fNTA 1I1)86,117, Il9)*

Shepherds or goatherds with small floeks are aIsa less productive than the larger esfanchs, although all btagonian pastoral activities suffer from technologiical bachardnes when wmpared with Australia or New Zealand. Prowdares such as deficient sanicary practices and incompetent shearing which lead to low levels of productivity, are more like@to be faund on the smaller ranches. The small shepherd does nat have the hnds to make investments that woufd increase profitability, For emmple, mast of the srnafl operations are unfenced or inadequatelyfenced, Xf different fields could be separated, the pasfures wufd rest and the g m s cover regenerate, thus slowing or ending the process of overgrazing and desertification.ls The minifundristas cannot afford to put up the fences, and thus the lands they use deteriorate more rapidly than on the large estoncias. Even if the pastoralist had the funds to invest in fencing, investment is dismuraged since most of them are sharecroppers or quatters on federal lands with precarious or no legal daim to the land they use?' As in the rest of the interior, the lack of clear title to the land encuurages overgrazing and thus desertiflcation, Kt

is the small ranchers who are far more like@to lack title to their land than the larger ranchers. This sufvey of the four regions of the Argentine interior presents a consistent p a r e of small-wale agriculture there. On the minifundios, land and labor are unproductive, This inability to produee very mu& candemns the minifidiistas ta poverty, and their poverty means that they cannot invest in themselves and their land sa as to become m r e productive, The backwardness of the emnomies of the interior is thus confirmed.

The lack of resources in the hgentine interior, togetherwith the hi@ly skewed distr11,ution of the ownership of those resources, have produced a demographic hemorrhage, mere is simply not enough us&te land far the multitudes of rural poor. Not only do the wealthy own a large share af the land, but the land to which the poor do have aaess has deteriorated because of averuse and abuse, Weak demand far the crops of the interior mmpounds the problem. Moreover, poverty in the interior of kgentina, as ekewhere around the globe, produces a sacial environment that encourages high birthrates.% The excess population has had no choice but to leave in search of a better life, In some parts of the interior (Santiw del Estero, Gzltamrtrca, La Noja, San Luis, San Juan, and Corrientes), economic stapation and the exodus of the popillation began in the nineteemh cenmty, In the second half of the twentieth century, gowth in the interior found its limits and, one by one, the redonal eeononxies faltered. This coindded with a dramatic drap in infant mortality. For example, in Jujuy in 1970, infant mortality was nearly If percent; in Salta and Neuquen it was 11 percent, in Ghaeo IQpercent, and in Rio Negro and La Rioja 9 permnt, By 1991, none of the interior provinces, if we can trust the data, had a rate of infant mortalitcy that exweded 3.6 percent, Life eqeetancy had increased due to better medical care and wider use of inoculations, The Gharage was most dramatic in Jujuy: life exipecbncy went from fifty years in 1959-1961 to sw-fauryears in f9W1981. Cmde birthr~esin this period, however, were virntalfy unchanged?' Constant birthrates and falling mortality rates produeed a spurt in the natural gowth rate of the population of the interior just as the stagnating economies there could no longer absorb the surplus popuf ation. Most of the emigration from the interior in the early days went to other parts of the interiar with more dynamic eeanomies (esgecially Misiones, Chaco, Farmosa, and Pataigonia), In the l%&,the nationd emnomy mrned inward and began its great eqeriment with import substitution industrialization. At first, most of the workers in the new industries an the pampas came from nearby farms and the interior was largely untouched, By the 1940s, however, the exodus from the interior to the pampas was under way; it a m l -

erated in the 1950s, reached a peak in the 1 and early 19"7* The military government b e ~ e e n2376 and 1983 aggressively dimuraged irnmigration from the interior to the pampas by bulldozing shanytowns and bmtally suppressing orpnizatians that spoke far the urban poor. The policy of de-industrialization also meant that there were no j o b for immigrants. Thus, migration h m the interior fell shargfy during t h e p r o w . Sinw 1983, the econclrny of the pampas has stwated, The economies of the interior wntinue to worsen, but the pampa cannot easily assimilate new migrants. They continue ta arrive, althou& in reduced numbem, and are warehoused in vast skanqtowns surrounding the mdor pampean cities, Provinws that w r e anw able to attract migrants (especially (=haw and f'ormosa) and provinms that until the last few decades m l d retain their populatians (SaIta and Jujuy) now have substantial emigation. The only parts of the interior that in the last decade have had net immigation are those with enormous subsidies to their industriat development from the national government, The present government has skaqly reduced these ziubsidies. mus, we can eqect immr'lgration to these provinces to cease and perhaps an exodus to begiin, We shaB emmine emigration from each regon in turn,"

The more dynamic and the more stagnant parts of the Narthwest have had vesy different migration patterns. Because of the sugar industfy, ?turnnitin, Salta, and Jlljuy have eqerieneed enough growth to retain most of their population (and to attract mnsiideraMe seasonaI immigration, at least . The stagnant and bachard eanomies of the other prav, etamarea, and Santiago del Esrero) have been e ~ e l l i n g population since the nineteenth eent-ury.. Until 1947, Jujuy received a fubstantial fareign and internal immigration as i~ sugar and tobacco industries grew rapidly. From then until 19@, the in0w of foreigners (mostly bliviana more than offset a small emigration of natives. Since 1960,net emigration has averaged beween 0.1 perwnt and 0.3 percent of its population annually, Until 2%Q,Saltil lost vefy little of its papulatian thraugh ernigation. This was mare than offset by the immigration of foreigners (again, mostly Bolivians), During the sugar a k i s of the 196@, 4 percent of Salta's population emigated. Sin= then, average annual net emigration has been 0.1 percent to 0.2 percent of the province% pqulatbn. Tuarn6n has not fared as well as her WO neighbors to the north, It errperiencednet immigration during the rapid expansion in its sugar industry. Since 1924 the provin~ehas been a net eqeller of population. Emigration from TucumPn was quite nxodest until 1 egan to grow rapidly during the 195@, and Ibeame a EXood during the when over 20 percetnt of the

population emigrated beause of the disstrous crisis in the sugar industry. In that decade, the population of the province aemaHy fell, since emigration exweded namrd gowth. In the 197% the province lost 1 percent of it-s population due to net emigation, and in the 19W 4 percent. The other three provinces of the Naahwest present a complete&different piemre. These provinces began eqelling population in the middle of the nineteenth Genntry as the cattle t r 4 e with Ghile and b l k i a dedined. Later, deforestation groduwd deseaificatbn and increased the excess papulation. Efy 1869, 1.7 percent of the national population were people who had been born in these three provin~es(mostly Santiaga del Estero) but w r e living elsewhere, and by 198Q the number was 1-9permnt (Ortiz 1987, 103). In 1970,40 percent or more; af those who were native to each of the three provinces (d were still alive) had moved away (S1 From 1914 to 1947, each province: lost between 10 and population through emigratian, from 1947 &I 1- betuteen 17 and 21 percent, and during the I. between 15 and 21 percent." In the 1 9 7 0 ~the ~ p m of emigration slowed mnsiderabEy, and in the 198QsLa Rioja and Catamaxa pined immigrants, thanks to mlossal government subsidies explained in Chapter 11, Santiago dei Estero, however, did not receive these subsidies and lost anorher 10 percent of its population through emigration in the 1980s.

Like the Northwest, parts of aye have attrlncted population, and other parts have been traditionat eqellem af emigants, The powth pote of C u p has been Mendom and, until the mid-19m2 when the misis. of the wine industry began, it was a net receiver of immigrants. The large majarity of them were foreipers. The pace of immigration was greatest in the period before World War I, as wine production incre~edgeometrically, but substantial numbers continued to arrive until 1960. Mfer 15160, the flour of immi~antsslowed to a trickle. Since 1975, as the wine market has shredded apart, there has been net emigration from Mendoza. Emigration from San Juan began in the nineteenth cenmry when the cattle trade with Chile declined and has continued t.a the present. As shown in Table 8.1, the worst period for San Juan was during the X9&, when 12 pereent af the population left, but the 198h were almost as bad. San Luis has also expelled popfation since the nineteenth cenmry. Between 1895 and %W, San Luis had the highest rate af emigration of all the pravinces in Argentina. The Rood cantinued through the 1Ws; by 1970,45 percent aE those who were native to the province lived elsewhere (SIMA 1975,43), During the 1980s, the pmvin~eexperienced net immigation, thanks to enormous government subsidies to manufaemring in the province,

TmLE &l. Rate of Emigration fram San Juan and San h i s , 186%1991.

&me$: ht&s 1973, p. 861; Lattes and

Sana 19%, cuadro 3.

As in the Northwest and Gyo, wrne parts of the Na&heafit hwe been trditiand sources of emigrants and, at least until the mid-twentieth cenmv, other parts have attracted population, Gorrientes has been losing emigrants sin= behre the first national wnsus in 1W9, whereas the rest of the Northeast gained immigrants until the 1950s. Every province in the region lost population during the 1 9 a , but since then the situation has been mked. From the late nineteenth century, the paee of emigation from Carrientes grew steadiIy, reaching a peak in the 1S)SQsand 19ms. In 1955 alone, nearly 3 pereent of the population emigrated, but throughout these WO d e d e s at least 1.5 percent left each year (Foschaiatti 1982, 133). By 190, over 40 percent of thox born in the province and still living had moved away ( S W 1975,42). Since then, emigration has tapered off; in the 1W&, 7 perwnt of the population emigatcb, and in the 19SDs only 3 percent of the papulation. Until mid-Nentieth ~entUv,many of these emigrants from Qrrientes went to Mlisiones, Formosa, and Gham to gaw eotton and yerba matB, where they joined hundreds of thousands of settlers from other parts of kgentina and Erom other countries, Then the demogaphic tide Turned and it mrned first in Ghaco, There had been substantial immigration to Gham in the Iate nineteenth century and it wntinued until 1945 wi& only a dip during World War I. Dun"ng the peak yeas in the early 1930s, emigfants swelled the pravinee's papiulatbn by more than 6 percent per year (hschaiatti 15182, 129). Emigration b e e n as soon as immigration ceaed, dimbed through the l%&,and reacfied a peak in the I ,when near& a quarter of the population left. This w s the high@&decennial rate Of emigation that any province of kgentina has ever eqerienced. With the erisis in catton cultivation in that deade and the switch to land-efienshe activities such as soy or cattle, nearly 150,W people left the province. During the X97&, emigration was far lower but rose again during the 1980s, when 6 percent of the population left. Immigratican into Misiones peaked in the early 1920s, at the height of the yerba mati: baam, and continued to decline until 1940, For the nea

d e d e and a half, immigrants continued to arrive, but there w r e never more than a few thausand annually. When the tung boom played out in the nearly 10 percent of the mid-l%&, emigration began. b r i n g the X population emigrated, but since then net emigration has slowed to a trickle. The second Gampaip of the Desert opened Formosa to settlementjust behre World War I. The decline in the eqort of quebracho and tannin during the war wreaked havoc on the economy and sent a flood of emigrants looking for work elsewhere; the province's population shrank in the late 1910s. m e cotton boom af the 192% quielrly ended emigration, and until the mid-194Os, many thousands of immigrants settled in the province, Bemeen the 1914 and 1947 censuses, the popufation of the province rnore than quintupled. Emigration began in the 1950s and averaged a b u t a half percent a year between 1960 and 1980. Thanks to massive government subidies, there has been a modest net immipation during the 1980s.

Patagonia w a vi~tuaflyuninhabited when kgentina became a nation Not until the Campaign of the Desert in the late 187& was there any appreciable population except scattered bands of Indians and the Welsfi cobnies in the Chubut valley, Afirer 1880, farmers and shepherds came in large numbers, at first to the northern provinces of Chubut, NeuquCn, and Rio Negro and later to Santa Cruz and Tierra del hegm. 1By the 1947 census, Patagonia had nearly 4 0 0 , W inhabitanrs. Bcepf in the far south, the pace af evansion dowed at mid centrtry., and Neuqudn experienced net emigration during the 1950s. Since 1960 and until very recently, immigration to Patagonia has agin been strong. This has been tme ewecialfy for Tierra del Fuega, the smallest and nevvest province of kgentina where government subsidies have been especially sizable. By the X9W, emigration to the island province averaged rnore than 5 percent per year. Wereas the Nor , the Northwest, and a y . a lost 730,000 people by emigration in the and 150,000 in the 1970s, Patagonia gained 6 8 , m and X00m , in those WQdecades (Rofinan and MarquQ 1988,25). All of Patagonia, and in particular Tierra del Fuego, has been the target of massive government subsidies from the 1960s to the present. The flood of migrants to Patagonia has apparently ceased and people have begun to leave. Structural adjustment has now resulted in a decline of subsidies to the region and the closing of iron and mat mining operations. The government's petroleum company has shed tens of thousands of employees as it h a been privatized. T?le emption of Mt. Hudson has devastated pastoral and tourist activities in Santa Cruz, and the highly ovelvalued peso has negatively affected almost all of the products of the region, which is heavily dependent on eqorts. The wool market has collapsed. There is

.

aneertotal evidence that a substantial emigration from Patagonia has begun. Especially hard hit are Santa Cruz and Chubuteu

It is the conventional wisrjorn among demographers that migration undertaken for econornk motives is a creaming prowss in which the mast productive members of the eommvnity are the most like& to emigrate ( b p 1977, 239). The very young and the old of the sending population stay behind while thafe in the prime age wharts leave. The disabled, sick, and weak remain while the strong and healthy depart, The unskilled and poorly educated stay put while the best educated and upw;udly mobile seek their formnes elsewhere, mere is considerable evidence in support of the contention that the best and brightest leave the interior of ~ r g e n t i n a .For ~ example, 61 percent of those who emigrated from the interbr provinces b e ~ e e n1975 and 1980were b e ~ e e n ages fifteen and twenty-four, wherew this cohort represented only 18 percent of the sending p~pulation.~ Moreover, in 1990, 29 percent of the population of Buenos Aites, ardaba, and Santa Fe ( p r w inces with net immigration) was under fifteen years old. fn evexyother province, the proporrian was at least 33 perent, and in ten of the poorest provinces of the interior it was 38 percent or more, brmasa was the hi&est at 44 percentez7 Most migrants from Catamarca, especially among males, are between twenty and fifty years afd ( b n t e et al. 1972, 321). Bardornh (1981), 115) commeRts on the aged population of Misiones, from which the younger have migrated. fiori"s (1W)sfu* of migation h n the interior emphasizes the exodus of youth (See also Gilberti 1965, 93). Numerous commentators have reported that shantytown pupulations haw few old people, Support of the creaming thesis is also oar own common sense. mlfing up one's roots and starting over in a distant location require substantial ewnomic:and psycfholo@calresources. Migrants in kgentina typically move from an isolated rural area to an urban slum. The best equipped to make this mwe have the money to financc?the mave, the skills that are marketable in the reeiving I a b r market, and the faresight, enerw, and flegbiliv to undertake such a challenging project, Migratory flows away from the interior pose major obtacles to economic development, The interior is left with higher dependency.ratios (more young and old people in relation to the working-age population), In additian, people are ultimately the foundation of all su develop eeonomicatly. If the most able and resourcehl have left, this vital ingredient of growh is faeking.

The poverty and inequalityof the interior translate into fiscal bacbardnes. 'The p a r do not have much tmble incame or wealth. The inequality ter in the interior than an the in the distribution of inmme and wealt 19&4,6.35; M a n a 1991,95), eads to politial inequality ( n o s e at the top of the emnomie an$ political pyramid do not tax themsekes too heavily. The middle class in the interior is too small to senre as the principal tax base. A government without remurm cannot build the inffstmcmrr: that promotes emnonnic g o ~ h . Before 196Q,the fiwl r e m r w s of the; intefior were far less than those Qf the pampas. For emmple, in 1 mthe bacbard provinces of the Northwest, Northeast, and &p speM only a fifth as mueh per apita as did the advanwd pravinces (the pampean mre plus Mendoza), and in the 193% two-fifths as much.% During the Per6n era, the federal government built whools and hospitals throughout the oauntq-the public health system and the public edueartional system were federal responsibilities at the time. This created a very rough parity in health and education spending among the provinces although the pampas began this period with much better facilities. Nter the national system of public hospitals was built, it W= mrned over to the provinces in 1970 to operate. Sin% then, few public hospitals have been built and the Eunds ta operate the hospitals have shrunk, but the popufatbn of the interior has pawn fater than on the pampas. Consequently, the small disparity bemeen the pampas and the interior in 1970 has grown (Wsrld Bank 1987, 25,31.). There is also evidence that the qualifyof public health facilities is lower in the interior than on the pampas." Moreover, there has been a dramatic eqansion of the printe health a r e system on the pampas sinm 1970. Pampean residents thus receive substantiaf ly better health care than residents sf the interior. hMic education has devofved to the prwinws mu& mare rewntfy than public health (primary whools in the late 1970s and secondary schools only in the last few years). Here, the differences between the pampas and the interior are modest, although private shoals are far mare prevalent an the pampas than in the interior. The first Peronist government began transferring suhtantial amounts of eash to the interior by means of revenue-sharing progams, and now provincial spending per capita there is substantially higher than on the pampas, Unfortunately, rnuch of the federal cash given ta the interior pays the sahries of permnnel instead of building infrastrucmre, The pwexty of the interior and the tack of political will encourage provincial governments to play the role of employer of last resoa. This has been especially so in the last fifteen years, when the eeonomic crisis of the interior has intensified. mus, the infrastmcture in the interior other than the medied and educational sectars is still far less developed than it is on the pampas,

Perhaps the mast dramatic way in which the pwerty of the interior has produwd an impoverished infrastructure has to do with highways As shown in Table 8.2, in 194, only the provinces of Buenc;rs aires, ardoba, and Nendaza had constntcted any paved roads, and by 19(i0only Entre Rios had joined these three, Within the next two dewdes, all of the rest of the provinces had begun road-huiiiding programs, but the interior m l d not overwme its ori@naIdeficit. Up to the 1950s, the national government took major responsibi1it)rfor the muntryfshighways, but most of the federal highways were in the three most developed provinces on the pampas. mus, the provincial n@ect of the r o d system was reinforwd, not eounterbafanced, by the ~ationafgsvernment. As late as 1950, there were only 8 kilometers of paved road in all of the Nartheast, and only 28 kilometen in Patagonia, fn 1%0, the Northeast (an area the size af New York, Pennsylvaniir, and New Jersey) still had only 150 kilometers af p m d mad, and Patagonia only 300, The pampean core provinces had more than twenty-fie times as much. improved hi&way in relation to their territory as did the Northeast or Patagonia, six times as much as the Narthwest, and three times as much as aye*

In relative terms, the interior had partially caught up with the pampa by 1981, The vmt, ernpty Pataganian desert still had very few roads, but the Northern part of the interior had about W-fifihs as muGh paved roadway

in relation to its size as did the p-ampean core. In the interior, Tucurnan and Misiones (the N o most densely populated provinces in the country) and Mendoza (the richest province of the interiax) were the only provinces with mu& over half as much paved highway in relation to territaty as parnpean Gore provinces. Santa Cm;?;,the provinw with the fewest kilometers of hiawaq", had only one-sixteenth as much as Ruenos Ares per 1,OEEO square In relative term, the kilometers of territory, and F o x I ~ ~ ~only Q s ane-fifth. ~, interior has been atching up with the pampa, but the absolute increase in paved highways since 3950 hats been greater an the pampaf than in the interior. EaGh province of the interiar had, until recently, at least one railroad connecting it to the rest of the countly. (Many of these are now being shut W n . ) Hiaways, however, are the principal transport arteries in any modern emnomy, including Argentina"* The lack of highways in the interior thus imposes an economic, social, and political isolation that is a major obstacfe to progrea.

One of the most important ways a gvemment can improve the health of its citizens is by preventing sickness, not just treating it, Sewers are the

TABLE 8 3 Total and Provincial Paved Roads, 1940-1981 kilometers o f mved road Der 1.000 square kilometers o f area 1940 Total Prov.

19.50 Total Prov.

1960 Total Prov.

Core Pampas Buenos Aires Santa Fe C6rdoba Peripheral Pampas Entre Rios La Pampa North west Salta Tucumhn Jujuy La Rioja Catamarca Santiago CUP

Mendoza San Juan San Luis

Northeast Comentes Misiones Formosa Chaco Patagonia NeuquCn Chubut Santa Cruz Rio Negro

Sources: INDEC 1983,453-459,and 1989,495-501.

1981 Total Prov.

TmLE 8 3 Irrhrabihnb d t h Access to Sewers, 194S1979

Noshwest Salta; Tummh

Jujuy La Maja atamara Smtiago Cuyo Meadoza San Jum Sm

wis

P G ~ ~ Q B ~ NeuquCa Chubut Santa C m R'o Nego Tierra del; Fuego

9.5 103

12.8 10.8 7.7 6.1 6.1 14.3 18.0 15.3 0.0

0.1 0.0

0.0 0.0

2.6 12.8

&urea: INDEG 2984,378-37% 1%9, 116; and 1991, 19,

me Economics of Baebardness

162

foundation of good public health, and in Argentina they are the responsibility of provincial and local governmentf. The data in Table 8.3 shaw that all of the provinces of the interior had a lower proportion of their population with access to sewers than in the pampean core." The worst-off region on this m r e W= the Northeast, where only 7 percent of the population had sewers in 1979. In fwo provinces (Jujuy and San Juan), the share of the papulation in houses with sewers fell bemeen 1'345 and 19753as the population grew h e r than the sewer systems, Sin% sewer Vsterns are found only In ei.ties, a better measure of sewer aaess is the proportion af the urban pogulation s e m d by sewers. By this p g e , all of the interior provin~es were still wne off than the eore pampean provinces. mirty-one permnt of the pmpem-core urban population hael sewer senrice; six interior provinces had at least 20 percent, but five had less than 10 percent, Summary and Cancliusions

Earlier chwters have dawmented the poor rewurce Base of the interior of hgentina and the ineqnalify and paverv that is widespread there. This chapter describd same ways in which this pwerty creates obstacles to economic development in the region, &very and inequaliv mean that the majority of farmers in the interior have tiny pfats of Iand that are substantially 'less praductlve than larger operations. n e i r unprodudiveness means that the resoumes to become more productive are lacking and their poverty is reinforced. The poverty of the interior has eqelled huge- numbers of emigrants. This has weakened the provincial economies by draining away the most able and productive members of society, leaving behind an eeonomiekally dependent population, Lastly, the poverty of the people translates into the poverv of the pra~ncialand local governments. The inability of the government to invest in infrastrucmre means that breaking out of that poverty is all the more difficult. Notes 1, Easify the m a t sbcfied oountry h this regard is f ndia, Sin& 1990, 102-107), far aizarrple, cites forty s t u d i af ~ the relative plroductiviv and eB&enq of small and in India alone, and Bhalla (1879) dtes a number of other studies. Both Bhallit agw that the evidena s u p w m the belkf that small farms are mare prolduaive. Both auttaors a p e that tfils relationship uvedeaed &r G r e n Rwalutian technola@es were adopted since they were uwd dbpropfiianately on (See seer 1984, 144, far a mntriary dw.) A p m m 1 of Singh's Gwrafure review indiates be may have ovemtated his wnclusions. Even in the pr+Grmol Revolution pfiod, fewer than hag crf the ftudies fiie cites unec;luivocally show thart output per acre is higher on small fams, Tbc: results of studies of e%&erxcy are even more d e b . Bew and Cline (1979, agp. B, 196203) cite a n m b e r of studies that show higher Iand prsductiviq on smau farms in developing muntries. See alm Stevem $977, 17-18; Squire 1981, 155-165; Csmia 1985,524e Bachman

and mhewa 1967, 2W247; Fuflado 1976, 7&79; and Binmanger and Elgin 19W, 3 4 E Q-thersmdies have not wppfled the notion that small fams are mare prductive or e a d e a t ( Jones 1991,254 Heisher and E u 1992,120-121; ; Gfier 1984, 14.4). er and Wiebe 1 te-od to have hi@er Eand produakity does not 2, The h d b g tkat S they are more cadent, For e o o n o ~ & the ? n w m a y suppfl the nation of effidenw refates the valtue of inputs to the value of outpub. Higher land pradudkiq that Ss gain& ody by wing more hputs does not nemssady meim in the irrfefior if disgeater e&&nq. The h u e of the eE&enw of smaU marion% of mum, but ~;yuantitativemawsk is not free &om measurement or estirriation bias either, h %n (l"275,148) and emom h mnametl"ie sfudier, of this hue. (1981, 21) for dimsions 4. B d v e d fram Gaao ro 26, %r: the A p n d k for a more detailed depiebn of the p e w of the interior. 5. % espdally m u a n a l 1988, 32&321; and Mamanail and R o h a n 1989, 67-70, 1986, 15; Mamanal and 6, Aehetti and St6bn 1975, 211; Benen&a and Rohm 1989,67; Gil 1991,124; and R a h a a 1986, to adopt =me of these 9, T%e minimk&s a n m m p n s t e for theb ally meeha&ation, by wing more labor on their fields, 10. Mammd and R o h a n 1989, 116117; T m w n e and karraga 1990,&8, 11, I&c&w econbmieo-gmiafes,No. 9 (July 19%): 7, No. IQ (September 19%): '74,and Na. 14 (Aupa 1993): 10-11; sr=e also Yanes and Cerber 1389,4%mchman 1982, 138, m a m a n o czane cultivation is largely rdn fed, whereas am in Sdta and Jl;gjuy is Mgated; alw, n m m h n is fmber wuth there is at peater risk of &ost. A w r d h g to e w r t s in the are$ these differearns should amunt for some, but not all,of the digerenee in yields & W e n the WO areas (Sabalain and Reborafti 1982, 147). 12. Balddch 2991, 153; Haasis 1973,371; and Fbrentino 1988, 543, 13. Manzanal and Rofman 1989,47W73; see alm %nzagni 1983,99, and lsolsi 1985, 18. 14, Mamanal and Rafntan 1989,8546; Brodemhn and S l u w 1978,224; and Idic&m eco&mk~-gocklm, No. X3 (June 1993): 33. 15, hchetti and S@fen 1975,216; Gallacher 1998,443, Reboraai t982,10; Bolsi P985,64; Milmanal and R o h m 15)89,85, 16. Mmanal and Rofman 1989,85; and hchetti and St6Xen 1975,21&215, 17, INTA 19816,21; Xdr'cahnes (July+ptember 1991): 103. 18, Amigo 1%5,33; and Mamanag and R o h m 11989,141-142. 19, h d ~ d n 11285,98; i M&nd.ezGasadego 1991, 105; and A&o 1965,4.6. 20. Far a d i w ~ i a nof this in the Argentiw clontea, see Archetti 1972,26&269. An unweighted average of m d e biahrates in the pampean mre wcts 18.8 per 1,000 in 19%. In the Noflbw~tit wm B.3, in wo 24.6, in the No~heast32.5, and in Patagonia, 128.6 (INDEC 1989, 128). 21. OPS 1989,27,31; INDEC 198389,128; Aceinelli and MQiler 1978, 9, 22, U n l w othewiw need, data for the follwing dimmion mme from or are delrived from h t t e s and Sana 199Zt madfa 3; h t t e s 1973, 85M61; XNDEC: 1989,

113-.120; and IIISDEC 1991,19, hJncfic&ra ~con6mic~-sociaIesP No, 10 (%ptember 1992): 1&1SO, for slightly different numbem from the ones premnted, 23. m e w data are dedved from Lattes 1973, 861, and h t t e s and Sana 1992, cuadro 3, Zmarano (1988b, 6661, however, gives sli@tlt, larger numbers for the 19f;Qs, beween 21 and 23 gerwat. Both ealmjations were b 3 s d 0x1 census data, U. Much& 1992,26; WO 11193, 14; and N a b 1994,7. 25. A m r d h g to Argentha's foremost demographer ancl author of mmy studies on migatiorm, B.Alfred Lattes, systc:rmratic Sudies of the aeamhg p r e s s in &gentha do not exist, My o w =arch far such a study proved unproduaive, 25. Brived from IMDEC 1%9, 61%120, and 11)85,3642,51. 27. UNICEF f 991, wadra 1. mese proviaas aka have k&er b&hates, which, like ernigatim, raise the gropsfiion of the ppulation under fiReen. mus, the hi@er proprticra of the ppufation that is young suees& but does not prove that aeanaing eksts. 28. Pofio 1990, 1 6 1 4 7 ; ss: al,m Potter 1981,88, 29. On the pampas in 1970 (when almmt aU hospital were public) there was one hospital (with sur@mlfacilities) for every 11,000 idabitants. Patagonia did slightly better, but in the rest of the interior there were two or three times as many people per sur@mlhospital as on the pampas fdedved from SXm 1975,46), Furthermore, in the interior, there are fewer medial spdalists than on the pampas, Only 21 perwnt of public st=aar dactow an the pampas w r e in general, praaice in 1989. In the interior, all but one provincse (Cham) had a larger proportion h generaj praaie. The hi&est was Qtamarca with 55 perant, and the average for all of the inteGor was asnerEy one-third (derived from S f M 1991, 6M1). 30. The pampan care in this table ineludes the Federal apital. Since: central dties are the Bwation mast f-&e&to be =wed ltly mwers, excluding the largest mntral city on the pampm would dktort the analysis,

The Politics of Backwardness The poverty and inequality of the interior of Argentina place a distino tive stamp on the political culhlre and the system of government in most of the region that reinforces its economic backwardness? The political culture of Argentina is often characterized as authoritan'an, individualistic yet intolerant, personalistic, and fatalistic, characteristiw that are not supportive of democracy.' These aspects of the political wlture of the country are generally believed to be especially pronounced in the more traditional parts of the interior.' The argument of this chapter is that the poverty, inequality, and ecanomic bachardness of the interior of Argentina reinbrce the political culmre of the region. Furthermore, the political culture in most of the interior encourages a government system that is inefficient and obstructs eeonomic devefopmenf, There are tuvo w m p t s that are keys to an undemtanding of the political c u b r e and the system of governanee in the interior af Argentina, ‘The first is what social anthropologists and polirical s~ientistscall the patrondIent relationship. The second is a type af politieat stmemre that political dentists faktel a patronage system or political machine, The Brsr part of this e two wnepts to characterize the plitieal syaerr.1 the kgentine interior. m e fucus will be on the interrelations between the political system and the political culture of the region on the one hand and its poverty and inequality on the other. The seeond part of the chapter will examine how politics and governance in the region help ta lock in place its eeonomic backwardness.

The Patron-Client Relatioa The analysis of patron-client relationships first appeared in the academic literature in the 1950s.' Interest in the foncept grew rapidly, and by the end of the f9& and the early 1970s, several scholars bad applied the concept to field research in Argentina.' Its wrrency continues to the present. With hundreds of scholars applying a concept in many different mun-

tries and historim1 settings, there is necessarily some variation in the use of the term, The following, howwer, represents the most wmmon usage (see especiafly Eisenstadt and Roniger 1984,4M9). The patron-client relationship is an extremely lopsided friendship based an a veq strong element of inequality in power between patron and client, that is, on the monopolization of wrtain economic or political assets by the patron that are importaat to the client, The archerypal patron-client relation is betvveen the large landowner and the peasant, but it is hund in many other settings. It is often couched in terms of loyalty and reciprocity and is nst legal, contrac~al,written, or enforceabie (X"uwel1,157). it is quasi-legal or even illegaX. Despite its binding and enduri the patron-client relation is voluntary, and either party, at least in principle, mn abandon the relation, The patron-client relation is an exchange, but what is expected of each party is not explicit (see especially Swtt and Kerkvliet 1977, 443444). The patron provides economic assistance to the client, such as access to land or water rights, provisbn of marketing semices, technical advice, and most important, credit. The patron often provides the safety net to protect the as elsewhere, is often the The patron, in h client against dis godfather to ma ecaisionaf ly, hundxe his clientskhildren (Hermitte and Herrgn 1($77,250). Many authors have emphasized that the patron is the intermediary between the poor and powerless on the one hand and the formal institutians of the modern society, such as the Fernment or national or r e e n d markets, on the other (for example, Wolf 1955a, 1075-1075). These insti~tions play crucial roles in the lives of the clients, but they do not have direct or effective aaess to those institutions themselves, hence their reliance on an intermediary. The patron thus may prwide protection from fegal and illegal ahses of authoriv, secure sentices.From provincial or natlanal governments, or facilitate the client" articulatian with the marketplace. In remrn, ciients offer a variety of unpaid or minimaliy remunerated labor services ta the patron, occasional gifts to the patron's household, and promotion of the patron's interests in general. This may include protecting the patron's reputation, giving political support, voting for whomever the patron designates, and informing on the activities of others. Clients are expected to be deferential, even servile, with their patron, displaying an almost EIid Isyalv (Turner 1983,226).

The patron-client relation appeared in many corners of the globe (including the more backward parts of the developedworld such as southern Italy or the U.S. South) after formal servility (for example, serfdom, slavery, and indentured semirude) disappeared, Cfienteiism thus muld not flourish

in the Art;entine interior until near the end of the nineteenth ~ e m r since y formal systems of forced l a b r persisted until then. Furthermore, poverty and inequality are necessary for patron-client relations to exist, since the relation is founded on the relative powerlessness of the client and the control over vatuabfe resources by the patran. Finally, sincl: the patron is an intermediary between the formal structures of the madern polity or economy and the powerless, the patron-dient relation can flourish only where a modern state cannot reIiabIy parantee secure property rights at every level of society (see especialfy W e i n p d 1%8,381-383). h G i a l to the esstence of clientelism is the isolation that prevents individuals from interaaing directly with the formal institutions of modern society. T%e isolation of eommunities from these institufions may result from poor transporfatian, linguistic or ethnic differenws, absence or poor development of regional or national markets, and the ineffective reach of higher political authority! Isolation from the institutions of modern societycharacterizes the world of the rural poor in the v a t and sparsely populated interior of Argentina (see especially Mermitte 1972b, 161, 163). All of the provinces of the interior fexmpt Misiones and TacumPn) have an average population density of less than seven persons per square kilometer outside the largest civ and its suburbs, and in some provinces, densiv is less than one person per quare kilometer, Many mral eommunities are physicalliy isolated, with inf equent or no public transportation. The mrat poor cannot afford automobiles or truclas and must either walk or travel by horseba~kor carriage, There are people in kgentina t o d q who have never wen seen an automobite, finpistic differences isolate some uzmmunities of the interior. In northwestern Patagonia and in the Chaca, there are Indians whose native if any, whites can speak the tonwe is not Spanish, In the latrer area, h, natives' language (Dorfman 1988,9). Most of the rninifinhtaf in Misiones and many in the Cham are dewendants of European wlonists who arrived during the first half of this century. Until mid century, the first language for most of these settlem was Bolish, German, Swedish, or anather European lanwage, and many still do not speak Spanish at home, Welsh is the first language of many residents of the Ghuht Valley. Regional and national markets often do not directly reach the rural p a r because of high transactions costs. Dealingwith many widely dispersed customers, each of whom is buying or selling a very small quantity, is ewensive. Large, urban-based businesses prefer to deal with a few agents rather than many producers or cansumers, The isolated, rural poor have little infarmation a b u t markets outside their own cclmmunities and they have less bargaining strength as indkiduals than as members af a p u p . Even more important, the rural poor have such small marketable surpluses that the costs of transporting them ta market would absorb all of their profits. Only if the surpluses of many arc pooled is it efficient to transport

them to distant matlcets (Hermitte and HerrBn 19"17,2913), Qfren the buyer of the minifindistab crops SO sells consurner goods, seed, spare parts, and tools to the minifindta. Fsr these reasons, many, if not most, minifundkfas in the interior of hgentina are involved in marketing arrangements that put them in a dientelistic relation with a merchant? Even members of marketing cooperatives often find that they must sell part of their crop to merchants who can pay cash immediatelyupon delivery or advance cab before the hanest, Family members of minifizndhtas may pfoduee goods that they sell to merchants who act as their patrons. Debt typically plays a major role in cementing patron-client bonds in the impoverished mntrysidIe. The inwne of the rural poor varies widely over the year, but their poverty makes it impossible to hold cash resemes for periods without inmme. Thus, they are Ghroni~aIlyin need of loans, and the patron's ability to make these loans produces the disparity in power that allows clientelism to flourish? The reach of the federal and provincial governments does not ga Ear beyond the provincial capitals, Bureaucrats and plitiml officiab, like their caunteparts in private enterprise, find it more efficient to deal with a few intermediaries than with many voters or citizens. Patrons have their clients' votes already in their pocket, sa they are the natural link between the government and the people. Sine an important part of the intermediation perkrmed by the patron is between the poor and the political inst.imtions of the provincial and national government, then professionals, and in partiwlar lavers, are often in a strategic position to play the role of patron, nilany minifidndistas who are not Fully employed on their small plot af land and also landless migrant workers in agriculhare are of'ten in clientelistis relations with a l a b r wntraetor who arranges their migrant I&ar year ltfter year.' The vely nature of migrant harvest work forces the worker into close dependenceon the antractor, 'The unions that Peronist reforms brought to some fields speak almost entirely for permanent workers, not for migrant workers. The contractor is their only link to the managers of the farm?@ Many migrant worlcers who da not use contractors always work for the same farmer, with whom they establish cfientelistic relations (Sabalain and Reboratti 1982, 172). Although the number of Argentine migrant farmhands has fallen considerably from its peak at mid centur)r, there are still about 10Q9W migrant wrkers in the interior. Since the mid-~entiethmnfury, blivian and a i lean m i g r a ~ shave largely rqlaced the cPisllo migrants. mese foreign migrant warken have apparently not been studied, but presumably they are as likely to use labar contractors as the Argeatines they replaced since their accesIF to information about seasonal employment is even more restricted than that of Argentines (Reboratti 1989b, 134). Many of them work every year in the hawest, and some have more or less illegally settled in hgentina,

Patrons have every interest in maintaining the political and economic isolation of their GIients to reinfaxce their position, For emmple, patrons have blocked the formation of cooperatives." In one case, the government in Catamarca wanted to help wavers who worked in a putting-out system in the desolate west of the province. The bureaucrats in charge of the program sought out those individuals with whom they had political connections and who w r e familiar with the problems of the area and the industry. X1 turned out, of mum, that the only persons the bureaucrats knew who were knowledgeable a b u t the weavers' problems were the very merchants whose business it was to sell woof to the weavers and buy the sfiawls that they wave, TI.Lese merchant-the patrons of the area-made their livelihood by sclling epensive wool and buying cheap shawls. Understandably, they had no i n t e r e ~in setting up a cooperative that wauld eliminate their income. The patrons brought the client weavers to the organizational meetings of the cooperative only to ratify what the patrons had already decided. m e merchants appropriated the gwernment funds for themselves and the moperattive was stiflbrn. Poverty heightens isalation and thus encourages clientelism, but goverq leads to clientelism for other reasons as well, Poverty is the inability to wmmand material resources; econamic powerlessness leads to polirical powerlessness and therefore dependence on those with political power, the patron. Moreover, the hunger and chronic malnutrition that most of the rural poor in Argentina w a r cause, through physialod~lprocesses that are not well understood, feelingsof dependenceand fatalism that encourage this dependent behavior (Stillwaggon forthcoming, chap. 5). Moreover, chronic malnutrition wn also lead to mental retardation. Subnormal intelligence allow manipulative behaviczr that strengthens clientelism (Creene 1977, 8 M 9 ) . The poor have little power to cantrol their life and environment and thus are often buffeted by events beyond their wntraf, This powerlessness leads to fatalism (Vessuri 1972,359). Poverty enmurages a short-mn view of the wrld; it is easier ta ask the patron for help right now rafher than spend months or years organizing one's fellows to work for benefits from the political system. The interest poup politicss found in modern poiitied systems is thus a I ry the poor can rarely afford,

Many analysts have smdied the circumstances that lead to a weakening of clientelism." For a patron-client relation to persist, it must be in the interest of both parties. & the economy develops and the political system matttres, the incentives to remain in a patran-client retation may wane and clientelkm may bde. The process, however, is reversible and dientctism may strengthen or reappear when the conditions that nurture it recur." Whereasclientelismis still widespread in the interior of Argentina (Hermitte

1972a, g), the conditions that producr: clientelism have changed, leading to the pussibiliq that the institution has weakened. One crf the patrons' incenlives to maintain the relation is to guarantee a suppty of l a b r during periads of peak seasonal demand (Vessuri 1972, 358). h remrn, patrons find work for their clients or lend them money in the off season. When land shortages replam I a b r shortages, the patron's need to guarantee a I a b r supply declines. The Argentine interior underwent ra profound change taward the middle of this century. Until then in most of the interior, land had been abundant, Since then, the population of the interior has almost doubled, a rate of growth far more rapid than the ewansion of itgfialtural land. The qualiv of the land in use has deteriorated shatply; prod- markers have weakened, and I a b r surpluses have appeared everywhere, Tht: vast exodus of migants from the interior is stark witnem to the mrcity of land, Under these conditions, one mi@t eqect the decline af elientelism. One factor that allaw dientelim to thrive is the p w i d isolation that separates the countqside from the e m o n y and poliv of the metropolitan mnter. Since the mid-twentieth cenmry, the transport infrastructure in Axgentina has imprwed dramatically, weakening the isclliztion of distant communities. In 1940, for example, the interior had less than 1,000 kilometern of pwed roads. 1981, the interior had nearly 25,000kilometers of improved roads flNDEC 19123,453459). With the erisis of the emnomy in the last fwo decades, the abl"lityof the country to eqand or even maintain its infraarumre has declined notice&&. Between 1976 and 1881, the military gwernment shut down many provincial railmads; the quantiq and qualiv of sewice on other lines felL In 1W2 and 1993, the national government either ejosed down or turned over to the provinces most of the nation's remaining pmsenger rrzilw%ys. The nation's hiaways have also deteriorated, National highways mnnecting wrne pravincial q i t a l s have deteriorated so much in the last three or four years that trwef times h m doubted, Seeonday roads are in even w r s e shape, The present government has been privatizing the nation's highways in the hapes that private& operated toll roads will bring improvements, Some of these roads have been resurfacctd, but on others the only new investment is the toIfboth. mus, the trend toward reduced isolation may have been at least temporarily reversed, and this could reinvigorate the institution of clicntefism, A politid system that does not penetrate the countryside enwurages the: p w t h of clientelism in rural areas. Until the 194% national and provincial governmentswere coalitions of elites that did not seek to mobilize the nrral poor, Per6n revslutionized hgentine politics by attempting to pali tieize both urban workers and the mral poor. n e r e is widen= that this has weakened the institution of cfientelisn. In particular, the Statute of Perdn, which regulated wages and working conditions in the countqside under-

mined the earlier solidarity between patron and client." Two different studies of clientelism on the pampas report that, since the rise of Peronism, dients w t e for whom they please rather than dving their votes automaticaily to their patron (Stricken f477,57;Vessuri 1972,361). Perhaps this has also omrred in the interior. Linguistic diffemnees can alw create or enhance isolation, Per6nts reforms in the late 1940s began to force linguistic assimilation by requiring that Spanish be the language of instaction in both public and private shaols (Ackeman 15177, 152-.156). Foreign immigration has slowd to a trickle in the last few decades, Spanish is not the native tongue of many Argentines, but almost evevane can norv speak the language. "This may also have encauraged the dedine of clientelism. Given the frquent mention of dientelistie relations in dimssions af the interior and given the continued efistence of an environment in the interior that in other muntries generates clientelism, one musr assume that the instimtion retains mnsiderable strength even if it is less robust than in the past. We should expect that clientelism will continue to weaken as the dead@% pass and the palitid and economic systems of the interior modernize. The Eveluliem of Paliticrrl Systems The wnditions that produce patran-dient relations may change, and a political system based on clientelism may evolve into something else. The patron is the intermediary betvreen the impoverished and potverfess an the one hand and the format instimtions of madem saciet;yan the other. When the poor have direct access to those institutions, there is no longer the need for an intermediary (Weingrod %%S,384). In other wards, the party or government buys wtes retail without having to go through the patron acting as wholesaler. The term used to describe the individualized, mate?riaIbenefits direetEy &en by party or government officids to the citizenrywithout the mediating role of the patron is "patronage." A system of governance in whieh patronage plays a predominant role is knerwn as a politiaf machine ar a patronage system. Politial machines were Eound in many large industrial cities in the Uniled States at the mrn of the c e n b y and, more recently, in many developing economies of Latin America, Asia, and Africa. It first appeared in Argentina under the Uni6n Civica Radical in the late 191Os." A machine is not a disciplined, ideoto@cal party, nor is it one held together by the charisma of its leader (Scott 1969b, 1143-1144). It is more like a business in wfiich partialarktie, material rewards are given mostly to individuals or families instead of goups of voters to s e a r e the votes that keep the machine in power, There may be a vamely populist image of the ionally, the palice may be called upon to rough up machine leder, O the apposition. The machine may develop programs that benefit goups of

voters, Nevertheless, the hallmark of the machine is that it atrains p e r throu* the ballot b x rather than through coercion or the charisma of its leader and that it essentiallybuys votes with favors to indkiduals rather than goups, For machine politics to arise, old patterns of deference and paternalim must be broken, In the United States and Argentina, it was the mwive infiws of immigrants h m Europe into cities where the traditional b n d s of authority were already weak that provided the opportunity for macfiine politia to flourish. Radical governments in kgentinai bemeen 1916 and 1930 fit this description of a politid mochine dose&. The platform of the Radicals W= little m r e than the belief that democracy was a gaod thing, Radical leaders came from the same social strata m those of wmpeting parties (Galla and Sigal 1965, 163-164; Snow 1969, 164). They pursued policies that were hardly different from those of preceding governments. Their appeal vvm not progammatic, Instead, they won votes by handing out government jobs and other favars on an immense wale, especially just before elections (Patter 1979, 13). Xn cantrat, the Pemnist Party does nat fit the moId of a political machine. The party waia lbtised on the personal charisma clif Juan Darningo and Eva Duarte Perdn and, after rheir deaths, on the memory of that charisma, The party made specific. appeals to goups of voters such as urban wrkers, the rural poor, Gtholics, and nationalists. Afthough considerable particularistk favors were @ven to individuals, this was not the primary mechanism for mobilizing voters. Finally, considerabfe coercive measures, such as political arrests, shutting down oppositbn newspapers, and enwuraging political terrorism, were used to keep the Peronists in power and bring them back to power in 1973. National governments since the Per6n era similarly cannot be characterized as political machines. The rise of the Radicals and then the Peronists illustrates a process that has afien oocurred as political systems mature in developing countries, that is, the appearance af new loyalties "that increasingly stress horizontal, (fun@ tional) class or occupational ties" (Scott la69b, 1146). As layalties change, the nature of inducementsfor political support change mrrespondingly, The inducementsfor support that a political party or government can offer those whose principal loyalty is to their family or small group are particularistic, material rewards (Scstt 1969b, 1142-11 143, 1147). There is no "pretenseof a wncern for the categorical interests of any collectiviv, be it society as a whole ar a subgoup within it" (Land6 1977,75). On the other hand, those with loyalties to the community or locality respond to indivisible rewards such as public works projects, shoois, and "park barrel" spending. When loyalties are to clas or occupation, voters respond to poliey commitments, tax laws, subidy programs, and the like; interest group politics often plzly an important role. In em& case, the voters resgond to concrete material incentives and are in a sense bribed into voting for the politician who offers

them the reward, The difference is in the nature and sGope of the bribe being offered, As loyalties expand beyond the famify to the community and then to larger horizontal groups, the natrure of inducements to which citizens respond changes a ~ r d i n g l y . ' ~ Reality is far more camplex than a mology based on these three stylized, sequential &ages of political development, &y @venpolitiaf system uses a m*re of all three different kinds of indumments, Clientelism may persist in isolated rural areas decades aft-er a political machine has appeared in the more developed and urban part of the natian (see especially P a d 1983, W ) , A national politi~alsystem based on horizontal loyalties can mefist with local or provinciaf politial machines, The foregoing dewribes three difkrent tyges af political sptens: thase based on cfientelism, those based s n patronage, and more modern ones based on horizontal fqdties. How can these three ideal types be used to characterize the polity of the Argentine interior?17 Provincial governance in most of the interior can hest be described as a m h r e of patronage systems and clientelism, In the provincial capital and perhaps a few second tier Gities and towns, the gavernment Eunctisns as a polirial machine, Xn the more isolated, rural, and bacbard areas, patron-client relations maintain their hold. In the most traditional and underdeveloped provinces, family diynasties remain in pawer for decades and mntrol the provincial political macfiines, using local patrons as fiatenants to rule the province (Mora y Araujo 1988, 174). The faadi family has dominated the government of Gtamarca sine the late 194Qs (Zicoliilo and Montenegro 1991, 19fQ. Fefipe S q a g ruled Neuquen Eor decades, and since 1990 his relatives have cantinued to dominate the province. The Menern famijy has fang been in cantroI in La Rioja, as have the Rorneros in Gorrientes, the Conejos in Salta, and the Euzm6ns in Jujuy. Adolfcl Rodriguez Sa6 mled San Luis far many years (Bramanti $W), In other provinces with traditional political systems, former military officers rise to pawer (Bussi in Tucurnrin, Ulloa in Salta, and Rufz Palacios in Chaco). In other parts of the interior, a more modern politid system based on horizontal layalties prevails. Mendoza is foremost in this category. Rio Nego, Santa Cmz,Chubut, and perhaps Misiones should also be adlded ta the list, The remainder of this chapter will examine the links lzetween the political system, the political culhlre, and the economy. The focus of this diswssion will be excfusively on the tradition4 politicarl systems of the interior and wifl ignore the few provinces that have developed more modern systems.

The Potitiwl Culture and the honanny

The political a l m r e in the more traditional parts of the Argentine interior is characterized by personalism, authoritarianism,fatalism, individualism, and dependency. This set of values poses obvious obstades to emnomic progress. Eanomic development thrives where ecanomk actors have a sense of their own effiwq and ability to shape their environment, where people are willing and able to take charge of their own lives and not just see what fate brings them, and where people trust the institutional matrix of their society to respond reliably and ratianalv. The poverty of the rural poor and the political system that thrives on that poverty enmurage, on the other hand, people who are pawerless, fatatistic, and distrustful of formal instiations. In most of the interior where traditional political systems persist, political relationships are highly penonal, supporting the perception that what is inprtant is whom you know and not what you do and that the formal institutions of society are ineffective (Vessuri 1973, 45). In same situations, ewnamic progress has flourished where a sense of community and solidarity contributes to the success of muicual astjistance efforts, bat the individualism of the czrfture of poverty diswurages this m m rnunal cooperation, The few horimntal assoeiatitre structures that do form at the grass-roots level rare@meet with much sumss and eannot seme ;is effective channels for exlpressing political demands. l%e failure of these group efforts reinforces the individualism and fatalism of the poor. The patron or provincial politician is hardly more Iikefy to hemme a modern, prawessive capitalist than is the impoverished minr'find&ta. The personalistie political cultr;rre encourages rent-seeking behavior and eormption. The mirror imag of the client's humility lis the patron's arrogance. The habit of command and the deference of the powerless breed authoritarian arrogance and earnervatism. The rich and powerhit profit from the system as it is; economic development could easily undermine their position. The personal namre of political relationships confirms the belief of the powerful, just as it does for the poor, that what is important is whom you how. me ~ulmreoE poverq thus has potent effeas not just on the poor and powerless but on the wealthy and powerful as well. Personalism and authoritarianism in the political culture of the interior do not encourage positive: attimdes toward democracy, Survey research confirms that confidence in democracy is weaker in the interior of Argentina, especially *ere economic conditions have deteriorated sharply in reeent years, and within the lawer socioeconomicstrata generally (that is dispxoportionatety mmposed of people who live in the interior or recently migrated h m the interior (Tirano 1979,213,241; CIadn, rJovember 29,1992, p. 13). Chapter 10 will argue that the lack of democracy in Argentina has discouraged economic progress in the nation as a whole,

The PoIitiaX System and the konomy

Not only is the political culmre in the more traditional parts of the interior unsupportive of economic development, the political system poses its own set of obacles to eeanomic progress, In reent years, an extensive d for economic progress to take place, there b d y of literaare has a r ~ that must be a sthle set of property rights in which effart in the economic sphere is systematically and reliably rewarded.'@ Investment is encouraged if potential investors know that they are likeb to be rewarded for their i~estment.People work harder if.there is a reamnabe likelihoad that their extra effart will be appropriatelyremunerated. Greater reliability with which a system rewards praduerive effort promotes greater productive effart. The more predidable are the rewards and the more closely t h y wrrespond to the degree of effort made, the better the system af property ri&ts encourages produaive effort. W a t is common to politieai systems based on dientelism, paronage, or some blend of the Wo is the use of particularistic material rewards to motivate public officials or voters, or what is commonly called corruption." fn contrast, voters whose allegiances are to communify or class and have a medium- or long-nxn perspective respond to legislation that provides cate@ r i d benefits, n e y find that organizing interest p u p s to pressure the legislative process can be effective. Nevertheless, it is difficult to legislate parlic-ticutaristic rewards. If what you want is a government job for your son, then lobbying the legidamre for a new law will probably not help, Asking your patron or local party hack may, however, bring results, W e r e cormption flcrurishes, the system of property rigPIts does not effectively promote productive effort.= Investing wisely or labring diligently is all tcla often not as we11 rewarded as making the right aquaintances in positions of power and bribing them with money or palitical support. If roo many bureaucrats have the abiliv to deny government senriees (m& as a permit to build a factory or import machinery), the total wst of all the necessary bribes may be prohibitive. The activity is either halted by the might of wrruption or goes undergrround. Xn the inEormal sector, the enterprise may remain too small to take advantage of scale economies in order to avoid notiw by the authorities or may underinvest in fixed capital that muld be seized iby the authorities.. The personalism of golitid systems built on dientelism and patronage encourages unprodu~rivebehavior in other ways as well, The system atliocates rwards 'based an whom you know and who ycru are, not what you do. A patron nay find it easier to enhance his or her power and inmme not by daing things that raise the efficiency of the local eanomy but instead by activities such as acquiring mare clients, undermining the pswer of existing clients, and cultivating relations with the politically powerfiaf. Providing honest and efficient governance does little to enhance the power and income

176

The Politics of Backwardness

of a politician in a patronage system. Alternatively, giving as many jobs as possible to political supporters or trying to change the juridical and regulatory environment in a way that benefits oneself or one's associates may be far more attractive. Clientelism and patronage have yet another disadvantage: They produce instability in the economic system. A client may gain if his or her patron finds favor with the political apparatus. If the political machine that has been giving one patronage is suddenly removed from power, then one's patronage is lost. Whether one gains or loses depends on who is in power and not on one's individual effort. Thus, the connection between effort and reward is weak and unreliable. What happened in BelCn, a departmental capital in western Catamarca, illustrates this principle well (Hermitte and HerrLn 1977, 251-252). For a brief period, a resident of Bel6n was governor of the province. While in office, he directed resources to his hometown to build the infrastructure that the town had lacked. Improvements in the piped water and electricity networks and a bridge over the river were constructed. Workers began to pave the highway that ran through the town. When the paving project was half done, the governor was voted out of office. With the road only half paved, the paving machinery was taken away to improve a road in the home district of the new governor. The town's brief glimpse of prosperity was over. Some years later, another Belenista was elected governor and the paving job was completed, a dike was built along the river, and improvements in other roads, street lights, and schools were built. This sort of favoritism was not generally viewed as scandalous--it was merely how the game was played. If the politicians did not grant their supporters substantial material rewards, they would immediately lose the support and respect of those who had expected to benefit. Excessive electoral competition, in Catamarca as in other countries where machine politics existed (including the United States), produces political leaders with a short-run orientation. This increases the level of corruption, therefore, and heightens the irrationality and instability in the allocation of the state's resources (Scott 1969a, 338). The alternation of feast and famine did not serve any of the districts of Catamarca well. Without any sort of long-range thinking, let alone comprehensive planning, much of the spending was simply wasted. Political systems built on clientelism or patronage are unlikely to have government personnel who are as competent or dedicated as those who work for a government where hiring, promotion, or firing is based on merit (Calvert and Calvert 1989, 133). People are more likely to be given a job not based on how effective they might be in that position but as a reward for political support. A government filled with incompetents or a bureaucracy composed of sinecures is unlikely to be very effective at anything beyond perpetuating its own rule. Chapter 11 presents evidence that the provincial

governments in the interior of Argentina are less Llompetent than those on the pampa, b t l y , a government based on ctientelism or patrsnage has an insatiable demand for funds beause politicians maintain their power only by gving material rewards to their supporters. One is nat elected by promising the electoratea stable economic environment framework in. which hard work and mrehlt investment will be ultimately rewarded. One is eleaed by promising to give someone's nephm a job. A political machine thus micatfy runs budgt deficits in an attempt to buy suppart (Darctnila 1985,213-115). The macro-emnomy in which it operates is consequent&fraughtwith inQationary pressures. In summary, pditical systems based on elientelism and patronage encourage rent-seeking behavior in general and wrmptian in particular. They faster instability in the system of property ri&ts and therefare dimurilge productive investment and labor and lead to inefficient pvernance, mey generate a government of sinewes where nepotism is the norm and mefit-based hin'ng and parnotion are the: exception. mey encouragebudget deficits and inflation. Lwtly, they discourage democratic farms of governance, the ecanornic wst of which wiflt be emmined in Chapter 10, All of this contributes to ecammic stagnation and inflation,

This chapter has anawed the political dimension of the culmre of paverty. Pet-sonalism, authoritarianism,fatalism, individualism,and antipathy to demoera~ycharacterize the political culmre af the more traditional parts of the kgentine inten'or. This political culmre finds its evresfion in a ptolitical system based on patron-client relations and patronage systems, neither of which is conducive to the process of economic development. In short, the political stmcmres in most of the hgentine: interiol; erected on the foundation of poverty and inequalily;are important obstacles to emnomic progxess, Mates 1, During the 1950s, many potitieal scientists took an h k r e s t in poliried culture. d &am two different p i n t s of view in the 1%Os and 1970s. "I%e am-Mamkt and dependency s h w l s MW the analysis of p a l i t i d euItuw as merely propagmda or rationalization, The publie choim thmris& dismimd the impamaw of palitical. culture since they aaumed that palitiml behavior was motivated by shortand dependenq theory was run felt-interest. By the If)EZOs,the inf;lut=nceof M a ~ s m waning; public cbaim theorists broadened their m p by including iastitutians flaw, rules, ideas, beliefs, imd values) in their analysis. Both of these develapmen.ts have spurned a reawdening of interest in political cuItul"l: (AImond 1993, k-xi), 2. For =ample, 0ttenbet.g 1973, chaps. 2, 4; FilloE 1961; Kamij 1988, esp. 109;

Weil 194, chap. 3; Crameller 1987, esp. 2,94; alveft and alvert 1989; Chalmers 1977, @P@ and Rugiera 1%8, chap, 4, 3. This eharaaedtion, as I have pointed out, has ai lang hispory in Argentina, gokg back to Samiento (1868) and Alberdi (lB4 f18521) h the mid-nhewenth cenmv. Many authors have a a p t e d some variant of tMs vim, For exampb, we T. Di Tefla 1%4,13-16; Alexander 1951,8-11; Gemmi 1980b, 103-llS; arkpatfick 1971,33; Madserx and Snow 1993,48,95; I". Smith 1f)80a, 1138Qb;f-fobsbaunr 1967, 61; fjttb 1975, 164, 170; and M u ~ and s Partantiera 1974, 73E Two efforts to memre poIitial attitudw in the interlar vemus the pampas are Tzano 1979, 213, 241; a d Ckdn, November 29,11292, p. 13. Furthemore, this charadekation of the traditional pgtical wltwe is widely ampted as an approp~abde&ption of mral Latin b e d - ( s e , for exmple, Zymelman 1963,3&%3Ci4;and f. M o d s 1%5, 30&311). It mwt be noted that few of the= authors (or those d@d h the preGous no&) used ystematic resarch methodologes such as wmey rewareh to nature of &gentinaVs plitiml culture. T%eir awrtions must be judgments infomed by a broad sequaintanw with the p l i q and oountry and until mnfimed by carefir1 rewareh should be treated with mme aution, The following anabsis builds on their awrtions and therefore must also be deemed tentative. This chapter is intended to stimulate firrther rese=archoa the subject. 4, VVoXf 1956a, 1956b; and MinfZ: 11156. For a historical survey of this fiteratuw, see Stnckon and Greenfield l972,2ff";and Se-ott 1977. 5, See es@ally, Veauri. 1972, 1973, and 1977; Archetti 1972 and 1979; Arehetti md Stdlen 1973, 19744,1975, and 1977; Hermitte 1972a and 1972b; Hermitte and Eerrhn 1977,1970; and Stdckon 1977, 1972. T'he latter two studies by StGckon are a1 organization and technaXo~ of elientelism on pampan mcancias. Sinoe the that preva2ed, at leag until rently, an the cattle esfanckg of the pampas was more ierrtelor less the same as now prevails in. the interior, there can be little ism work the same way on the m u n c h of the hterior. Mast of hau* esfaathe interior is, of m u m , dwated to a t t e h , In additbn to the= studies aE contemprary cgentelism, higorians have ana@ed ~EenteEisticpolitical procews in turn-of-theentv Argentina (GaElo 1986, 380; and Potter 1981, 1979). 6, In some parts of the world, laws restriaing physical mobility have contributed to this imlatioai, but such taw no longer exist in Argentina. Xn the nineteenth mntuq, the gauchss of the pampas, for example, were forbidden by law from leaving their department (munv), and this was the crime for which they were mast &equentXy promated (Slatta 1980, 14%1Sf), hnisbment w s mnmiption into the amy fo fight the Indians. In the first hag of the Wentiefh wntuv, Indians in the eastern a a m wuEd not legafly leave the area and were thus restriaed to looGng for work in the re@on. 7, Arehetti and StQlen 1975, 215; Vesuri 1973, 2&29, 45; and Hemitte and H e d n 1977,242,247. 8. EIemitte and Herr8xl 1977,298. T'he appwent pemanence of the rural p o r t s indebtedness is proprly t&en as a measure af their dependenm on thaw with more weagth, but it is important to realhe that the pmr may have a strong interes in remaining indebted (Hermitte 1972b, 273). If the debt were complete& paid off, the client would no longer have the leverage atter the patron that the debt implies and

end the relationship, Payhg a smdl amount T very well ch whenever possible, but never the entke loan, is thus p~ of the p r m a of num&g the patran~Eentrelation. 9, ford 1977,9&102; Sabalh and Rebaraai 11982,156,162; aatd T4dm de PlaoiGwclbn 1974,35. Wteford (1977, 110%103) m&es this arpment, We a h found that h was for the cxrntradar to hold the national identity documents of his migrant In kgenthrra at the time, one was r e q ~ r e dto such a d w m e n t at all n d e h g the dmment w s clem& an act of pladng oneslf in the *wardship of mother. 11. I I e ~ E and e H e n h 1977, W ,and 1970, 306ff; and Archetti and St6bn 1975,215, IIy f y t t and KerbEet 1977, 426; Kette&g 19@, 41M21; and b n d 6 Ti977, %-N. 13. %%.is has rmstXy happned, far exampb, in the Philippines (McBeth 1991; Ti@ao 1992). 14.. Waldnnan 1981, 186; and Fienup, fitramon, md Fender 15)"72,chap. 7, 15, Potter 11381,1979;Rwk 197Sa, 1975b, 1972; Smith 1974,1969b; and C d o anid Sigd I%S. 16, For a contrary view, M aalmefs 1977, 401ff. He arpes that pemnalistic atic p l i t i a charam* all Latin American pgties, whatever their level of development* that it is a cultural trait inhed&d gam their Medire;nanean bacbround and not a hnaioa of the level of emnomic and political development. 17, Politid d e n t i m have f m w d on national p G t i a and ipared provhdal gwemanw in Argentha, My cbaradekation of the politieail q a e m of the interior b tbus not b w d an academic studies of provindat governments, Instead it is based oa two sorts of fnfomation. First, 1 have foliwed the daily pres in Argentina for ans, and aeadennmany yeam md wave i s &am the iotedar, that have genera ated clienteEmm and mac%nes in raa e similar to those that prwail in the btedor of Argentina. Without any basis for believing that Argentina is an exaption to the patterns found in s ~ E a cirwmaangs r el%where, one is enmraged in the view presated here, n i s is an area that clearly warrants Eurther research, 18, A complete &tatation of this literature would have hundreds of entfies, so only a very few work will be mentioned. A =mina1 illark is that of Egertwn (19W), who explains haul the inesrpoxatian of tranmaian msts modifies ewnoaoia. Brewer has an, interesting analysis of how traditional refations retard agfiwlturd progres h the 'l%ird World, Narth has ineczvrated the nation of t r a n ~ a i o nm&into a general tfieory of economic histag. 19. -tt 15177,495. The h u e here is not moral but analpial. Xt may be u ~ h f to p i n t out that; in the hdustfialhd m u n t ~ e sa mntury or mare ago, what we now d arruption was ubiquitous ( m t t I96%la,315-317). 119, Some anaiysts have arped that eomption may have a positive impaa on emnomic p m b since it work as a p i a rate far government vvorkers and enables entrepreneurs to werwme governmental replations, If, as wme have arwed, the raisan d2tre of much realation is the p a i b i l i ~of comption, then the armment

bewmes Cirwlar. At any rate, mast dudies ccrncfude that mrruption is antitktical ts economic development (Shleifer and Vishny 1993, 600).

The Backward Interior and the Argentine Nation

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Prologue to Part Four The continuing crisis of the economies of Argentina's interior imposes guhtantial eosts upon the entire muntry and is one of the important reawns for the mtiads failure to maintain the momentum of growth establish4 in the first part of the twentieth century. The purpose of this prologue is to sketch a few examples of the costs that the interior's backwardness imposes on the country as a whole. Chapters 10 and 11 will treat two particular isues in Feater depth, hlliptiam Eo the: Pampas

Traditionally, the interior of Argentina has exported its demographic surplus to the pampas, though the slow growth of the pampean eeonomy in the last two decades has led to a decline in this internal migation. Ch;tpter 8 discussed the effects of this migration on the interior. From the point of view of the are= that have received these immigrants, mostly the pampas, and in particular the suburbs of Buenos Aires, the new additions have been a m h d blessing. They swelled the labor force required in the early stages of industriali;?atiarr. Bemeen 1930 and IW, kgentina's leap into impart subtilution industrializationwould have been impossiblewithout the transfer of a vast demographic resource to the pampas. Then the pace of industrialization slowed and its character hanged, requiring workers with more education and skills. Migration from the interior began to impose substantial costs on an economy that could no longer absorb waves of migrants from the hinterland. In the late 194@, the first villas misek, or shantyrowns, began appearing in Buenos Aires, a sign that the housing market could not effectively respond to the immigrants' needs and that the new arrivals did not receive salaries that would allow them to obtain standard housing. In the l%&, mushroomed. Urban growth spilled over the city limits of the federal apital and into the suburbs, which until then had been the bumlie Iowtion of cattle emneks and weekend homes for the well-to-do. l%is created a vast belt of villas and dums that now hold miflions of people. Most of the poorest of these were born in an interior province but were expelled from their birthplace by its faltering economy. For example, of the

5.3 minicm people who lived in the suburbs of Buenss Aires in 1970 (when mipation from the interior peaked), half were native to the interior of Asgentina (derived from SIMA 1975, 4243). At present, the number of people from the interior living in the suburbs of Buenos Aires is probably not very different from what it was in 3970, although their proportion of the population has declined.' Furthermore, many of those born in the suburbs of Buenos &res had parents who were native to interior provinces. Since the migrants from the interior are the poorest of the poor, the majority of dla dwellers are from the interior or have parents from the interior. The economic exiles from the interior live in great poverty in pampean v i l k . A family makes their one- or huo-room shack from scraps of metal, wood, cardboard, and cloth. The muddy spaees that sceparate their hovel fiom the n e s are piled with garbage and feces. They mok their food on an open fire in the corner of a room. Their one meal a day is only bread, pasta, and yerba mate, Their wretrched housing and malnutrition produce injuly, disease, and death. Their children drop out of school because they have ta get a job, mind their younpr siblings, tend their own children, or have no place to do their homework. Alcoholism, drug use, unemployment, domestic violence, and sexual abuse are rife. Crime is rampant. As everywhere, most crime bred by poverty is committed against the poor, n e r e are some ~ l k where s almost all of the residents earry guns to protect themsehes. The industrious and lucky can rise a step or two above this on the economic ladder, T%ey have made their own &elting, but it is eonstaucted of bricks. Perhaps the floor is cancrete instead of dirt. They may have a well on their tiny property, but virtually never a sewer hookup. One or more family membem may have a replar job, althaugPl they must stand on a packed bus for an hour or two to get to it. A rain storm turns the streets in their neighborhood into a quagmire, and then they cannot get to work. The litany of ills caused by rural-urban migration of large numbers of poor people is too well known to merit detailed discussion. From Chicago to Calwtta, from Los Angeles to Lima, the congestion, social disorganization, cntme, and environmental degradation wused by this human defuge are now familiar. Public services (hospitals, schools, transportation) are overwhelmed by the tide, but the poor immigrants cannot pay the t a e s that would allow these services to expand in step with the demand, Ruenos Aires and other pampean cities have been similarity blessed and cursed by rural to urban nigation rhat exceeds absorgtive capacity. Social Disorder and Milihry Repression

h o t h e r ewmple of the externai costs of the interior" sachardness b m e by the eountry ~LSa whole has to do with social unrest and civil disturbrtnce* Tueumitn is one of the provinces of the interior in which soda8

inequalities are the most profound. Moreover, its economy began deteriorating earlier than in most other parts of the interior, and when the economic crisis came, its onset was far more precipitous than elsewhere. The sugar market on which the province was uniquely dependent faltered in the and then wllapsed in the latter part of the deade, producing enormous eeonomic and mcial disl tions. It is no awident, then, that Argentina's first and only guerrilla war occurred in Tuclumhn. Althou&h a variety of terrorist groups robbed banks, kidnaped expatriate executives, and bombed political party offices in many parts of the country from the late to the late 1970s, only in Tucumhn was there a true merrilla army, and only in TueumBn was there a true guerrilla war. When the military took over the government in 1976, they exercised a campaign of terror that left many thausands tortured and summaxily executed, the des~p~reckios. Ts justifjr their use of such athiess measures, the military portrayed themselves as the underdogs in a war against subversion that they labeled la pema suck, the dirty war. Of eourse, it was only a war in Turmnzdn, and even there, no rnare than a few hundred cadres were at any time involved. That miniamre war, however, helped produce the mind set that justified the militaly's brutality. It provided the cover, the rationale given to the public, for the militaly's reign of terror. The backwardness of the interior (in this instance, TucumAn), its poverty, inequality,and economic sta~ation,produced social disorder that in turn strengthened generalized barbarism throuaout the a u n t y . Epidemic Disease

Yet another example of haw the bacbardness of the interior imposes important costs on the entire nation has to do with public health (Stillwaggon forthcoming chap. 6). As in many other mantries in Latin America, cholera has recently plaped k ~ n t i n a ,In $m, there were SS3 reported cwes, and in the following year 2,982. In the first ~o and one half manths of 1994, there were 815 cases. The number of caes has been only a fraction of those in the hardest hit countries, such as Peru, but hgentina is holding its collective breath, waiting to see if a wide-ranging epidemic breaks out. ]in the first two years of the eholera epidemic in Argentina, there was only a handhl of cases of the disease appearing in the central provinces. All! of the other cases and all of the mare than Eifry dea:ths have o w n e d along the northern border with Bolivia and Parapay, in Jujuy, Salta, and Formosa. This region is the poorest in the countty. Most of those stricken have been Indians who were until recent& huntem and gatherers, They b m m e ill after eating raw fish taken from streams that flowed from Bolivia. There are no piped water or sewer systems in the region. Most of the victims lived in J u j y or Salta, provinces with substantia't wealth that is highly concentrated in the hands of a few families. n o s e with the power to decide chose not to

extend the benefits of piped water and sewage systems to the* areas men after cholera broke: out in Peru and began its spread acros the continent. Cholera is a disease of poverty. Lack of sewen produces contaminated water; the Jack of dean water for drinking or washing is the primary ecological mndition permitting cholera to flourish. Moreover, if the patient gets to medial care soon after the onset of qmptoms, the disease: is almost never fatal except to those weakened by another disease or malnutrition. Virtually none of those in the middle and upper clwes who have ready to medid care die of the diseae, Lt is yet another curse that the poor, many of whom do not have access to medid care, must bear. mus, the pave* and underdevelopment in the far north of Argentina produce the conditions that will allow cholera to become endemic, Gholera, is not just a problem Eor the interior. kgentina is one country, and cholera in the north threatens the entire nation. Especially worriwme is the rapid growth of cholera cases in the city and province of Buenos Aires. Xn the first year of the epidemic, there were only six cases there. In 1992, there were thirteen mes, but in the first two and one half months of 1994, there were thirty-two cases? If cholera ever takes hold in the major cities of the pampas, the results could be devastating. In the suburbs of h e n o s Aires, where seven million people live, roualy half have neither piped water nor sewers (Stillwason forthcoming, &apt. 5). Most of the wens draw from contaminated ground water or aquifers. The water treatment plant that offers piped water to the minority k ancient and poorly maintained. The loss af life, the abenee from work of the sick, the medial elcpenses of treating the disease, the costs of preventive measures, and the collapse in Argentine eqorts (the wuntryfsfood eqorts were embargoed by the European Communirgr and could be again) could spell disilster for the national emnomy. Gholera is just one of the diseases that are spreading from the interior to the pampas, brought there by the cctntinuous movemienf of peopte between the chronically poor rural areas of the interior and the vitlrrs mheniz of the pampean cities. Chagast disease, for example, is incurable, debilitating and often fatal, and in some provinces afflicts a quarter of the population. The disease: vector is an insect infested with a ertain paraisite, In the last two decades, the disease has spread from the interior to all provinces of Argentina. Most alarming are the new cases recently found in suburban viths of 'Buenos Aires, Chagast disease is a disease of poverty, afflicting those who dwell in the suhtandard housing *ere the insect thrRes (Stilfwaggon forthwrning, cchapt. 4). The dkeast: is endemic in many parts of the interior, but until nou, the pampas have been spared this curse. The poverty of the interior, therefore, threatens to impose enormous costs on the muntry if epidemic or endemic diseases spread to the major pampean cities, m e neH tuto dapters will emmine in some derail two different ways in which the intelior imposes msts upon all Atpntines. First, we examine

b w the Ibachard political euftrure of the interiar affects the workings; of the national government. The subsequent chapter analpes the fiscal drain o n the federal govemnentts budget and consequently on the more developed part of the Gauntry that pays most of the t a e s , the pampais,

1. Ia 1991, there were 2.7 ~IXionresiden% of the suburbs of Buenm hio were k m in other third af the ppulat ~ data that indiate the pmpdion the hwdor, bM the mnws did not o o B the (INDEC 5992,58). Xn the city of Buenw &es and its suburbs, 83 p r a r i t of the r a n t g m h h the p h e age ppulatioa (aged Wenq to m - n h e ) was kom h ~ g a t i o n(Slm,42). As one iadieation of the corn the h@dorhthe slum of Buenw &eh at r m n t sunrey found that in one villa mke&, SS p r w n t of the beads of houeholds were born h the h k r i o r ( a n t r a de Salud NRB 21, f 992, 3). 1s anotfxer neighborhmd in the suburbs of the city, 54 p r m n t were born in tbe intedar (aeaya 1985, 134). 2. IndicaBom m c ~ I ~ - e c o & m i No, e ~ ~I6, (March 2994): 139.

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The Political Costs of the Interior's Backwardness We have already examined the ways in which the poverty and inequality of the interior affect the political culture there and how this shapes the politicit] systems of the traditional parts of the interior in a w y t h t poses obstacles ta the regiantseconomic development. This chapter emmines haw the backward political mtture of the interior presents obstacles to the ewnomic development of the county as a whole.

The Paweflu1 Im terior ?"heeonventianal view of h p n t i n e poUtia is that, as the wol, beef, and pain exports Erom the p a q a s surged in the later part of the nineteenth century, sa did the political power of the pampean ago-exporters, They were Ied by the wealthy landowners in caneert with allied industrial fprocessing of agricuI~ralproduets of the pampas) and mmmercial (marketing those products) interests.' Since the early part of this cenhlry, it is commonly believed, the pampas have ran the country virtually unchallenged by other interests; the national government became federal only in form, not in content. From the mid-twentieth century, the agra-exportem hqve had to make room at the bargaining table far pampean incJIustrialistsand workers, but this km transformed rather than ended pamp"ean dominance, ConventionaX m u n t s oc~asisnaflymention the "traditional elites of the interior*in a way that dismisses their importance just as the poverty of the interior is depreciated by the phrase "pockets of poverty." The role that the interior's popular political groupings play in the national political arena is likewise overlooked. Not only do studies of the national economy ignore the emnomy of the interior, but studies af the national politkal system ignore the polity of the interior as welI, The thesis of this chapter, on the other hand, is that the interior has wielded in the past and continues to wield in the present considerable influ-

ence in the national politicat1 arena despite the small size of its ewnomy cornpared with the pampean emnomy, Nthougfr the pampean elite is now, without a doubt, the single most powerhl grouping in the cauntry, it has been frequent&forced to make important concessions to elite and popular political pressure from the interior. In addition, millions of people left the interior-tafing their political culmre with them-and moved to the pampas, where they became voters. The elites of the interior sent many of their numbers to play important roles in the national government; t Z l q also brou@t with them political attitudes, sqles, and habits of thought and behavior that had been bred in the traditional social and political systems of the interior, Taken together, all of this has had a profound inopwt on the kgentine nation. The fin%step in the argument is to show that, c a n t r q to the conventional belief, the interior wields cansiderable political power at the nationd level, One measure of this power is the interior" disproportionateshare of the nation's resources, transfened by means of the politicaf system, that is documented in Chapter 11, It will be shown that the interiar exercises pawer over the country in three different ways, First, politicians from the interior o m p y many prominent and powerful posts in the national government. Second, the imerior dominates or at least exercises veto power in important political fora suGh as the Congress. n i r d , the interior plays prominent or even cnrciaf roles in national political millitions or parties. In fact, none of these factors taken either individually or callectively can prove that the interior has political power. Wha really has the pawer in any given pofitiaf system is virmaIly never transparent. This fact, of eourse, ex,plains the existence of the academic discipline, political science. The object af the following pages is not to prove emetly how much power the interior has, but merejy to marshal1 evidence in a way that cats doubt on the conventional belief of pampean omnipotense, The l&erbr and &e Park Barrel

If it can be shown that the interior of Argentina is receiving more than its "fair share" of resources from the national economy, we have evidence that suggests the disproportionateinfluence of the interiar over the national political system. Part Two showed that most of the impartant agrimlhlrali products of the interior have been sold (until the recent liberalization) in pratected domestic markets, The majority of the population of Argentina lives in the pampean provinces, and an even larger share of the nation's purchasing power is found there. When the cansumer pays a premium for a domestically produced product because the foreign competitor is kept out of the market by a tariff or some other trade barrier, the consumer is, in effect, subsidizing the producer, Trade barriers on goods that compete with the interior" aagrialtural products thus produce a transfer of ineome from

the consumer, largely pampean, to the producers of the interior, By way of eontrw, for mu& of the last half-century, the agricultural products of the pampas have been subject to substantial export t m s or discriminatory exchange rates, which amount to the same thing. These have the opposite eff;eaof the trade barriem enjoyed by the interior. Argentina's system of trade protection is biased in favor of the interior. If the proceeds of the duties on foreign trade were retained on the pampas, that would compensate for the benefits to the interior that the trade protection offers. On the contrary, Chapter 11will document the vely substantial redistribution of tax revenues from the pampean economy to the interior-at least in the last quarter centuq-W the federal government. Trade protection redistributes resources from the pampas to the interior, and the federal budget reinforces that redistribution instead of offsetting it. n e s e benefits won by the interior Erom the national gavernment do not, of course, prove that the interior is politically powerful, since the pampean political groups may have an independent interest in diverting resources to the interior, The national government may have realized, for emmple, that there are important costs (such as threats to public health or political stability) imposed on the pampas by the backwardness of the interior's emnomies. I suspect, however, that concern over these eosts plays a much smaller role than geopolitical considerations, Mal is conventional& -.fled the interior of AFge~inais really the e~erior,since It insulates the pampas froxn neighbring countries. Stimulating economic development along these borders may, from the national or pampean point of view, be simply good military defense? Fear of military attack from land-hungry neighbors has an extended history in Argentina. The: muntq fought a long and bloody war with Paraguay, has several times been on the brink of war with Chile (most recently in the fate 19"7 and early 19W), and at feast until very recently has hared the giant to the north, Brdl. The belief that Chileans, who outnumber kgentines in Patagonia, pose a growing territorial threat is eornmonplace. Geopolitical considerations have spurred an intense interest in the country's border regions. It is mmmonly aecepted that this motivated the enormous subsidies &en to Patagonia in the last tu7enty years. The last military government stoked nationalism to a peak and then passed a law giving substantial subsidies to mining activities, virtually all of which have benefited the interior, An eqlicit objective of the law was to fament emnomie actkity in the: border areas (Artana 2991a, 122). The military also initiated development projects along the border with Paraguay in Eormosa and Misiones, prctvinces habitually negected by the national pvernment. On the border with blivia, the provinces of Salta and Jujuy received cansiderable infrastructural development, Catamarca on the barder with Chile received a Iuerative industrial development program, Tkis spending surely m l d not have been out of mncern for the mraf poor since the military

government pursued brutally regessive policies in other, less strategic parts of the interior, Subsidies to the interior gew under Mfonsin. Moreover, his plan to transfer the national capital to Batagonia adhessed prineipafly geopolitid concerns (the continuing friction with Britain aver the mlklands and worries over milean intmshn into Patagonia) rather than internal political presmres. Beyond any direct military threat, hawever, is hgentinak sense of territorialdestiny, Politicians and citizens alike view the: provinces of the interior cts inseparable parts of the kgentine nation. In the popular imagination, Argentina did not begin as a canfederation of independent states but is rather the direct dewendant af the Viceroyalty of the Rio de fa Plata (although unjustifiably shorn of its provinces of Uruguay, Paraguay, and Chile). The belief that Argentina has lost large parts of its territory to nei@hring caunt~esproduces a fear that still more land mufd be lost and a fierce determination to protect what is left (Escutdi: 1987, 19SSa). This sense of territorial unity that pewades hgentine nationalism is surely a part of what gjves the interior its leverage over the federal fisc, Nevertheless, the benefits showered upan the interior by the natiand pvernment have not p n e just to barder regions but are spread throughout the interior, The pravinm that arguabiy received the most federal larwss in the last decade is San Luis, whiGh is not a txlrder province. The conelusion that the interior's disproportionate benefits from the federal government reflects in part its disproportionate political strength is difficult to avoid.

Another way to demonstrate the power of the interior is to point to the many important political fipres of the national government who have come from the interior* Until the ear& 19@, most of the presidents of the republie were natives of the interior. The first president of a united hgentina was from Buenos Aires, but his suGeessor was Dorningo Sarmiento from San Juan, Nc was followed in office by Nicolhs Avellaneda and JuXio Roea, both fmm T u r n a n . Ram had led the army that finally suppresed the re&onal and the Campaign of the warlords in La Rlaja and Catamarm in the 1 Desert that suppressed the panpean Indians in the 1870s. He mmpletely dominated the nexl: quarter century of Argentine political life, serving two terms himsdf and designating his successor. By 1m4, Roca found himself m longer able to dictate presidential succession, The new president, fos& Figueroa Alcarta firmly curbed Rocab powers. When protests by sensors and deputies from the interior mounted, Figueroa Alcorta simpty shut the Congres down for a year. The political influence of the interior was clearly waning. Politial figures from the interior remrned to lead the csuntry after the downfall of Yrigoyen in 1930. Jose F. Utibum, a member of a wealthy

me Poli&icaICosts of Ihe Inter;iofg Backwadmess

f 93

family from Salta with major interests in sugar plantations, led the first suwsshl military mup in kgentina. Uribunr W% soon faflowed by Apstin Justo, son of a fomer governor of arrientes and son-in-law of a former governor of Ria Negro (Potmh IW, 13). Justa wras sumeded by the podefio, Roberto Ortiz, but he man resigned due to illnes in favor of Vice President Rambn Ca;stiIIo, a natSve of etamarca. It was Castillo's plan ta nomin;;tteRobustiano Patrbn Gstas, the owner of the largest sugar plantatisn in Tummlin as his saaessor that finally trisered a military coup in 1943, thus weeping the conservatives of the interior from the presidency (Rock 1985,247). For most of the next half cenfury, the presidency was in the hands of the pampas? The only exceptions were Arturo Frondizi, a Eormer deputy from Grrientes who was president b ~ e e 1958 n and 1962 and Jose Maria Guido, a former senator from Mo Negro who was interim president in 1962 and 1963. Carlo$Menem from La E a j a entered the presidenq in 1989, To find that many (and in the first: eighty years of the republic, mast) of the presidents were not fram the pampean prwinws but from the interior does not by any means imply that the interior W% nrnning the country by itself, (Similarvsa pampean president does not mean that the interior has no power,) Woever is president in Argentina has to reckon with the daminant ecanomic powers, the pampean ago-eqorters, and since the 1Ws, the pampean industrialists and workers as well. Nevertheless, nineteenthwntury po.teiiw dearly viewed presidents horn the interior as a threat, Althaugh Sarmiento, Avelfaneda, and Roca followed liberal emnomie policies similar to those of Mitre, their elections ta the presidency were hotIy contested and ammpanied by violence. nmsands died in the revolt that ammpanied Raw" selection in 1880. During the 1930s, the interior heid on to the presidenq only throu@ the wholesate use of fraud and the proscription of the Uniijn Givia Radical, whose political base was on thr: pampas. The bitterness of these s t m d e s over the presidency ;eugests that po~efios thought they had something to lose by having a president from the interior. i!%e IMerhr and the

If the interior's control of the executive has been broken for long spetts, its eontrol owr the national Congess has been almost cantinuous. The Gongress, of course, is an important political instirution in kgentina since it has, at least in theory, the ultimate responsit>ilityto make the law of the land. Furthermore, it is an important steppingstone ta executive positions in the government, Most of the wuntry's presidents without a military backgau~d came from the Cangress, Moreover, the Gangre= has often served as a springboard for entry into the president's cabinet (P. Srnith 2974, xk, 20).

Each Argentine province has two senators, The pampean core incfuding the federal capital has tj5 perwnt of the country"s population, but only one-sixth of the senators (eight out of forfy-eight). h e n o s Ares Province has almost 40 percent of the countyespopulation and only 4 percent of the senatom, Each core pampean senator represents2.6 million residents on the average, seven or eight times as many people as each senator Erom the Northwest or the Northeat, and over eighteen times as many people as e a ~ h senator from htagonia. In most countn'es where a federal system prevails, the members of the upper house of the national legislature represent provinces or states, not citkens, What distinguishes the Argentine system is the predominance of many provinws in the interior with little population, In Arpntina, the largest jurisdiction has 180 times the gopul&ion of the smallest province, Only one of the eighteen provinces of the interior has more than 10 percent of the population of Buenos Aires Province? Representation in the House of Deputies is in theory proportional to population. Amrding tcr the 1853 canstimtion, the number of deputies assigned to each province was to be adjusted periodical& amrding to the official census. Acmal practice during the semnd half of this century has steadily drifted away from the csnstitutional mandate. The first deparmre frarn proportional representation in the House of Deputies was in the 1W constitution of Perbn, which stipulated that eaeh province have no fewer than two deputies, whatever its population (Porro 1W,181-184). Two years later, nsmting deputies from national territories (all in the interior except La Pampa) reeked the same number of seats as if they were provinces, a l t h w a the wnstitutian made no affowance far congessional representation of territories, Perbnk snstitution was annulled upon his overthrow in 1855, but the Peronist principle of at least two deputies from each prwinw was written into law in 1959, effectivefy amending the 1853 consti~tion.Xn 1972, the lavv was changed w i n , and the minimum number of deputies from each provine was increased to three, Xn addition, the territoly aE Tierra del Faego was given twa voting delegates. (T%e other former territories were by then provinces,) In 1983, ea& provinw received a minimum of five delegates. Presently, only eight of the ei&teen interior provinces have more tfran the minimum five delegates paranteed by law. Table 10.1 shows the representation of each provine in the House of Deputies since the early ~ e n t i e t hcentury. Early in the wntury, each provinee's share of mngtessionat deputies matched its share of the population vey closely. Even as late as 19.60, the interior had 28.4 percent of the populaion of the country and only 30,3 percent of the deputies in the angress, As shown in Table 10.1, the political strength of the interior in the House of Deputies has grown since then. Now, the interior has 31.3 percent of the population but 43.2 percent of the deputies. The pampean eore has 65

TmLE 10.1 Deputies Representing b c h Pravince and the Provincial Population, 191&1891 mvinckl Population

CUP Mendoza Sadl Juan San h i s

7.6 3.8 1.9 1.9

6.2 3.6 1.6 1.0

8.1 3.9 23 1.9

Pa&goa& Neuquen &but s m t a cm MONegro Tiema del Fuega a

Total e l a t i o n bcludes only those Mng in ju~sdiaionswith reprewntation

in the national a n p e s . &mm: Adaped from Poao 19W, 184; XNDEC 1989,11; and data supplied by the Bibfioteea del a n g e s o , Totals may not add due t a rounding.

persent of the population but only 51 percent of the deputies. Patagonia has 4.5 percent of the population and 9.7 percent of the deputies. Each deputy from Tierra del Fuega represents about one-twelfth as many residents as each deputy from the parnpean core* Mendoza is the only interior province whose share of deputies is smaller than its share of the national population. Thus, the interior's political weight in the Hause of Deputies, just as in the Senate, is out of propartion to its population. In April of 194, the electorare of Argentina chose delegates to an assembly Gharged with rewriting the constitution. Representation to this body as even mare skewed than is representation to the Gngess, Buenos fixes Province hdone representative for every 109,W citizens and Tierra del Fuep had one far every 6*W, This disproportianal representatian show the political power of the interior to ehange the rules of the p m e in its favor.

The conventional wisciorn portrays Argentina as a wuntry dominated by its chief executive, who is in turn dominated by the pampean ago-eqorting elite. In this view, the interiar, an$ their representativesin the angress, have little power. The interior's disproportional representatian in the a n gress daes not contravert the notion of the interior's impotence s i n e the exemtivebran& of the government, in the wnventianal view, mns the muntry without bothering too much about what the Qnpess thinks. Evidenw for this paint af view is Wofofd. First, much of the law is made by presidential decree, not mngressional ledslation, The president ean oken ignore the Congess and can make the law as he wishes. Until recently, however, the Cangess had to retroactkely approve emergency decrees. f ewnd, the president has the power to intervene provincial governmen@,that is, throw out whoever is in power, appoint new administrators, and call for new elections. When Congress is in session, the president is legally oMigated to ask its permission to intemene a prctvince, Presidential interventions are often carried out when the &ngress is not in session, or the sitting Gongress simply is not cansulted despiw the law. Interventions of prwincial governments are important to the angress sin= the provincial gcvvernments play an important role in deciding who gets sent to the angress, Nation4 senators are chosen by provincial legiisfahres, not by popular vote, mus, control aver provincial governments means control aver the nation4 Senate ancl veta power over national fegishtion. Furthermore, the provincial pvemments play an important rate in deciding who wilf be deputies to the Congress. Before the Saenz Pefia electoral refarm law of 1912, the governor and his appointees chose the officials who decided who muld vote, who wunted the ballots, and who announced the

results. The government in power rominely rikged elections, The governor thus had enormous influence over the choice of deputies to the National C"ongessbemuse he wuld determinewho the electorate wais. Furthermore?, he csuitd &so overde the electorate by simpliy tearing up ofinding ballots and annauncing the desired electorail outcomes. Since the governor controlled the police, organizing a mob of thugs to prevent the opposition's supporters from voting was easy and common. Voter apathy also worked in the government's favor; typically, no more than 15 percent of those eligible to vote did so (CalIo 2986, 378). The Saenz Pefia reform put the federal judiciary and the army in char@ of bdkzting for the president and repres~ntatiwsto the national government, but the provincial governments continued to supervise elections of officials to provincial office (Potter 1979, 98-100; Rock 1975b, 76). The governor still controls the police, which has "an inordinate influence on the level of violence and fraud in the electoral process" (Potter 1979, 126). The governor also appoints the justices of the peace, who control voter registration. He usually can count on the alle@ance of the chief justice of the Supreme C=ourtand the presiding oEficer of the provindal Iegidature. He normally has the support of focal m;tyors and, if not, ean intervene lacaf governments to produce friendlier officiafs. With sympathetic officials organizing elections, fraud is clearly not ruled out. The gQwrnor can also appeal to the legislature to nullify enough votes to change an election, including elections of deputies to the Congress, and has cansiderablc influence in detemining who is nominated to mn far the national House of Deputies. In short, the 1912 electoral reform did not crimp vely much the pawer of governors to influence ejections held in their jurisdictions. Elections in Santiaga del Etera illustrate hour present-day fraud in the interior is ~arriedwt. Nearly half of those barn in the province live elsewhere. meir names, however, remain on the electoral roles in their natlfve province unles they have gone through the complicated pmcefs of estabtishing official residence in the Iocality to which they have moved, In Santiago del Estero, those who do not come home to vote are %otedwby corrupt officiats (Verbitsky 1993,IW-200). The dead replarlywte in the province 8s well. In this fashion, those in cantrat of the provincial government can pefpetuate their rule. The electoral reform of 1912 instituted universal male suffrage. A condition for the eldstence of a patronage machine is the popular election of officials (Scott 1969b, 1143-1 144). The Saenz Peiia reforms thus generated conditions that ailawed provincial patronage machines to arise at the very time when the Radical government was creating a politifal machine at the national level. Electoral reform reduced but did not end the governors' control over the election machinery, but it also gave them mother pofiticaf weapon-patronage, mus, provincial governorscontinue to have e~raardinary influence in determining the composition of the Mouse of Deputies.

This explains why presidential intervention is such a crucial tool for maintaining eontrol over the national government. T%e Radials used provincial intervention aggressively in their attempt to wrest cantrol of the national government from traditional elites, Vrigoyen intewened twenv times in his fimt tern in office, triple the rate of the previous fifty years. In the nea eight years, there would be fourteen more interventions, virtually all with the blatant political motive of removing conservative governments from power (Potter 1979, 52-54, 101-102, and 1981,100-109). Sine then, interventions have mntinued to be a frequentb used tool in the hands of presidents seeking to consolidate their authority. The government of Carlos Menem had intervened four provinces by 1995, more or less intervened another, and considered intewening several others. This frequent use of presidential intervention is employed by many as evidence of presidential dominance and congressional impotence. (For an example of this point of view, see Dolkart 1975,172.) The facts also suggest another interpretation. Interventions frequentlystir up considerable rancor both in the intervened province and in the Congress. Thus, the president is forced to spend his political capital when he uses the power of intervention. m i s is partialarty tme when the president interveneswithout congressional approval. Yrigoyen, for example, infuriated the opposition with his repeated intewentions, fifteen by pres2ential decree, Afoer his triumphal 1928reelection, his party still did not have control of the Senate. More interventions brought him to the brink of a Senate majority in 1930. Sensing that they were itbut to lose control, the elites of the interior first parafyir;ed angxess and then supported a coup dtCtat? The stalemate that the conservative elits from the interiar praduced in the Oongess and thus in the federal government as a whole ultimately formed an important part of the justification for the military takeover. In short, when the president we3 his power to intervene, he in a sense is also using up his power to influence the political system (Potter 1919, 103). Obviously, if the president did not have the power to intervene, the Congress and the provinces would have a greater share of power, but the possibility of intervention does not mean that they are powerless. The power of the president is, then, often exaggerated.

One way political power can be exercised is by playing an important role in a politiml coaXx'tion or party, IJntil the Saenz P e ~ electoral a rebrm of 1912, all elemralfy sumsshl parties in hgentina were based on a single person. Mass suffrage, however, produced mass political parties, the first two of which were the SoGIalist Party and the Unirjn Ciiriw Radical. Initiafly, the power base of these modern palitieal parties was on the pampas, The Socialist Party was centered almost entirely in the city of Buenos Aires. Originally, the UCR was based in Buenos Ares but later had important

me Political

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IW

pofticaX support. on the rest af the pampm and in Mendoza (Potter 1979, 162). The W C R was organized in all of the provinces and the UCR had a memure of support in the interior. Old-line provindaf conservatives who had changed party labels to get benefits from the national governmentjoined and aften led Radical coalitions. The heart of the part?/in the early years, however, lay an the pampas, The tJGR pumed a number of policieefor example, reducing sugar tariff's and nationalizing petroleum esrwtion-that can hirfy be described as disriminating against the interior (Rock 1975b, 7&77,84; Solberg 197") 115&154), The role of the interior in the UCR had gown considerably by the 295Os. men,as now, each province sent four delegates to the party's national committee. The interiox w a able to use its majoriv in the mmmittee to force the presidentid nomination in 1958 of &mro Erondizi, the Correntine, over Ricardo Balbh, the por~eio(8uenos Aires Ilemld, April 23,1995, p.7). m i s caused a split in the Radical Parry and Frondizi"~faction won the general election, The political strength of the interior thus played a pivotal role in naming the president of the nation, If Argentina's first mass political parties were based principally on the pampas, the same cannot be said of the second generation. From its inception to the present, the interior has been a centrat part of the malition that makes up the Peronist Par@. Wunerous studies have shown that the principal sourt;es of Pemnist support have been not just the working class of the largest industrial cities, but also the mral voters in the Ieast developed parts of the interior: The Peronistts share of the vote has been highest in the least develaped provinces, Similarly, within provinws, Peronist support among defrartmenb correlates inversely with the level of emnomic development, In M6 during Per6nts first campaign for the presidency, he allied t caudiIIos in the interior who in turn gave him the wtes of their clients? Support for Perbn by the rural poor in the interior was also the result of a deliberate strategy on his part. The Peronists "discovered" regional inequality in the 1940s and tried to da something about it (Agulla 1984,46), Per6n lost no spporpuniv fa show his wncern for the interior, or-% his detractors would have it-lost no opportuniv to skillhfly emloit ancient regional resentments (Dolkart 1975,194;Dfaz Alejandro 1970,108). Peronism's popular support in the interior geur as the years passed, fn 1946, Perijn received 23 perGent of his votes from the less developed regions of Argentina (the provinces other than Buenos Aires, Wrdoba, Mendoza, and Santa Fe), In 1%1,30 percent of Peranismtsvotes were from the less developed regions, and by 1973 @he election in whieh Per6n could run), 37 percent (Mora y Ataujo 1980,424). The Peronist vote in 1962 and 1965 alsa showed considerable support in the interior (Miguens 1988,222; Grkpatric)c 1971,169). Enthusiasm for Peronism in the interior reahed a peak in 1973 but has remained high since then (Mora y Araujo f988), Perbn's

support in the interior was not just from the rural paor; many among the elites and middle class supported him as we11.8 The growth in support for the Peronists in the interior was probably not unrelated to the wide array of Peronist programs that benefited the interior. For emmple, in 1946 the federal revenue-sharing prsgram was restructured to redistribute Eunds away from the pampas to the interior, Interior pravinces found that their federal Funds doubled or tripled by this change. The Stamte of PerSn restruelured rdations b e ~ e e nthe rural paor and the wealtfiy landowners, to the latter's detriment. 'ibis had its most dramatic impaet in the interior. Per6nfscanstitutional rebrm gave ears congressional representathn to the interior beyond what the 2853 constitution had offered. Two territories were made into provinces during his presidency and were mlled Presidente f erSn and Eva Per6n (now Chaco and La Panpa). The Between 19M and 1955, the Persnists built thirty-seven hydroelectrieplants, virt-ualh all in the interiar (Rock 1985, 263). The length of the national hi@way nemork in the interior nearly doubled in this decade, Employment in the federal government doubled, and many of those with the new jobs came from the interior. The interior responded to these policies by voting for Peronists, With the return of elemral politics in 2983, the interior continued to ptay a cmcial role in the Peronist Party, The Radicals, whose base is still on the pampas, won the presidency, but only ei&t provincial governments, hcepting Santa Fe,the msre developed provinces supported the Radicals. The Peronists rain best in the poorest and least developed provinces (W, Smith 1989,258). The Peronists lost the inner ring of industrial and suburbs around Buenos Aires, which had reeeived most af the migrants from the interior bemeen 1945 and P970 and which had been the bedrock of Peronist support in earlier years, 'They won, hwever, the omer ring of suburbs, which had rewived later waves of migrants h m the interior (Madsen and Snow 1993,14). With the help of a few small provincial parties, the Beronists gained control of the Senate. From 1987, the Peranists euntrolled both hsuses of Congress fwith the help of smaller provincial parties in the lower house) because of their strength in rhe interior provinces. It W= this politiml power in Gongress that allowed the interior to efiraef: an avalanche of resaurces fram the national gavernment described in detail in Chapter 11 (Rsfman 1992, 20-1 1). Pravincial governments used these resources in narrczww partisan ways to build political mpport for their own machines, therev becarning even more entrenched, Peronists held their first ever presidential primary election in 1888, and the ~o prindpal candidates were h t o n i o Cafiero fxorn Buenas *res Pravince and Carlos Menem from La Rioja. In the early days af the campaign, Menem's sole support among prominent politicians was Ramtin Saadi, the governor of Catamarea and the head of the elan that had ruled the provinee for decades Menem said almost nothing a b u t his program but promised

the voters a remrn to the glory of the p a t , He alm piayed on the antiponefio animosity of the interior. Menem won the primaly with huge majorities in the interior, especially in the western pravinces, and in the outer belt af industrial suburb around Buenos Ajres, which had voted Peronist in 1983;Menern lost in the more developed provines (Madsen and Snow 1993, 142). Ifi the general election, with the emnomy in shambles, the Rzldicals had no & a m af winning. Tfierefore?the politicians aE the interior who had kept Menem's candicacy alive in the early days of the campaign and the voters of the interiar who voted for him in the primav assured that he would become president? Politicat Faifurns and & o n a ~ eSbgnation

The foregoing discwssion has arped that the Argentine interior wields cansiderable power in the national polity. The next step is to emmine how that power has led to political failures and economic crisis of a national. m p e , It will be arped that the political culture of the interior is exported to the pampw, strengthening authoritarian, antidemoeratic, and personalistic attributes of the national political culture. Moreover, the disproportionate political strength of the interior helps to produm the politial gridlock that afflicts the Argentine polity. L shall end with a discussian of the economic msts of atrthoritarian rule that is enwuraged by the antidemocratictendencies of the interior, lirznrira-

from tke IMe&r and P;ol&cal G ~ h r e

W e n private citizens and powerhl politicians alike leave the interior, &ey bring their political crulare with them. The habits of political thinking

and behavior formed in the bacbaird political enviranment in the traditional parts of the interior are not shed when the immigrant from Santiago del Estem votes in Buenos Aires or the politician h m La Rioja senres in the national. government, The immigrants fram the interior of k p n t i n a carry with them a bacbard political culture that has helped to push the national polity in mhoritarian and antidemocratic directions. In this manner, the bachard political culture of the intehar affects the entire national politial process." Many writers in the 1950s and 1960s argued that a large majority of the urban working dass that put Perdn in office had recentfy immigrated from traditionat rural area, Because of their authoritarian personaliy, personalistic approach to politim, and pofitkal ndivetC, they were easily swqed by charismatic appeals from demagogues. n e y had little experience with or tmst in democraq and were willing if not eager to support civilian (and later military) authoritarianism." Germani's ((1980b) forwhf restatement of the orthodox arpment has been strongly criticized by the so-called revisionists.'"~umerous studies

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have shown that it w a not just the urban workiing class that supported Perbn. As noted above, he received cmcial vstes from the working and middle clsses in the provinces of the interior, especiaf Iy in the least developed ones, and from rural workers in general. Moreover, the orthodox claim that a majoriv of the urban workers in 1945 were recent immigrants from the interior is inwrrect; the majority bad immigated from rural areas within the parnpean provinces. Per6nb victory in l%, however, was very narrow. Without the support of bath the ninariw of the urban working cl= r a n t @arrived from the interior and the voters wfio remained in the interior povinws, Perbn would have suffered a cnxshing defeat. "To the extent that the interior can be considered the swing vote, the interior put Percin in office. The bulk of the criticism of the orthodox podtion has foased on what the revisionists see as an artificial or irrelevant distinction k w e e n the old working class (mostly foreign born) and the new working dam (recently arrived rural migrants)." The revisionists assert that the orthodox side appmaGEred the i m e with a political or ideological agenda that encouraged them to exagerace the differencesbeween the old and new working classes, The left wing in the 295Qs and 1 found camfort in the orthodox a r p ment because it eqlained may the faifure of the wrking class to develop the apprvriatt: dass consciousness as predict& by Marx The old working class, they arped, was steeped in European watking-class traditions and was we11 organized, diwiplined, and politically correct. (Nl of this the revisionists deny). Without the franchise, however, they muld not eqress the dissatisfaction with Perdn that they were alleged to have. T%e new working dam had recent@arrived from the bacbard (that is, precapitalist) interior and muld not have been eqected to have the sorrect class c-onsciausness. One eould thus be a leftist and stilt hate the Perdn so irdored by the working-class electorate. The right wing had a stake in the orthodox arwment, too. The nationalist ri@t wing could speak of the enbIIo immigrants, steeped in the traditions of the interior, redeeming the country from the foreim elements that had polluted the pampas with their decadent European culture. The liberal r i e t wing eould a r p e that the rife of Berdn was made possible by the barbarism of the interior that they sr, despised (see Crawley 1984,9%919). In short, the orthodox position was convenient for a variety af political gersuadons. If the orthodox position had politicrat or idealogcal agendits, one might wander whether the revisionists did, too. Most of the Argentine revisionists are on the political left; the bulk of the revisionist onslaugfit came during the 197@, when the Ieft was rethinking its earlier rejection of Peronism. Moreaver, the conservative mainstream may have saught to distance itself from the center-periphery dichotomy employed by Cermani and the dependktas (see Kenworthy 1980, 19).

&thou@ the revisionists see Xittfe difirence beween the old and new working classes, they are much more likely to emphasize the backward political culture of the old working class than to deny the backwardness of the new working class (see, for example, Little 1975,177). The old working class had been mar@naIized from kgentine political life and was politkally unsophisticated. Moreover, many of the foreign migrants who made up the bulk of the old working class came from the more undeveloped and backward parts of Europe, such as hdalucia, Galicia, southern Italy, Poland, and Russia.'' Even if we accept the revisionist assertion that the old and new working classes were similar, Germani's argument-that the personalistic and autharitarian political mlture of the working class encouraged the w r s t tendencies tivithin Peronism-retains its force. Xt is generally msumed in this debate that migrants are assimilated into the urban and presumably modern ~ulmrewjtbin a demde or so (Germani 1980b, 109;Little 1975, 16fi). Within this span, the migrants from the interior supposedly lost their antidemocratic, authoritarian, and personalistic cultural anct psychalogical traits, Working in a twentieth-centuryindustrid establishment in one uf the hemisphere's largest cities, the migrant from the interior is assumed to have quickly accepted the rhythm, pace, and rationality of a modern, market-oriented society. In fact, most of the new migrants, just like most of those in the old working class, labored in family-owned and operated estabfishrnentswith on@a few employees. In the 1930s, the average manufachrring establishment in Argentina had fewer than ~ e l workw ers, and in the IQ& just under fourteen workers, Import stlbstitutian industrialization spawned myriad tiny shops, which pulled the average down to fewer than nine during the 1950s (Diaz AIejandro 1970,539). The social stnrcmre of these tiny skaps were also pemanalistic and authoritarian. Presumably, urban sora"ety outside the workplace was different from rural society, but for most of the working class in Argentina at mid century (for much of the middle class, too), the social environment on the job had important similarities to work in mral areas. This suggests that the acculmration af the migrants omrred more slovvlly than is commonly asumed. This m;ly help explain the continuing weaknessof democraticinstitutions in Argentina. The revisionists focused on the 1946 elmion, where Germani's argument has certain flaws, some of which were mentioned above. Nevertheless, Germani's goal was not to explain a single election. He intended his arguments about the traditional background of Perrin's supporters ta illuminate a movement that dominated Argentine political life for a half cenmry. His mistake was to stress the immigrants from the rural areas to the pampean cities who came before 1946. The great flood of immigrants from the interior, however, began during Perrink first prefil'dency, peaked in the 1960s, and wntinues to the present. As diswssed above, Pemnist dependence on voters in the interior or on reeent migrants from the interior grew substantially between 1946 and 1973 and has remained high since then. If the per-

wnalistic and mthoritarian golitieal mlture of the interior had any effect on Peronist policies, it sure& pew after 19.116.

It was not just the rural poor from the provinces, or even their cousins in the interior" towns and cities, who moved to the pampas; the rich and paweh1 came as well. And they became presidents, senators, deputies, and mbinet ministers. The political culture of the elites h r n the traditional parts af the interior was also authoritarian, germndistic, and antidemocratic. mey were amstomed to political bekavior dominated by rent seeking. They were unamstomed to making progammatic appeals to voters. The politieal cunency with which they were familiar was patranage and corruption, They had a weak committment to demoaacy. It is difficult to believe that the pattieipation of the interior's elites in the national gavernment did not reinforce the worst tendencies in Argentine polities and gavernance, T%ishpothesis abut the effect of the interior's rich on the national politieal system has not received the attention given to the effect of the interior's poor, but it is at least as plausible. The I&hr and Bomrnic Policy

In the early days af the republic, wealthy landwners dominated the emnomy and polity of Argentina, Since the rise of impart substirution industrialization in the 1930s, this class h a had to share powr with industrialists producing for the &me& market (further subdivided beween foreim and kgentine ownership) and the industrial working clas, mese competing power groupings have frequently been unabfe to reach a consensus about eeonomic pofiq. W y cannot the landowners, industrialists, and working dass arrange some form of stable compromise? n e r e have been many attempts to answer this question." What follows is an extension of these eqlanations. As wealthy landawnem, the elires of the inten'or share certain goals with the parnpean oligarchy. Eoremost is the maintenance of their rights in landed property, b d e d elites in all corners of the wrld, including hgentina, typically consider a conservative appraach to governance as the best guaranteeof this. In partimlar, system-threateningchiff lenges such as armed rebeflian or lefti-wing elearaf success are viewed with great: alarm, mis explains in part, for example, the enthusiasm for PerBn among many of the interior's elites (Waisnan 1987, 1 6 1 7 1 ) . His promise was to cuopt the burgeoning working elm,integrate it into the poXitkal system, and thereby frustrate any left-wing attempt to overthrow the system. Similarly, the military government" promise to stamp out revolution and terrorism in 1976 appealed to the conservative etites of both the interior and the pampas.

Tbe elites of the interior and the pampas also h m opposing interests. The pampean ago-exporters thrive best under a liberal trade regme. The

beef, gain, and oil seeds of the pampas can eampete in world markets without any governmental propa The pampean oligarchy thus wants hksez$aire govemanw, 4s Part Two of this book hias amply doamented, agiculture in the interior cannot generally compete in world markets without government sabidies and trade protection, The interior's elites need an activist gwemment willing and able to protect domestic activities from foreign campetition. mus, the interior &ten finds itself at odds with the pampean oligarchy and in league with the industrialists and workers of the pampas, who seek an a~tiverole for the government in the emnomy and a generally protectionist eeonomic r e w e . Per6n"s electoral support h m consernatives in the interior in 1 9 4 is again a p o d example of this point, Beause of Perbn's economic nationalism, the elites of the interior were far more likely to support him than were the elites of the pampas. Just as the isue of economic nationalism #dividesthe efites of the interior from the elites of the pampas, so too does the issue of political nationafism. The interior, far away geographically and emotionally from Europe and the United States, facIng what it perwives to be hostile nei@brs amass the nation's trorders, has generally inabated considerable nationalist sentiment." The prosperity of the pampean elites, in contrast, is based on their mmmerw with other countries, and they tend to have an internationalist polifi~alpevective consistent with their liberal ewmmic ideas. Xn particular, the pampean oligarchy has favored warm relations with England in the early part of this mntury and with the United States more recently, kgentr'ne nationalism, frequentlyverging on xenophobia, has justified diplomatie and ecanomic isolation, military neutralicy ( m during the two world wars), palitical neutrality (as exemplified by the refusd until 1992 to sign any nudear nonproliferation treaty), a belligerent posture towarrl the United States in various international fora, and a fiere defense of what are taken to br: the nation%proper boundaries. This has bmught the country to the brink of war several times, to an actttal war with Great Britain in f 982, and has generated decades of costly economicconflict with the United Sratev (EmdtS, esp. 1983 and 1988a; Tulchin 1W,efiap, 6). The interior's support of natbnafism has encouraged a policy that has impoed substantiaf costs upon Argentina, In short, there is a profaund community of interest between the elites of the pampas and the interior, but on certain important issues, deep differenws separate the landed elites of the two areas, Sometimes the qrarian elites of the w u n q unite and sometimes they do not, This instability in politi~alalignments at the tap of the class structure has been one factor dimura@ng a system of stable class alliances in Afgentinat.

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Jnrerior's Baebardness

We have seen i;o far that the pampean oligarchy is often in fundamental disagreement with its counterpart in the interior. If the elites in the interior were powerless to protect their interests, this lack of canfensus wauld be of little import. As was shown in the first half of this chapter, the interior does have wnsiderable political leverage, and hence differences af opinion between the interior and the pampas can be disruptive. The split between the president, whose actions have to reflect the eeonomic and demogaphic preponderance of the pampa, and the frequentw hostile Congas,which disproportionately represents the interior, is perhaps the most obvious emmple, The split b e ~ e e the n pampas and the interior is only one oE the intractable divisions within AFgentine sclciev, but one that in my judpent h a not received the warranted attention. The impmse generated by these %ndarnentat schisms plays out in several different ways. Perhaps the rnost eommon result of this deadlock is that no policy is intplemented since at least one group has the power to veto any proposal. For emmple, the Pemnist-led Senate rejected most of Alfonsin's attempts to reform the hgentine polit?~and emnomy. Of crucr'al imprtance was his bill to refarm the Iabar movement, which passed the House of Deputies but lost by one vote in the Senate. Unable to make fundamentaf refolrms, his economic programs failed. The eeonornic ctlsts of governmental paralysis in Axgentina are clear. A seeand autwnne of the political impsse is the retreat- from any democratic attempt to reconcile eanflicting interests, Instead, governments have relied on technocratic bureaucrats such as Gieger Vmena under Ongania, Martinez de Hoz during the proceso, or SourrauiEle under Affonsh. Each of them simply rehsed to incsrporaite powerful interest groups into the policy-making process, thereby dooming their respective plans to failure (Mr, Smith 1989, esp. 291fQ. Dorninp Cavallo, architect of Menem's S t h i l i ~ Plan, has perhaps mided this trap, His think tank. (the Fundacibn Mediterrhnea) has established close links between certain seaczrs of the hsines-s community and the prakssional emnomists who are now mnning the lkonomy Ministry. The problem with the technocratic solution to political impasse in the past was that the government grew progressively more distant from the governed. At some point, rising politial pressures led to a mpture in the process and a speedy exit of the emnomy minister. The new miniser then imposed a new and often very digerent plan. The resulting instability in the formation of economic policy imposed important costs on the ecanomy. If investment and growth were ta flourish, the ecanomy needed a stable regulatory and juridical environment and consistent macroeconomicpolicies, A third outcome of the political impasse is presidential mle by decree, In a smoothly bndioning democracy, obtaining legislative approval for a new law is a complicated and time-consuming process, giving a certain

stability to the legal environment. In hgentina, however, if the president wants to get mu& ammplished, he must often rule by decree since the Congfess so offren obstntcts his program. The ease with which a new decree is promulgated or an old one rescinded contributes to regulatoly and juridical instability, and this instability of property rights is a major obstacle to economic dwelopment in Afgentina, When the government sets itsetf abave the political forces of s o c i e ~ and cuts itself free from restraint imposed by Congress through ntling by decree, poliey milking often flops back and fotth from one extreme to another. The back-and-forth character of Argentine policy making has been widely noted (see especially Dim Alejandro 1970, chap. 7). Just after his appointment as economy minister, Domingo Cavallo argued that to "passlaws is more difficult than to make emergencydecrees. But the normalq achietred through law produes a superior juridid stability, bemuse it creates the awareness of salutions much more salid md durable, generating conditions propitious for investment and, consequently, ecanomic growth" (Verbitsky 19I;13,166). During the first five months of his presidenq, Menem issued more emergeno/ decrees (thirty) than had been isued during all previous governmen%of Argentina combined. In the n e s three years, Menem issued more than 200 additional decrees, Many of these decrees were cosigned by Gavalfo, in spite of his earlier statement. Until recently; the Congress had to retroactively approve presidentid decrees if they were to retain their legality. Menem, however, rammed through Congress a bill to exgand the Supreme G u r t from five to nine members and he packed the court with his cronies, The neur court then ruled that Congess did not have to approve his decrees though it retained the power to disallow them. A fourth outcome of political impasse has been the collapse of even the ~ appearance of democracy and the aswmption of power by the m i l i t a ~The ability of the interior to produce governmental paralysis, frequently by their control of the Congress, has encouraged military takeovers in Argentina. In 1930, for example, the interior brought the Congress to a complete standstill, and the president was unable to respond effeaively to the deepening crisis of the Great Depression. The deadlock in Congress was an important part of what made the coup possible. Congressional stalemate also contributed to the downfall of Frondizi in. 1962 and )Ilia in I9S.l7 In &gentha, militay governments do no better than eiviiian ones in putting the economy on the road to growth since they must confront the same political gridlock facing civilian governments. Not long after assuming power, there are irresistible demands to turn the government back to civilian authorities. The longest any military government has lasted in Argentina was eight years, and most were in power for far shorter periods, TTlb back and forth behueen civilian and military governments generates obvious instability in propertly ri@ts, which prejudices economic gromh.

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mere is Gause for optimism that &gentinat$ half cenmry of political stalemate may be over, Fifreen years of ewnomic dedine culminating in the hwerinflation of 1989 may have permanently changed the playing field in hgentina, The emnamic crisis shawed that the old way of doing thing was untenabfe. The shrinkage of manufac~ringand the growth of open unemployment dramatically reduced the strength of organized labor. Furthermore, the international political and intefleemal environment has changed dramatially in recent years in ways that are far more suppartive of liberat eeonornk policies than in the past. The ability of the interiar to insist upon nationalist economic and political policies has o'bviously mllapsed, at feast for the present. Nevertheless, rule by decree may have only papered over wnfiias that dhide important sectors of the Argentine paliy and thus may ultimately prave politically unsustainable, The real test of the present emnonic plan is its ability to suwive the pwing of the Menem-Cavalla team. The clash of different political forces may again bring the economy to its knees, Demwraq and banamie Development

The remainder of this chapter will argue that democracy in Argentina can better support economic growth than can authoritarian rule. To the extent that the backward political culture of the traditional parts of the interior has encourwd authoritarian military and civilian governance at the national level, the bacbardness of the interior poses an abstacfe to emwmic pragress, 'The digassion will first examine ðer or under what cirmmstan@esdemocracy has promoted emnornic g w h in other developing countries and then see how these generalizations illuminate the Argentine w e .

Whether or not authoritarian government per se discourages economic growth has been long debated. Until the 19W, many analysts thought an authoritarian government was a prerequisite for growth: only a strong leader m l d take the long view, forer: the fociety to sme and invest thraugh wage and consumption repression, end the uncertainties inherent in democratic governance, and make the necessary reforms. Democracy, it was believed, was subject to popular, short-run pressures that would quickly derail the growth process. Several empirical studies published in the 1960s and 1970s appeared to confirm this belief." By the 1980s, the conviction that authoritarian rule was a necessary evil had begun to waver (World Bank 1991, 132-133). Experience with many and 197E)s had shown that dif'ferent authoritarian regimes during the 1 they were no less likely to yield to narrow constituencies than democratic governments, T;fre absence of periodic turnaver in the government enmur-

aged cormption. Clemocrw was identified with the rule of law that would provide the parantee of property rigfits nemssary for economic prosress and avoid the arbitrariness oE authoritarian rule. Democraq would encourage the free flow of inhmation necessaFy for modern economic growth, since a system of checks and Dernocraq might make reform more has&!@ balanws, a free press, an8 open debate wuld @vepeople a stake in rehrm. A numbr of empirical studies in the 19W, many using sophisticated statistkal techniques and large data sets, confirmed the nation that democracy and civil, economic, and political liberties promote economic growth:' Other recent smdies, however, have mncluded that the farm of government makes little difference.% Moreover, the statistical methodology used by all of these a d i e s has been critized?' Thus, we should not wnsider the natter settled, One of the mrt:uwtisfying aspects of most af the works cited above is their arbitrary division of the world into authoritarian and demcratk countrie~.~ Some authoritarian governments (especially South Korea, Singapore, Taiwan, but also others such as Indonesia and Turkey) have been able to generate impressive powth rates. Under other authoritarian governments, such as those in. Haiti, Zaire, Abania, Iran, Myanmar, Romania, and the a n t r a l Aerican Republic, hawever, 'policies contributed to economic blight sz, severe that only a dictator eould have sustained them" (Hagard and Webb 3993,14$). M a t appears to distinguish economi~atlysuwessfuf authoritarian rule is continuity in leadership or dear mles of succession, a merjtoeraticbureaucracy insulated from popular pressures and fram political elites, a mrporatist organization of interest groups, and an effective internal security apparams. Failing dictatorships were penetrated by cormation and ehar;aeterized by dientetistic, perscmalistic, and familial political relations. meir internd semrit;y forces were predaory and their bureaucr;lcies open to poIitiea1 pressures and thus unable to pursue any mherent ipoliq, Some countries are in an intermediate position k w e e n these two poles. The Philippine government in the late Marms years, for example, had a strong executive, weak legisltamre, and emnomic policy makers insulated from popular pressure. On the other hand, there uras extensive corruption and politic%#interference by Marms. Indonesia" government was broadly similar, "mmbining islands of technocratic rationality and administrative competence with clientelism, exemtive intervention, and instimtionaiized eorwpthn" (Wasad and Kaufman 3989,238).

The country's most recent experience with military rule falls in the intermediate category between economically sumssful and unsuccessEu1 authoritarian governments. Under the proceo, there wme clear rules of

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sumssion but no guarantee of consistency in emnomic policy under different generafs, The economic uncertain9 surrounding the change of leadership in 1981 was an important part of what mined the ecanamic plan of Martinez de Hoz, The ministry of the eeonomy w a staffed with competent economic policy makers and was insulated from papular pressures. Nevertheless, it was not protected from meddling by the generals. The rehsal of the military to privatize lass-making public entevrises on national securiv p u n d s and its insistence on huge arms purchases doomed efforts to achieve fiscal balance. Inflation wuld thus not be restrained and emnomic reform was stillborn. The brutal repression dimuraged foreign investors. kloreover, the pxmefo was plaped 'try eornxption and hmnted by the country's dientelistic political culture. Authoritarian government thus failed to bring stability and g o ~ toh Argentina, If the generalswere to return ta przwer in Argentina, there is no r e m n to suppose that the new mifitary leaders would be any more effective than previous ones. Indeed, the military is so wealcened by self-doubts engendered by its spectacular military and economic: failures and by a decade of sustained budget cuts under civilian rule that it is unlike& to be able to direct. the economy as well as it did in the past. Lt is doubtful that kgentina under the military would dissolve into the chaos of Zaire, but it is equally improbde for the countv to approach the success of South G r e a or even Indonesia, A review of the suaesses and failures af autocracy elsewhere in the w r l d thus leads one to the position that only democracy offers the possibility af generating economic refom and renewed gxowth in Argentina. Overthrming democracy and imposing a military government is eostfy. The p o l k apparms is evasive, and many of the country's most talented individuals flee into exile ar are jailed s r exewted, The rewriting of the regulatory and juridical rules of the game lead to uncertainy and waste. When the generals remra to their barracks, there is another rewriting of the roles, thus more unceflainty and was&. finishing the generals is also evenshe and, as in hgentina, draw the attention af political leaders away from ecanornic issues. Perhaps the worst of all possibfe worlds is the revolving door governancr: that has characterized Latin America in general and Argentina in particular.= Argentina now has a democratic government; it should retain it, if for no other reason, than to avoid the transition msts imposed by a mi)itary takeaver, which would undoubted&begin a costly new cycle of alternating civilinn and military government. Qne af the wsts of the revolving door is the ineffectiveness of new democratic governments.% They frequently lack the political power to deny special interests their aastomed favors and impose the harsh austerit-ythat structural reform often requires, Peru, for example, is just nsw recovering from one of the most severe mises in its history due, to a geat extent, to the economic chaos created by the populist policies af a demacraticatly elected civilian government that reptawd a military one. The eqerience of Sarney

in Brazil in the l&e 19& a d a succeaion of civilian pernments in Turkey after 1973 and again after 1983 also sente to illuarate this principle. The same dynamic has held in Argentina as well. Alfonsink pursuit of ewnomic populism and his disinterest in or inability to impose struemral reform produced emnamic disaster. Mansin, however, wzls not the first Argentine president to behwe this way. Until 1989, the first few years of each new &itian government have been charaerized by wage increasesand eqansionist policies. This happened with Per6n in 1947 and again in 1974, FrondiZi in 1S8, and Xllia in 1964. hgentina is naw hapetfilly p a t this period, during whieh democratic institutions must bs: reestablished, and has entered a perioid during which demwracy mutrf be an imporrant catalyst for ewnomie revival. There is another reason to believe that now is a propitious time far democracy in hgentina. One of the advantages that authoritarian government is said to have over demaaaq is its ability to override intractable politiml antagonisms in the pursuit of strue~ralrefarm (Masard 1990a, 24). As we have seen, there is reason ta tzelieve that the seemingly irreconcilable dif'fetences that have divided the Argentine polity in the past have attenuated, If so, the supposed dvantages of authoritarian rule are now less salient for kgentina. AIthouglil the return of civilian ru)e was in a sense inevitable in 1983, the end of authoritarian rule w a not. The eistence of formal democratic instimtions that permit the periodic election of a wantq's lmders does Rat mean that the government is responsive to the governed or that the ntle af law has been established, T'%ereis little reason to believe (and no evidence to support the belie0 that formal elections by themselves can have much effect on ewnomic gowrh, Stable property ri&ts under a rule of law, open. and free dimurse among citizens, and inquisitive journalism can produce demoeray In content, not just in fom, and can encourage economic grages+at least, mme would add, when irreconcilabte politicaf cteavages do not e ~ s t ,

Hkfaricrdlly, Argentina has had a weak grap an democratic institutions even under civilian governance, During the l%&,the Goncordancia used dolesale eleaion fraud and repression, Perbn's administration was notorious for seizing property from political opponents, confiscating opposition newspapers, inciting mob violence, and roughing up dissenters, When Per6n returned ta office in the 15270s, the gavernment was even mare abusive af human and properw rights. The tragedy of the present government in hgentina is its failure to realize that true democracy is an ongoing process in which the munty's leaders are responsive-and respansiMe to the people. At a certain Iwl,m e

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must sympathize with Menem's impulse to rule by deaee and sidestep the sbstmetionism built into the kgentine legal stmcfure. (One mi@t be more symp~hetkif his strenuous eflbrts ta reform the constitution addressed this isue rather than focusing on his canstitutionslf ability to succeed himself in offia.) Nevertheless, Menem has discarded democraq in his bid for economic reform, and this surely must give one pause for concern. Mentioned a b v e are Menem's ruling by decree, pa~Gngthe Supreme Court, and ramming legislation through angress. There is more foreboding evidenee of Menem" disinterest in demoaaey. The creation in August 1W4 of a se~urityagency to oversee the military, the police, and intelfigencegathering agencies has been criticized as potentially repre~iveand authoritarian. The new agency was organized by decree the day after a terrorist twmbing of a Jewish community center, but officials clase to the president csnflded that the agency was also designed to respond to popular rebellions such as had oururred in Santiago del Estero the previous Menern's treatment of the press has also been troubling. Sinee his election there have been hundreds of instances of journalists being assaulted, threatened with injury or death, or arrested after criticizing the government. Instead of prosecuting the culprits, the government announced in January 1995 a suhtantial increase in the penakies for libel. Critics called the bill a gag law designed to intimidate the press. PubIic protests have been suppressed, At one well-publicized event in mid-1W3, Peronist t h u ~ using , portable telephones to coordinate their actions with police officers, beat up spectators who whistled or jeered President Menem at the public hnction. Despite demands from rhe victims, who had photagraphs and videaapes af the amaiults, the Menem administration never investipted the incident. EIis indifference to the right to free speeeh was obvious to all. A well-tixminning democraq is thus not yet within Argentina's grasp. X hawe argued that the politiwl culture of the more traditional parts of the interior is antidemocratic and that this reinforcers authoritarian,tendendes already within the national government. It would be facile to argue that Menem's eurrent disregard for the finer points af democracy proves my point-after all, there have been presidents from the pampas who have done far worse-but it is certainly consistent with my arpment. Menem is, after all, from the most bachard and least developed prwinc;r=in the cauntry, The foregoing discussion has marshaled support for the proposition that democracy can best encjourage economic gowth in hgentina. To the eaent that the backward political culture of the interior undermines the process of democratic: consolidation in Argentina, it is posing an obstacle to economic progress not just in the interior itself but in the nation as a whole.

n e Poliricaf &S&

of the I n & ~ r "&achadness s

223

Notes 1. Par exmple, see 9.S % b a t1988,370; ~ and Rock l WSb, 66, By way of contrmt, in the other "new c a w t ~ e qesmally " the United States and Gnada, aga-exprters were phdpaliy fadly famew w h w p f i t i a l strengh, &thou& considerable, was

e c l i p d by industrial interests. mere, polldes eomhtentiy favoring hdustdal dwefopment were applied from the mid-ninetmnth wntury. 2. The ~Gw has an intens sensti: of gagrapby in Argentina. Xndmd, the only maps that m be legally pub%hed in the wuntq mwt have the miE%arytsspprovaf. The tedta&al ab=sian of Arpnthe fareip over the last m n t L~ anabed 6 h a vaiety of warb. 3. The Bibfiota del Gongreso (Ubrav of G n g e s ) has biographical g about kgentiaa's presidenb. didionahes and enqclopdias @ ~ Marnation AJmmt witbout amption, the biogaphies af migtary preddenB after 1943 began with theb m E w schmliagf not their plam of o tm ar ~Eldhmd.mw, the: native pravinw of a number of ~ f i t presidents q m d d not be amrtahed. 4, In the United Statc;q in wntrat, the ppulation of the largest state is only E@ times that of the smallat, As in Argentina, there are wwntwn states that have less thm 10 permnt of the ppufatian of the largest state, but there are more than ~ i w a-s many states in the United States as there are provinas in Argentha. 5. fluring the last mngesionrill, ==ion in the months before "Yrigoyen was remwed from ofgse, the a n g e s pamd no legisiation. The only subj& of debate in the Haue af Deputies was wer the medentids of deputies*and the Senate only its ommn (Pofier 1979,57), 6, Mora y k a u j o 1980,401436, and 1988,172-175; Mora y Araujo and Smith, 1980,4543, and 1983, 173-188; flareate 1980,381-389; Urkpatsck l971,108-111; P, S ~ t b 1980% , 70; Oaenberg 1973, 183; Mora y Araujo md Uorente 1980, 504R a t & , Jam&, and Jdrez 1876, 409410; Turner et ai. 1988, 1S204; Wellhafer 15r74,2&249; Madl;en and S a w 1993,87; and M i t A e r 19624 10&107. 7, P. Smith 1980a,73; Mora y Araujo 1980,434; and Madsen and Snaw 1993,95, 8, Ottenberg 1973, 183; Llorente 1980, 387; and a r k p a t ~ c k1971, 111, The pEtieaX p w e r of the ktefiar has been felt at other times in Argentina's nt histoy. For example, during the fate I96Os, Ongaga txturted the eXites of the mterior .tr, fegitide his corporatist project and authoritairan rule W. Smith 1988, 61-62). 10, Let me stress that 1 haye no intention of the problems of Argentine a e m that the pampem oliprcb have any more regard for demma the elite8 of the interior. Nevefifieleq it itis generally believed that offie ~ d d l class, e the industrialists, and to a lesser eseltlr, the WO modem p l i t i a l outlwk and seme ts counterbalance the aristwatic modes of t h i ~ n gand b e h a ~ o rof the pampi;m oligarchy. (For a contraq view, ser: Nun [1968], who arpes that tfie middle class suppoas military intewention to protect. its advantages from the w~rGngcI~ss.) In the interior, the middfe class and the industriaf w o r ~ n gclass are very smaU and far we&er politically than their muntepafts on; t k pampaas. 11. For exaimpb, we Moreno 1966, 77-78; Mendaza 1959, 78; Alexander 1951, 8-11; WeIUloffer 1974,24%2&; hiwtSs 1971,QiBff;Wit&er 1"364,lO&IQ7;Baily

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1%7,82.; fpola 1889,335-S@; and Gemani 2980b, 103-1 15, Mipens (1988,210) lists about m e n q authors who have made this armment. A related but distinct wwment is that the recent aripanb to pgmpean c i t i q We their munterlpafis in other p& of the gobe, were alienated, mamie, and rwtfea bwaum of their r e a n t entry into wbm life. It was this afienation, not t k i r paGtical cultwe, that made them open to chakmatic, m u l i s t , or demago@cappalCs (see es@d& Madxn and Snow 1993). 12, For example, see P. Smlth, 1980%lf28Qb;Kenworthy 1980; Eab 1975; Calve& 1985,11&27; M w e n s 1983,152-160, and 1988,21%223; Mumis and 1974, 73Ef; Poflirntiero and is 1%9, 8%91; Munek et a;l, 1987, 121-1122. and Pomntiero 1974, 13. Kenwoflhy 1980,211-215; GttIe 1975p171-17& 73,7677,121; Poflantiero m d M u d s 1%9,82-91; m ck d al. 11;187,121-22. were 38 p r m n t of the immigants to kgentina in the first t h e e 14. nts d a d e r s of this century. Rmians and PoEes made up 4 8 perant of 45 bemeen IW1 and 1910, and 7,6 perwnt b e w e e ~1911 and 14)30, ftali p r w n t of the immipants in the earlier pfioil and 34 permnt in the Iater (Dfa Aejandro 1970,24). A p o ~ n share g of Itaiian immigants were ~ o the m underdevelowd wuth, BeWeen lSKZO and 1913, just aver half mme &om muthem Italy, up from 37 germnt in the last quamr of the nineteenth century ( b b i e 1964, 29). 15. For e x m p b , see h i i a 1W3,8; Waismatn 1987, 218, and 1989,73; W. Smith 1%9, 26% Wyaia 1986, chap. 8; 1". Di Tefla 1968, 24%%3, esp. 262; and b w i s 1990, chap. 20. See Bradford 1991, 123 for a, discusion of the impo~zanmaf political conamus far ewnomie development, 16. % Chapter 1, note 7, far a diwmian of the r o b of the intefior's intelleeuals in enmura@ng nationaljst sentiments. 17, Rock 1885, 343, 346; and Guadagni 1989, p.159. It vvas Peronist oppsitian to Frondhi m$ fllia that led to the militaq takewer, and a major piliar of Peronist @ren@h, as we have arped, was the interior. 18, Perbap the mo& no& Adehan and Mods (X%?, 202). See Huntingfor a mmey of the* eartier work. &C: also ton and Bm'nguez (1975, Mamb 1979, 2m. 19. Grier and n l l m k 1989,271-273; b l l y 1988,657460; Ban0 1B1, (1.32;Diek 1974, 82M24; North 11181; Dr%ze and %n 1989, esp. 278; and Komendi and Mewire 1985, 156. Wasard and W b b (1993, 145) and P m e w o n ~and Limongi f 1993) cite stilJ more smdies. 20, Wwde 11383,3635;J a c b a n 19'76,1096;Kohfi 29%,154-.160; and Remmer 1991, 182-197, S i r a v and fdeles (15591) review thirtwn &udic=sand wnclude that the evibentsrt does not favor one side or the other. 21, For example, if redme type had no eE& on ewnomic growh but demmaties were better able to sunrive s l m gowh, then poor& tydoming aufmades would be replaced by demwades but not the revem. mis endogenous st=laion. pro ex:^^ would result in hi&er obsened gawh rates for autacra&es than demomacies wen t b u @ regime did not agect growh, Given that most early smdies m p p e e d autmades and most Iater studies suppfi demoaadeq although both wed similar data siets and statistical techniques, one is justiFred in suspecting the role of ideoloa in inffuendng results (Pmworbi and Limangi 1993,6144).

22. H a g a d 1990a, 1%19, and 18Wb, 262-264; md Hasard and Kauhan 1989, 235-239. 23. 'This is not Pa a r p that a long tenure i_n. omm for an. authodtadan regme is wBdent ta produa m n o d c propea. Bspite Xndonesia"s S u h m , P ~ a p a y ' s Stroessner deman&ra%sthat teBure does not 2%. t;Vorld B& 1991,133; and H a s a d and & & a ~ 2989,243, S . Sims f 994b, AI% see a b Bwms A h Hemld, Aupst 7,1994, p, 14.

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The Fiscal Cost of the Interior's Backwardness Ghapter XO documented the political p w e r of the interior over the national government. The purpose of this chapter is to show that the interior has used this power to claim resources from the national government and transfer them to the interior, This drain was substantial for many decades, and by the 1980s it had become a torrent. T h i s foss of resources by the national government is an important part of the explanation for the spectarnjar collapse of the emnomy under the Mfonsin government at the end of the decade. Fiscal poverty in the interior not only diswuraiged development. there; it also imposed substantial costs on the nation as a whole. Like many countries including the United States, Canada, Brazil, Switzerland, Australia, India, Germany, mina, and Nigeria, the hgcntine Republic has a federal form of government in which subnational units of gctvernment-states or province arry out a major share of governmental activities, The Argentine provinces have the principal responsibility for police and criminal justice and a major share of the responsibility for education, health, and infrastntcmre, The constitution permits the provinces to levy taxes except on foreign and interprovincial trade, Every Cederal system hces the problem that the tmes lcvied by one of its provinces enmurages economic activities to move to other provinces, Given that inteqrovineial mobility is general& far easier than international mobility, the prclvincial ability to tax is necessarily weaker than the national, Over the last century in all parts of the world, regional economies merged into s i n g e national economies beeause of hlling transport and mmmunieation costs; thus, interprovincial mobility rose sharply. As a consequence, national government transfers to their provinces grew. Typically, there is a redistributional element to this fiscal federalism by which the more prosperous prowinms transfer resources to the poorer.

In kgentina, fiscal resaurces have been redistributed from the mare prosperous pampas in favor of the impoverished interior. "I'his transfer contradicts the widespread belief, discussed in the introduction to this book, that the prosperous pampean provinces are exploiting the underdeveloped interior and that this exploitation is the source of their poverty. This chapter will discuss in Nm each of the five ways by which the national government has channeled funds to the provinces in Argentina: revenue sharing, national treasury contributions, direct national spending, royalties for mineral extraction, and industrial promotion schemes. The chapter concludes with a sumrnaq measure of the national government transfers to the provinces, Revenue Sharing As in most modern federal systems, the national government in Argentina mrns over taxes it collects to the provincial governments, more or less without any strings attached. What makes Argentina unusual is not the fact of revenue sharing but its size in relation to both the nationat and the provincial hdgets. Xn most of the world" federal systems, federal transfers range beween one-quarter and one-third of provincial tax coffections (Petrei et al. 19W, 15). In Argentina, federal grants to the provinces are larger, in some years substantially larger, than provincial tau revenues. Among the eleven largest hderal governments in the world, only in Australia do the pravinees have a comparably small role in levying taxes. In the 1980s, about 80 percent of federal taxes in Argentina---almost everything except tariff revenueswas divided automatically between the federal government and the provinces, and aver half went to the provinces (Petrei et af, 1980, 4-45). By the mid-198Qs, provincial and local governments collected less than 15 percent of the total tmes wliecred in hgentina (Piffana 11388, 8.2-8,3), In the United States, state and lwaI governments collected mice that percentage, and in Switzerland nearly three times that proportion,

In the early years of the republic, government spending was a small share of the economy. The national government was almost completely financed by tariffs on foreign trade, which the provinces could not levy. Thus, there was no conflict between the different levels of government over the tax base. By the end of the nineteenth century, however, the federal government%gowing need fnr h n d s farced it to look beyond tariff revenue, and it began encroaching upon revenue sources that had traditionally been left to the provinces. At the dawn of the republic, 95 percent of national government revenues came from tariffs, but in 1895, the proportion was 75 percent (Parto 1990,951. Furthermore, the provinces routinely flouted the

constimtional ban on taxing interprovinciaf trade, threatening to strangle internal commerce. The situation eame to a head in the 1330s, when the Great Depression forced all levels of government to scramble for funds. To resoke this conflict, the federal government established a form of revenue sharing known as aparll'cipation (copartic@ncidn),whereby it split the proceeds of certain t m s with the provinces.' The coparticipation program has been modified often sin= 1935, but the general principle of revenue sharing has remained. The changes concern the basis on which b n d s are distributed among the pravinces, the r a e s that are part of the propam, and the fraction of the pra~eedsEram these tmes that goes to the provinces, @er the years, other revenue-sharing sehemes have been added to caparticipatian. n e s e many changes have pmduced some trends worthy of comment. First, as the government's share of CDP rose over the cenfury, necessarily the impact of revenue sharing on the economy grew apace, Second, the skare of tariffs in national government revenues declined, and thus the share of taxes subjed to revenue sharing increased. Forty percent of the national government revenues in 1930 came from sources other than tariffs; in the 1960s and 1 9 7 0 ~the ~ proportion reached as high as 95 percent bat uiually hovered around 80 percent (Petrei et al. 1980, S). For this reason as well, the impact of revenue sharing on the natianal and provincial ecanomies has grown, Another important change in the coparticipation program is that it has become steadily more redistrihurive, Behveen 1935 and f 946, the provinces received federal Eunds in proportion to their own tax eotlections in prior years. It is unlikely that. coparticipation in its first decade produced any significant redistribution.' In 1%6, the first year oF PerCtn's presidency,coparticipationwas restmctured to channel funds from the pampas to the backward provinces of the interior (Nfiiiez Mifiana 1973, 16). Bemeen 1946 and 1917, for example, mparticipation funds given to Buenos Aires Province fell by 5 peP.eent, and those given to a r d o b a by 16 pereent. Gatamarclrlk share grew by over 200 percent, La Riajak by over 300 percent, and Jujuy's by 150 percent. Beween 1955 and 1973, there were several different revenue-sharing schemes in force sinuftaneousIy, each with its own farmula for distributing funds to the provinces. The bulk of the money was given out on a per capita basis that redistributed Eunds from the rich to the poor provinces. Other criteria used in determining each province's share favored the more prosperous prwinces.' On balance, however, revenue sharing in these years redistributed funds in favor of the p u r e r provinces. Revenue sharing was thoroughly reorganized in 2973-the year the Peronists returned to the presidenq-and coparticipation became sharply more generous to the poorer provinces. SW-five percent of the funds in the principal coparticipation grogram were then distributed on a per capita

220

IE7ze Fkcal Gosd of the Intehr"~Bacbardncm

basis, 10 percant in inverse proportion to the population density, and 25 percent in inverse proportion to the level of emnomic development of the province (Petrei et al. 19W, 6). All three of these hefors favored the less developed provinces. In 19130 and 1981, the military government reversed the redistributive thrust af the Peronist pragaim. It reduced the tax base: subject to caparticl'pation, lowered the provincial share of the taxes that remained, decentralized the administration of ceftain semices, lewing the provinces with greatly reduced funds and higher expenses.

When demacraq refurned, the Radical gavernment once again began redistributing federal resources to the interior, It sharply increased cash grants ta the provinces through contributions from the national treasury (discussed below) to make up for their loss of capartieipation hnds, n e s e payments favored the interior even more than the coparticipation funds that they replaced. The political struggle over how to develop a new mparticipation program was intense, and not until 1988 was a new scheme renegotiated. A politically acceptable formula that distributed the funds to the provinces could not be found, so ultimately each province received a f"1xed percentage share that raughly reflected their recent share of wparticipation and treasufy mntribution hnds. The new allocation favored the poorer provinws of the interior even more than the previous system. In the late 1;940s, Buenas Icaires Province received 36 percent af copartieipation Eunds, and its share was still 34 percent in the early 397Qs. The 1973 rewriting of the law e v e the province a 28 percent share, and hy 1988 it was receiving only 22 percent (FIEL 1995b, 283). mroughout this period, Buenos Aires Province" share in the nation's population grew; thus, on a pcr capita basis, the g r w t h in the province$ disadvantage was wen mare pronounced. Furthermore, the provincial share of national government taves subject to coparticipation increased from 48.5 percent under the 1973 law to 57.6 percent under the 1988 faw. In addition, mare taxes (the most important af which was the tax on gmaline) were included in the coparticipation scheme (FIEL 1993, 15% 152; see also Schutfthess 1982,29). Revenue sharing continued to be a source of contention between the provincial governments and the Menem administration. In August 1992, the federal pvernment pmposed another deal, again assigning each province a percentage share of coparticipation funds rather than using a formula to distribute the monies. The new fiscal pact removed some tmes from the coparticipation program and reduced the provincial share of the taxes remaining in the program ta 43 percent. The government agreed to a minimum payment aE 8.7 billion pesos, half again as much as the provinces received in 1990 and a third higher than the previous peak in 1986, (Clanit,

August 2, 1992, hlitica, p. 8). The government was so confide^ of the continued growth in federal tax revenues due to economic growth and increasd effectivenessd tax collection that it sharply raised payments to the provinces and set a guaranteed minimum payment, Xn return for this generous (in its own eyes) offer, the Menern administration demanded that the provincial gavernments efiminate several tmes that it.believed distorted the economy and retarded growth, Taxes on produaion, such as voss business income taes, business property taxes, and stamp tmes imposed on the financial sector, were to be replaced by taves on consumption.' Menem refused to submit the new program to the Congress for approval until all of the provincial governors had agreed to support the pact. By mid-1995, all of the provinces except Crirdoba had ageed to the pact. Red&&ib&~ and Copa&iparion

Table 11.1 presents two different ways of showing the increasingly redistributive namre of coparticipation. The first N o columns show the per capil.a coparticipatkn funds re~eivedby e x h province as a proportion of the national average. In 1960, the most prosperous pravinee, Buenos fires, reeeived Eixnds per capita equal to three-quarterg of the national average (see also Berfinski 1%9, 183). By the end of the 198&, Buenos Ares Province remived only hatf of the national average, The Gare pampean provinces received 80 percent of the national average in 1960 but only 63 percent by the late 1980s. Zn 1960, most of the interior provinces received 1SO-2W perwnt of the core pampean average; four provinces received more than Wa and a half times the care pampean average, 'Three decades later, most of the interior provinees haci improved their position. EIeven provinms then received more than two and a half times the pampean core and three provinctes (La Rioja, Catamarca, and Santa Cmz-Formosa almost m d e the a t ) received more than quinmple that average. The Noflhwest and Northeast gained the most; Fatagonia, which had been heavily favored in 1960, did not show any gain, h o t h e r way to laolc at the redistributive effea of the mparticipation program is to see how it affected gross product in each province, The fast two columns of Table I f .l show the net gain or loss from eoparticipation for each pmvince, expressed as a percent of their gross product. h 1W0, the mod disadvantaged province, b e n a s Aires, Iost 0,7 percent of its pravinciaf gross product through the coparticipation program? The net gain in gross product from eoparticipation in La Rioja, the mast advantaged province, was 7 pereent. Only two pmvinws received mparticipation hnds net of nationaf tax payments exceeding 4 percent of their gross produa, By 1488, h e n o s Aires was fusing 2.3 percent of its gross product t h m g h coparticipation; Formosa, the most favored province, gained from coparticipation by an amount that exceededane-fifrh of its gross product, Five provinces received

TMLE 21.1 Redistributional Impact of Coparticipation Copafiicipation Per Gapita as Permntage of

N a f b w i Average

100

a r e Pamps Buenas A i z s Santa Fe

80

ardoba

Pehpheral Pamps Eatre Rim h Pampa

hrcentage Gain or Lass in Provincial C r o ~ Product; as a Result

'75 95

86 I. l 1 98 L78

Noahwesl Salta

Tuam8n JEzjuy

Lif Riojat Catamarm Santiago 6ayo Mendsza San. Juan San Luis

Sclwces: a l u m n s one and WO, adapted from Porto 1990, 118. &lumm three and four, adapted from Portct 1990, 109, 138,

mare than 10 percent of their gross product from the =heme, and four more reeeived 5-10 percent, Thus, the redistribution in favox of the interior grevv sharply aver the years. Athough the underdeveloped interior of hgentina receives a dispraportionate share of coparticipation funds, the prapram's Eunds are not dist~butedsolely based on degree of underdevelopment. When an index of development is regressed on coparticipation funds per capita by province, the R-squared is only 0.30. Other factors, notably political influence, play a substantial role! 0fl;lerRevenue-Sharing Prorams

Mter the 1973 reorganization of revenue sharing, copartieipation steadily lost ground campared to ather revenue-sharingpr~gramsthat target funds for specific purposes rather than merely. strpporting general revenue. m e s e smaller fulnds taken together p e w from less than 15 percent of revenue sharing in 1973, reached 50 percent in 1988 and 1989, and were 35 percent by 19W ( R E t 1993, 159). The most important revenue-sharing fund afrer coparticipation is the FQNAW (Fondo Nacional de Vivienda, or National Housing Fund) program, In 1992, FONAVIt5;h n d s were one-eighth those of the euparticjpation program, down from one-quarter in 1987. FONAVI allocates housing funds on the basis af measured shortfalls from national norms. Thus, the province with the sewtest housing shortages get the m o s money, without regard far the province's ability to finance housing investment (World Bank 1985,W ) . The rapid growth in the population of Patagonia in the 1960s and 1970s produced severe housing shortages, and Patagonia has thus received a disproportionately large share of FONAVIk hnds (FIEL 1991b, 294). In 1988, only 28 percent of FONAVZ"sfunds went to the five pampean provinces, althwgh their share of the nation's substandard housing was double that f i p r e (HEL 195)lb,2W), The pampa's share of the naionk population outside the federal capital and their share of grass product were stilt larger. Thus, FONAVI favors the interior even more than does coparticipation? There are a number of other revenue-sharinghnds. Beween 1973 and 1988, a regional development h n d distributed its monies almost entirely to the interior provinces. A second fund receives revenues from the cigarette tax and di~ributesmonies exclusively to the least developed provinces, Corrientes and Misiones receive the largest shares, and Salta mns a close third (Fern6ndez Pof 19&, 91). A third program channels funds to provincial wmpanies that generate electriciy. A fourth revenue-sharing program beween 2988 and 1992 distributed funds to those provinces witb the greatest financial disequilibriorn, thereby rewarding the most fisally irresponsible provinces, all of which were in the interior, There are other revenue-shariq programs that do not have a strongty redistributive dimension. One, roughly

half the size of FONAVI"s, receives taxes earmarked for the constmction of highways and bridges. Another assists provinces that have had nafuraI dismters. Aside from coparticipation, revenue-sharing programs taken as a group are even more redl'strihutke toward the interior than the coparticipation program itself. Xn 1988, 59 perGent of wparticipation Eunds went to the pmvinces of the interior, Ocher revenue-sharing funds sent 62 percent of their monies to the interior (derived from FXEL 199fb, 280). Revenue Shrimg and RediSt&uh"on

The regressivity of all revenue-sharingprograms taken together (wparticipation plus other revenue-sharing knds) is shown in Tabfe 11.2, The provinws re~eivedfrom the national government between $153 (in Buenos Aires Province) and $1,099 (in Santa Cmz) per capita in revenue-sharing funds in 1991. The Gore pampean provinces averaged $190 per capita, only hvo-thirds the national average. All of the provinces of the interior except Mendoza received more than the national average, Batagonia was the mast b o r e d by this redistribution, receiving triple the average of the csre pampean provinces, but the Northwest and Northeast were not far behind. There were twelve provinces in the interior that reeeived more than $50Q per capita and another four that received $400, This is a substantial amount of money in a Gountry where the per capita gross domestic product (CDP) is only $4,300 (in 199Q) and $3,370 in the interior. In the poorest ei&t provinces of the interior, where revenue-sharing transfers are the highest, the per capita gross product is only $2,025.8 Another way to look at the redistribution caused by revenue sharing is to look at the share of gross product that each provinw gains or lases. Buenos Aires Province (the bigest loser) ~ansferredrough& 3 percent of its gross produet ta the interior by means of revenue-sharing pmgrams in 1988, and a r d o b a and Santa Fe also gave up wbstantial shares of their gross products? The interior received a large proportion of its gross product in revenue-sharing funds in excess of the national taxes it paid. Formosa, the most favored province, gained (net of tmes it paid) an amount equivalent to 32 pereent of its p a s s product from these programs, Eight provinces in the interior received revenue-sharing funds that exceeded t a e s paid into revenue-sharingfunds by an amount that was at least 9 percent of their gross product, A final way to think about the impact of revenue sharing is to mnjechlre what would happen if the interior were as developed and prosperous as the pampean core. If so, revenue-sharing funds per capita would be roughly the same in the interior as they are in the care pampas. In 1988, however, the provinces of the interior actually received $1.3 billion more than if their per capita revenue-sharing firnds were the same as in the pampean core, and

TmLE 11.2

Revenue Sharing and Nattianal Treasury Gantributians,

198&1991 Natianal Treasury BtzZIals

fircenrage

Per Capiu

of ~ a f i o m l Average

hlhm Per CapiB

Pereen&ge of National Average

284

100

633

100

569 465 Chubut 442 Santa C m 1099 Rio Negro 513. Tierra del Fuega 1021

200 I64 156 387 180 355)

19.50 13.63 11.78 34.38 22.49 36.00

308 215 186 543

National Avemge

CQreParnpg Buenos Aires Santa Fe Ccjrdaba

Guy0

Mendoza San Juan San Luis

Paagonia Neuqukn

355 569

Source: mCZQlumnsone and two, adapted from Indica&ves econ$mico-sociales,No, 9 (July 1992): 27, 40,44; XNDEC 1991, 19, altmtns three and four, adapted from FIEL, 1991b, 280,

226

me Fi~calCost of

tj2e InfedJs fJacbard~ess

in 1991 the figure was $3.3 billion.'' This amounted to about 1 percent of GDP in 1988 and a b u t 1.7 percent in 1991.

Under the Menem adminisration, revenue sharing has grown wbstantially. Funds disgersed through all revenue-sharing programs in 1992 were 17 percent more than in 1988, the last full year of the AIfonsh administration and the last year hefare hyperinflation, Rwenue sharing in 1992 was 24 percent more than in 1991, but grew less than 1 percent in 1993.'' One reason fsr this growh is that the Menem adminl"stration forced the provincial governments beginning in January 1992 to take over the provision of a larger share af public services (nutably education and public health). Nevertheless, the increase in revenue sharing in 1W2 was more than double the expense of the services transferred to the provinces (FIEL 1993, 156). In late 1993, the Menem administration announced a large eut in the 44 pereent wage tau (a tax suhject to coparticipation), but the , t s were to bt: larger in provinces at a distance from Buenos Aires ( h e n o sAires Heratd, November 19, 1W,pp, 1,s). The federal capital's. reduction was to be only 30 percent, the suburbs of Buenos Aires 35 percent, and the rest of the province 40 percent, Sama Fe and G6rdoba would get a 45 percent reduction, but most of the interior wo-uid receive a 65-80 percent reduction in the wage tax, The offiicial rationale for the differential tax cuts w a ~that the federal capita1 received a disproportionate share of federal spending, a befief examined below. 'The new wage tax rates will increase the redistributive impact of revenue sharing favoring the interior. National Treasury Contributions

From the beginning of the republic, the I;tur has permitted the national government to $ve fixnds to provincial pvernments whose budgets are in deficit (Psrto 1990,93-94,121). The president of the republic has complete discretion in deciding how much money to distribute and to which province to gve it. There are no legat restrictions on how this money is ta be spent. One purpose of national treasurjr contributions is to offset year-to-yearvaxiatians in revenue-sharing funds, The t a e s on which revenue sharing is based frequently change, since the tax law is almost cantinuously rewritten by the Cangrelris and through presidential decree, The economy has been wildly unstable for decades, so the tax base varies enormously as well* In some years, the national Wverrrment finances a very large share of total expendicures by means of the inflation tax (which is not subject to revenue sharing) (Porto 1986, 7.2). National treasur)i contributions; are also used to help prowinces with particular fiscal difficulties. And, given the lack of controls, the ftlnds are given out for frank& political ends,

In 1850, nearly a quarter of the federal funds given to the provinces was from national treasury mntributions, in 1960 about 5 percent, and in 1970 a b u t 15 pereent. The ecltnomic chaos in the ear& 15370s produced severe distortions in p b l i c finance. :By 1975, when the misis reached its peak, nationaf treasury contributions were nearly 6Qpercent of total finds given to the pravr"nces. The military reduced the f i p r e to below S percent by the end of the decade (Porto 1986, 7.11; 1990, 121). As mentioned above, national treasury mntrihtions rose sharply during the early 1980s to offset: the drop in coparticipation revenues for the provinms, In 1983, nationaf treasufy contributions to the provinces were more than double coparticipation funds and wcre 40 percent of total transfers to the provinces by the nationaf government (Parto 1986,7.11,7.13). With the 1988 reorganization of eopartieipation, national treasury contributions fell shavly, 'They were wmewhat higher the following year during the hyperinflation.but fell again during 1990 and 1991. In 1992, nationat treasury wntr&utians were stighrly higher than in 1988, but only 2 percent of eopartieipation hnds, The amown& budgeted Ear 1993 and 1994 were roughly the same as in 1992 (liodicadores crco~bmico-sochles,No. 15 f December 19931: 83). National treasury contrihtions have been h r more redistributive toward the underdeveloped provinces of the interior than have been rwenue-sharing progams. Table 11.2 shows per capita national treasury contributions for each province for 1988. Buenos Aires Province received the least of any province, only I percent af the national average. The cnre pampean provinces together received only 12 percent of the nathnal average. Except for Mendoza, all of the ather provinces of the interior received far more than the three core pampean provinces. The mast favored province, La Rioja, received $963 per capita, compared with $0.75 in the w r c pampean provinces." In 1988, when national treasury contributions were low (about one-tenth of 1987), the provinces of the interior received $17.64 per capita from national treasury contributions, If the interior had received the same per capita amounr that the panpean core provinces received, national treasury contributions to the interior would have been about $17 mitlian less than they actuafIy were, or a b u t 0.14 percent af GDP.

The Innution Tax Qne of the mast important taxes in Argentina in the last half eentzlry, and in particular the last twenv years, has been the inflation tax; A tax, in the most general sense of the term, is the appropriation of resources by the gowrnment. This ean be done explicitly, for example, by collecting a percentage of retail sales (a sales t%) or a f ~ e dsum t"rom each cStizen (a poll tax), and then using the proceeds Eram those taxes to purchase goods or sewices from the private sector. The government has another way to claim resources from the private sector: it can simply print money and then spend

it, The private sector is deprived of those resources, just as with a tax, so in that sense the process of appropriating resources through expanding the money supply is appropriately called a tax If the government appropriates resources in this fashion, the nearfy inevitable result is inflation, hence the name, the inflation tax, Since the late 194Qs,almost wntinuous inflation plaped the kgentine economy, and in the 1970s and 1980s the country had the highest sustained rate of inflation in the world. The Gauses of this inflation were complex and multiple, but surety the printing of money was the principal source oE i d a tion and permitted the other causes to came: into play. The higher the rate: of inflation, other things equal, the higher the inflation tax but the lower the government's tax receipts from other t a e s * This is the so-called Tanzi effect: since it takes several months or more to collect taxes after a tax liability h a arisen, the value of the money that the government receives when the taxes are finally paid is less when inflation is higher. In periods of very high inflation, therefore, the inflation tax became the sin@e most important tax in Argentina, One estimate puts the inflation tax at 4.5 percent uf GDP b e ~ e e n1983 and 1987,'~ I%c=reis no stmcfured program that shares the innation tax among the national and prwinciaf governments, but the sharing takes glacc: nonet-heless. Whenever provincial governments inmr debt to finance a fiscal deficit, they usually claim a share of the infiation tax proceeds, T%ere are two ways by which this is done, First, the provincial governments issue debt in small denominatians to finance their deficits. Provincial governments pay their employees%ages with these notes, whieh then circulate as currency within the province." S a n d , the nationai bank has regularly assumed the debt af provincial banks when the provinces defaulted, thus some of the provincial deficit bemme a part of the national fiscal deficit. As an indication of the magnitude of this process, the Worfd Bank estimates that 40 percent of provincial bank debt is now unrecoverabie (Friedfancj 1995). mus, inflation is generated directly at the provincial level by the printing of notes that circvlate as money and indirectly by increasing the national unfirnded debt, Some prorrinces finance a major share of their budgets from debt that they will never repay, In La Ricga, the worst ease, the budget deficit was 18 pereent of the province's gross product during the 19fUls, when President Menem was the pravince's governar (compared with 0.55 percent fur B u m s Aires) (EXEL 1W3, 16167). During the 198CIs, the combined provincial deficit (after receiving federal transfers) averaged $1.3 billion annually, about 1.1 percent of GDP, and $1.8 billion or 1.-ercent of GDP in the last three years of the decade. (In most years, the majoriv of this defieit arose in the interior provinces.) If there had been no federal transfers to the provinces, the provincial deficit would have exceeded 8 percent of CDP for the decade, and the federal

The Fkeaf Cost of rhe Inre&& Bacbard~ess

229

government's deficit would have averaged only 2.7 percent (derived from FIEL 1993, 158,166). The Menem government at first was unable to manage the emnomy in a way that redumd provincial deficits. With the dramatic inaease (43 percent) in shared revenues between 1990 and 1991, the pravincial defidt began to fall. 13y the second half of 3991, the combined fiscal deficit of the provinms was at an annual rate of just over $1 billion, over W percent of which was generated in the interior provinces (derived from Roueo 192, 22). The pravincial deficit fell in 5992, was nearly $500 million in 1993, but ballooned t s $1.6 billion in 1994, as the provincial ecsnornies vvorsened under Plan Cavallo. It is expected to reach $2 billion in 1995." As a proportion of national GBP, this is still substantiafly belaw the levels of the late 198h; however, the budget deficits of the interior" ggoernments eantinue to put upward pressure an the rate of inflation, whkh by late 1% had again reached worrisome levels. Rayafties far Minerat Resources

Of the eighty-six minerals known to exist in Argentina, forv-faur art: considered strategic, and their development, at Xeast until the early 191)Qs, m the sole responsibility of the federal government. The Menem administration, as part of its liberalization of the economy, has begun privatizing minerai explaitation.. Until 1992, the federal government reimbursed the provinces with cash rqalties when mineral resources were extracted. Almost all of these royalties were for petrufeum and natural gas. n e y aeeounted for nearly 32 perwnt of federal cash transfers to the provinces in 1988 (FZEL 1891b, 28E1,285). In NeuquCn, Tierra del Fuego, Ckuht, and Santa Cmz, royalties were between 44 percent and 62 percent of federal transfers, and in Salta, Mendoza, and Rio Negro they were bemeen 20 percent and 25 percent. Ruyatties thus play a pruminent role in the budgets of these seven provinces as well as constituting an important drain on the federal budget. Politicians in the interior claim that they have been underpaid for their resources. Roya1t-ypayments were 12 percent of the welt-head price: af the petroleum, but the price used to caf~zrlatethe payment was the Argentine price, vjfiich was lower than the international price (FIEL 2991b,285), The present eeonomy minister and his chief assistant estimated the ryalties that would have been paid in I985 if they were based on the international petroleum price; they made a second calculation based on 50 percent of the value while stifl in the ground (eavallo and Zapata 5986, 87). By their calculations, w e n of the nine provinces receiving royalties in 1985 would have received more by the first calculation and all would have gotten more by the second.I6 In the most extreme case, and under the most generous assumption, turo provinces would have seen their royalties and their total federal payments increase several fold.

The provinces have pressed their case for larger rayafties, In 1987, the federal government, in a frankly political arrangctment, paid the prwince of Safta an amount bmed on the international price of petrolmm. Xmmediately, the other oil-producing provinces claimed a larger annual royalty payment, too, for a total of $6 billion, or 5 percent of GDP, In 1991, the governor of Rio Negro confiscated central bank deposits in the prwince and kept them hasage until he could ger a better settlement with the federal gvernment, or at least until he won reeledion in the campaign in which he was invoked at the time. Presently, as the federal government privatizes the eqloitatian of mineral resources, provincial gcrvernments receive a share of the proceeds in a lump sum sr;trlement, Note that the nine provinces that produce petroleurn and natural gas are aIsa consumers of these products. The price of natural gas to the- consumer-set by the federal government-was lower in areas where it was produeed, but not enou&h lower, amrding to one study, ta reflea fully the lower transportation wsts (Givogri forthcoming, 3-10; see also Cavallo and Zapata 1986, ti3-71). Similarly, prices for fuels and lubricants were almost the same throughout the country; an efficient system of pricing would have reflected differential transport costs, which would in turn have favored the petroleum-producing provinces. Thus, coming and going, the petroleumand gas-producing provinces were losing. The interior pmvinces without petroleum or gas resources, however, gained.

The inability to fully capture the rents from petroleum and namral gas extraction by the producing provinces, it is arped, has. been a major obstacle to their development (Cavaflo and Zapata 4986). It is my wntention, however, that the petroleum- and gas-producing provinces, with one possible exception, muld not have effectively used the royalties to stimulate their deveiopment. To support this pasitiort, one can marnine the role that mineral resources have played in regional development in other parts of the world, The exploitation of mineral resources has rarely generated a process of selfl-sustaining development in the focaIe in which the minerals are found.l7 Even if the petroleum- and gas-producingprovinces of Argentina muid claim a larger share of the rents generated in their territories, it is unlikely that this would lead to anything other than a more generous welfare state on the Kuwaiti model. Perhaps the best evidence for this assertion is that the vast sums of money given to these provinces by the kderal government for years have only served to finance sinecures in the provincial government without generating a process of self-sustaining e m n m i c development. These provinces received enormous amounts of ruyaIicy payments ($500 million in 1988, about 0.4 pereent of national CDP), plus even more cash

through revenue sharing, industrial promotion, national treasuty contributions, and a disproportionate share of federal spending. None of this has triggered self-sustaining economic development in the past, and there is no reason to believe that expanding royalty payments or turning over ownership of mineral resources to the provinces will do so in the future, Underswring this point, one Patagonian province recently took its share of the proceeds from petroleum privatization and deposited them in a U.S. bank for lack of investment appormnities in the province, Industrial Promotion Schemes

Except for the processing of crops, industry was located almost entirely on the pampas until the mid-1950s. In 1956, however, the federal government introduced its first program to encourage private industrial development in the interior, a decade or so before it became fashionable in the rest of the world. This first effort established a duty-free zone south of the fortysecond parallel, roughly Patagonia south of the Rio Negro valley (Schvarzer 19W, 72ff).I8 It stimulated a modest amount of manufacturing development in the region. Since then, dozens of similar programs have been implemented. The Plan Cavallo ceased funding most new industrial promotion schemes during its first few years but never completely rejemd the concept. The benefits to Tierra del Fuego, for example, linger. Cavallo's resolve to be finished with industrial promotion has apparently f'attered, In fate 1994, the government proposed new tax incentives to promote industry in San Juan, La Riaja, and Gatamarca (Buazm Aires FIerald, December 4, 1994, p. 2).

The results of this arehefypal program in Patapnia were similar to those of subsequent industrial promotion schemes in the rest of the interior, and thus deserve exrended comment. First, the tax subsidies did not lead to widespread industrial development, Nearly all of the new factories that taok adwntage of the lw lacated in Trelew, the city closest to Buenos Aires but still south of the forty-second parallel. Second, by 1975, ninety-four plants had been built in the area, but fiftyone of these had been abandoned. Perhaps the failed plants were unprufitable even with the substantial subsidies. Perhaps they were only "factories with wheels," as they are called in Argentina, moving on to some orher province where tax subsidies offered by later laws were even larger than the subsidies available in Patagonia. Or perhaps their owners never intended to operate them once the subsidy was received. n i r d , the original law has been modified many times: twenty-WOlaws and decrees affccted the regr"on between 1956 and 1972, and many more

232

The Fiscal Cwr of"rhe Jnreriar's EXacbardnesf

changes have been made since. The tcgislative and reguiiator)l uncertainty m a t e d by constant change has plagued all of the progams af industrial promotion in hgentina, b u r t h , one of the most important tax subsidies in Patagania, and the most important in recent years, was the exemption from the value-added tax. As long as any stage in the production process of a firm took place in the prarnakd region, the final good was free of the tax (Cavaito and Zapata 1986, 136). There was thus little fiscal inantive to vertically integrate production in the promoted region, and many factories taking advantage of industrial promotion schemes undertook only token rictivities in the promoted area. Most af the factories in Trelew, for example, were wooien textile mills* On the surhce, this appears to be an mnomicalXy efficient lo~ationbecause the raw material for these factories was produced in large quantities in Patagonia. On closer inspection, we learn that the raw WO! ww shipped first ta h e n o s Ares to be cleaned and then back to Trelew-a distance of 850 mifes-to be spun, and finally returned to Buenas Aires for weaving. Thus, industrial promotion has produced an inefficient fragmentation of production processes and excessive transgortation costs. Furthermore, since most plants located in the promoted region were part of preexisting operations elsewhere, regional promotion was a beaar-thy-neighhr policy. A find implication of this form of investment was that; the investors rarely came from the promoted province, The potential for triggering a process of autonomous economic development was therefore minimal (kpiazu 1989, 70). Fifth, other than the exemption from the value-added tax, the tax subsidieswere, in effect, subsidies of investment in fixed capital, thus encouraging an artifidally high and inefficient level of capital intensity. Xn addition to tax subsidies of Fixed capiral, investors in industrial promotion projects also received below-mafket interest rates on loans fram the guvernment, In D87, this credir subsidy amounted to a billion dollars, about 1.2 p e m n t of GDP ( k t a n a 2 9 9 1 22). ~ ~ The share of this subsidy that went to the interior cannot be learned from available data. Sixth, since most industrial promotion projects involved a single stage in the production process of an enterprise whose other stages were in Buenos Ares, hacbard and fonvard linkages to other economic activities in the promoted region were minimal. The World Rank estimated an impact multiplier of 1.09 fnr the industrial promotion program in Patagonia (cited in Schvarzer IW, 75). The Patagonian experience, however, is not unusual; most promoted projects in the interior did not use locally generated raw materials or seH to local markets (Azpiam 1989, 69). Seventh, besides the tax subsidiesdiscussed above, incfustriat promotion in Palagonia and elsewhere in Argentina imposed indirect costs upan the Argentine economy. One of these costs was the inefficiency created by enmuraging the investment of resources in othewise unprofitable activities,

m e r e is no way to put a price tag on this distortion of the eeonorny, but one smdy sugests that this cost has been substantial." A final characteristic of kgentina's regional promotion policies is that they fortified oligopolistic power (Azpiam 1983,68,and 1992,18), This was not so clear in the early years, but by the 1980s the trend was unmistakable. Exact@how this came about is not altogether transparent. Industrial promotion benefits didi not go automatically to everyone who was entitled; insteacf, one had to make a specific proposal to the appropriate ministry for aweptance by the progam. The comple~tyand expense of the: approval process led to the exclusion of many small. enterprises. One reason the process was so expensivewas the bribing of the public affiGials invoked. There may also have been nonmonetary wnsiderations in the selection process (family ties, friendship, palitieal h o r s ) that allowed well-connected businesses to obtain approval, Note that in Psztagonia and elsewhere,industriaX promation schemes did not have mechanisms af control or evaluation. In the Iate 1980s, several independent researchers studied industrial promotion in kgentina, but the gcnvernmea itself never studied what it was doing to see whether it was a suaess or failure (&piam 1992, 18). According to a World Bank study, fraud, tax evasion, and inefficienq charaaerized industrial promotion in Argentina (dted in Solanet 1992; see aXso Artana 1991c, IS),

The government" next big industrial promotion scheme was in Tutum4n. As discussed in Chapter 4, the bottom fell out of the sugar market in the mid-1%Qs, and Tucum6nk emnomy was devastated. The province's sugar production was dominated by ineffi"&entmin$ctzdios, and the collapse of sugar prices became an economic tragedy for the province, Wealth and income are very unevenly distributed in the pravinee, and the level of social hostili? was high. These social tensions produced a perrilfa war that was not finally sramped out until the military took over the country in the late 1f)"irt)s. An early response to the crisis was Qperacidn Tucuxngn, an industrial promotion scheme that @we huge federal tax subsidies to industries that built new factories in the province (Schvarzcr 1990,76fc Bones 1985,26ff). The industrialists' response was unenthusiastic, so the subsidies were raised in 2972 and again in 1974. Moreover, the benefits enjayed by TucumAn were mended to Salta, Jr?juy, and Santiago del Estero (Boneo 1985, 30)By 1975, 150 new installations had taken advantage af the promotional Iaw in Tucuman. Under the program, $27 million was invested, leading to jobs for 10,000 people, a tiny fraction of those who emigrated from the province seeking work elsewkere. The tax subsidies to this program were $ 3 M 3 million (depending on how they are calculated) that is, larger than the

2.34

771e F&cal Cost of r/ze Inlenir,Y"sBackruardnas

amount invested, Mter 1973, Operation Tucum%n lost steam as other provinces received promotional programs of their own. In 1972, a new law offered substantial benefits to wmpanies that h i l t factories in Tierra del Fuego (Schvaner 1990,79-82; Azpiam 1989, SMQ), Qnfy 16,000 people inhabited the Argentine side of the island, and the wool and forestry activities that kept the ecanomy alive were in serious trouble. The Peranist government that took power in 1973 had no interm in the program and did not approve any projects. The military, with its territorial obsession over Patagonia, returned to power in 2976 and immediately breathed new lift: into the program, The law has been modified often, but its essential outline has remained unchanged. In IW2, the government announced that the program would be canceied at some unspecified date in the fumre pumas Aires Herald, November 11,1992, p. 3). Subsidies under the program have been substantially reduced, but not yet eliminated. Industrial promotion in Tierra del Fuego really took off in the early 1 9 a , when color television arrived in hgentina. There was a high tariff on tetevisiun sets but none on components imprted into Tierra del Fuegcl. Industry there was also exempt from the value-added tax, the income: tax, and social securiy csntributions. mree-quarters of the new factories in Tierra del Fuego assembled electronic appliances, They were imported in "kits" and assembled in Argentina to be sold in the domestic market. Nearly WO-thirdsof the country's televisions and radios in the 1980swere assemb'ted in Tierra del Fuego, Xn 1983, the law was changed to require that the vafue of imported inputs wutd not exceed domestic vafue added, but the law was apparently ignored, The number of indusmrial workers g r w mclre than tenfold to six thousand by 1984. By 1986, S percent of the nation's imparts came to Tierra del Fuego. The drop in tariffs on eonsumer electronic goods under the Menem government has recently produced hard times in the island province. W r k e r s responded with violent strikes and demonstrations in May 1994 and March of 1995.,

In the same year that the T"ierra del Fuego program was established, an industrial dispromotion scheme fnr Etuenos Ai-reswas enacted (Schvarzer 1990, 82ff). New factc~rieswere forbidden in the city of h e n o s Airres. Within a thiq-sk-mile radius from the center of the city, the government imposed a tax on new factaries that was proportional to its distance from the center of the city, thereby stimul~ingthc mnstruction of a neur industrial belt around the city, exactly thirty-siu miles from the center. Mter 1977, any factory located within the thiry-six-mile ractius wuld not receive benefits from any industrial promotion scheme, AdditionalEy, new factories were prohibited in GrErdoba and Rosario, the next WOlargest cities in kgentina. Beween 1979 and 19M,a law placed rcstrictisns on the numbers of emplay-

ees that different kinds of industriaf establishments in the suburbs of Greater Buenos &res were permitted. The motive behind these Iaws of dispromotion promulgated by various military governments was to reduce the concentration of blue eoffar workers in the major industrial cities. It was the uprising of factory workers in 1W in Cbrdoba that trigered the unrweling of the Ongania regime, which cansequentfy brought chaos to the country and the return of Percin. Eager to avoid worker-based resistance to its pfains for national reeonstmetion, the military set about to disperse the industrial working class throughout the country,

In 1979, the military gnvernment established a new scheme of industrial promotion for the province of La Rioja that offered huge tax subsidies to companies williing to locate there, The province was permitteri to grant federal tax exemptions for small prgects (up to $1 million) without any approval from the federal government, and thus almost afl of the projects cost just under $1 million." Put another way, the provincial government was g&en the authorilty to spend federal money without any control, Xn 19M, Catamarca and San Luis and, not long after, San Juan were given the same progam as La Rioja. By 1984, the projects approved pravided tax subsidies that were seventeen times as much as mthorized by the enabiing iegislatictn. The subsidies were as mueh as three times the size of the capital invested in the project, Corruption and misrnanagtzment in the administration of the program were substantial. Investors from outside the province owned almost all of the factories. Bachard and foward linkages ta the local economy were virmally nsnehstent (Scfivarzer 1990, 8&90; Yoguel et al. 1987,624). Many nf the new installations made no economic sense (FIEL 1988, 171). In La Rioja, a Iarge tanner), was built; if all the wttlle in the province were slaughtered at once, it would have kept the operation supplied with raw materials for two and a half months. In San Luis, a factory was built to exercise quafity cantrol over textiles woven in Buenos Aires (500 miles distant), After the inspection, the cloth was sent back to h e n o s Aires for m a n u f a c ~ einto garments by the same eompany. Zn the faur provinces taken together, promoted factories were large enough to use all of the nation's output of steel, leaving the rest of the eountryfs steel fabricators without any raw material. The steel was produeed 5 rniles away, and the new factories' major markets were also hundreds of mites distant. Excess capacity plagues many new hctories; unable to sell their praduct in the weak domestic market, they haw been forced to export at priees far b e l w the domestic price (Azgiazu 19W, 78). Xn some pmvinces ("Tierra del Fuega, La Riuja, Catamarca), there is praeticalty no industry that is not located there because of some industrial

promotion program. In many other provinces (Chubut, San Juan, Formosa, Santiago del Estero, San Luis, Neuyukn, Santa Cwz, and La Panpa), industia! promotion has created most but not all of the province's industry (Gatto, Gutman, and Y o m d 1987, f 2%130, 139). Most manufacmring in other parts af the interior is the processing of agricultural products like wine, sugar, and paper that were heavily subsidized. ''I% manufacmrinl; =, in the interior is almost entire& the consequence of substantial subsidies from the federal government. When these benefits cease, there are very few areas in the interior that hme built up enough momenmm to be able to continue developing on their own. W I Idw&&f ~ Promolion Does Nog Swcaed

Stimulating industrial development in the interior of Argentina is an uphill battle. The problem is essentially the lack of external economies or emnomies of aglomeration that the major industrial cities of Buenos Aires, a r d a b a , and Rosario offer. n e s e cities already have a trained, disciplined work force amstomed to the rhythm of hctsry work, which is absent in areas where industry is new. Suppliers of raw m~erials,parts for machines, and specialized business sewices are already located in the three major industrial cities. When the machine breaks in Buenos Aires, it may take a day to have a new part installed. A factory 1,Wmiles away in Jujuy may be shut down for several days while the new part is obtained from suppliers in Buenos Aires or skilled repair personnel are brought in. Even if the part and the skilled labor to install it are an site, larger inventmies of parts and raw materials are required, given the difficulties of transport. Even more important than these static mnsidcrations are factors that have to do \rJit.h the dynamic of change in the technology sf prwduaion and in consumer tastes?' An enterprise that does not stay abreast of the latest techniques or consumers' whims does not last long in today's world, Even if routine production processes eould be decentralized w a y from the major industrial ciries, top managers often must remain where they can stay in tauch with trends in technology and marketing. Most manufacmring estahlishments in Argentina are family enterprises, and managerial authoriy is not delegated outside the hrnijy. Buitding a new plant in Tretew or Santiago del Estero means splitting up the family, an important drawback in a sacie-ty where families are very closelly knit. Perhaps the mast important aalorneratian economy has to do with consumption by managers and technicians rather than the acmat production process itself, Most of the new bctories h i l t under industrial promation sehernes are owned by firms located in h e n o s &rev and not by firms whose owners already live in the province. mus, managers from Buenos Aires must be sent to run the new plant, Even if an efficient blue ~ E l a rlabor

h r c e could be recmited in La Riaja or Posadas, managerial and technical personnel simply refvse ta be relocated (Bonea 1985, 131-132). Buenos Aires is the most sophisticated and urbane city in South h e r ka, The glitter and amenities of Buenos Aires contrast sharply with the provincial capitals in the interior, most of which have no more than 100,000 or 200,600 people, Outside the provindaji capital there are just small towns, In some provincial capitals, most of the houses do not even have sewers. Doctors are few and poorly yuafified; hospitals lack the most up-to-date equipment. The educational sjtstem presents important obstacjes to industrial decentralization. The schools in the interior are inferior to those in the miltjar cities af the pampas, It is difficult in kgentina for smdents to transfer from one school or univefsity to another, even if an acceptable alternative in the interior could be found. To do so might mean repeating several years of classes. The best universities are in Buenos Ar"res or a r d a b a . University students usually live at home, so parents of universiyage children cannot easily Ieave the major industrial cities. Xn Argentina, the educational system cannot gracefirfly ammmodate industrial deeentralization.

In the mid-1913&, the industriaf promotion programs for La Rioja, Gatamarea, San Juan, and San Luis were eaendcd to all sf the provinces of the countrgr. The federal government directly administered the proFarn for the newly added provinces. Since federaf oversight was far more careful than provinciat oversiat in the original provinces, the latter continued to receive a disproportionate share of industrial promotion funds. In addition, in the last two decades, a number of other industrial promotion programs have been promulgated, Tagether, there were about thirty such schemes by 1990. In 1987, the Argentine government spent $2.7 billion promoting industry (Artana 1991c, 23). Half the federal subsidies went to regional promotion schemes such as those described above, and almost all of this went to the interior. h o t h e r 30 percent had benefits that went excjusively to the interior (cTierril del h e g o , a l w h d , sugar, tobacco, ports in Paragonia, cottan, and yerba mat61 or had benefits that went mostly tto the interior (fishing). Same of the remaining 20 percent (reforestation and export promotion) affcrred substantial beneEits to the interior. in total, the benefits received by the interior, although they cannot be calculated precisely, were roughly $2 billion in 1987. The four povinces (La Riaja, Gatamarea, San Juan, and San h i s ) with their own pmmotianat program got the lion's share of these benefits, receiving almost $1 billion, just over $1,OW per inhabitant (Artana and Salinardi 1991,62). San Luis received $4,824 per capita annual-

ly in industrial promotion subsidies, and La Rioja received $919. San Juan and Catamarea got $413 and $513 per capita, respectively (FXEL 1993, 91). Between 1987 and 199Q,these four provinces averaged almost $2 billion annually from industrid promotion, nearly double the figure far 1987. Misiones was another province especially favored.z2 As an indication oE the quantitative significanceof grants to the inrerior for industrial promotion schemes, tax subidies to only the four mast fav~red provinces amounted to 1.7 percent of CDP in 1987 and slightly more from 3987 to 1990, Adding in other industrial promotion schemes brings the tatat to abut 2 percent of CBP (derived from Astana 1991c,21; and k t a n a and SaXinardi 1992, 62). The cost of trying to bring jobs t s a re&ion whose development was in reverse was thus not inconsequential. B e m e n 1973 and 1987, 40 percent of net investment in Argentina received benefits from industriat promotion schemes. Tax subsidies often acceded thc h n d s invested by companies that received the subsidies. By the mid-198&, 90 percent of net investment in the country benefited from industrial promotion, Private investors had virtually stopped putting up their own money. Furthermore, since the interior received the bulk of these tax subsidies, the majoriv af private net investment was in the interior by the t98Os. All of the abave estimates of the costs of industrial promotion are based on the costs of projects as they were officially approved.'l The actual wsts were far greater, perhaps as much as double these official figures. One way by which the actual costs exceeded the actual cast is that the benefits of industrial promotion ineluded nor only tax forgiveness,but also tax postponement* During the inflationary 198Os, postponing the payment of tmes for a year or two was tantarnaunt to a sharp reduction in real tax liabilities. b o t h e r example is that projects would he approved under the assumption that a promoted factory would operate with one shifc per day. After approval, the factory waufd run three shifts per day, triplting the tax subsidies based an the value-added tax (which was the most important tax subsidy), The government has had some success in controlling the costs of industrial promotion. In the last few days of the Alfonsh government, the size of the tax subsidies to industrial promotion were cut and the Menern government reduced the subsidies stiII further almost inmediateIy. Together, these cuts reduced the tax subsidies uf industrial promotion by half. The ifolfowing year, approvals of new industrial promution projects ceased and penalties were imposed on wmpanies that had not fulfilled their pmmises concerning production, employment, and investment (Massaeane 1993,9, and 19948). These measures reduced the totat costs of industrial promotion by nearly half (Massacane 1993, 14-15). AIso by decree, the government began ta reintroduce in stages the value-added tax in Tierra del Fuego. Even though new projects are no longer being approved, the continuittg subsidy of existing projects persists at about $2 billion annually (Artana and Murphy 1993,

17ze Fkcal Cost of the Inrehrls Bachfardness

239

212-213). Since the laws authorizing industrial promotion were never repealed, they remain latent threats to fiscal stability. Federal Spending

Federal government spending in Argentina is not evenly distributed among the provinces. There have been three smdies of the regional distribution of federal spending and they can help us determine whether the interior is subsidized or disadvantaged by the way the federal governmem spends its moncy. In the late 1950s, the Qnsejo Federal de Inversiones (the Federal Investment auncil), a government agency ehargedwith studyinginterprovinciaI economic afhirs, analyzed the issue (FIEL 1991b, 2%). A secclnd study by NfiRez Mifiana and Porto (1984)used data from the late 1970s. Conejero and Dorninwcz (forthcoming) carried out the third study using B83 data. (See aka CavaIfo and Zapata 1985,93-103). In sorting out this issue, one must distinpish b e ~ e e nspending that benefits the entire nation (central ahinistrstbn, except justice, dcfc-nse, and economic development) and spending that benefits specific localities (justice, police, health, education, and culture).

In 1983,17 percent of federal spending that benefited the entire nation was spent in the interior although at that time it had 29 percent of the nation's population. On the surface, it appears that the interior did not rewive its fair share. Nevertheless, over half (53 percent) of federal spending in this category was spent in the Federal Capital, which had less than 11 percent of the country's population. Outside the Federal Capital, the interior's share of federal spending on indivisible public gaods was slightly greater than its share of the population (35.0 percent versus 32.6 percent)." Whether or not the interior was getting its fair share of federat spending depends, therefore, on whether or not the Federal Capitat's disproportionately large share is somehow justified. The reader shauld note that the Federal Capitat is only a part (30 percent of the population) of the Buenos Aires metropolitan area. Federal spending on indivisible public goods in the capital benefits residents of the capital, of wurse, but it also benefits those who live in the surrounding suburbs (those who live in the sllburbs but work far the government in the eentral city and those who benefit from the regional multiplier effects of government spending in the capital). In the late 1970s, metropolitan Buenos aires had 35 percent of the nation's population and just under 60 percent of federal government spending on indivisible public goods.% Thus, the federal capitat's share of federal spending is not as disproportionate to its population as first meets the eye.

There are very good reasons why federal spending on indivisible public p o d s is wncentrated in the capital city. The clustering of government activities increases the efficiency of public administration for the same reasons that exrental mnomies draw private businesses together into elose progmity. The consuftative and interactive namre of governance requires spatial agilomeration, especially in a countfy like Argentina, wheae the mnmunications and transportstion infrastructure is z;o poor and political pawer is high& @oncentrated. In w e q country, national governmental institutions are entered in the capital city. Tkat, of murse, simulates the economy of the eapital city, but this is dift"icult to m i d exeept by reducing the size and importance of the national Wvernment. Unfarmnately, there is na way to show that the 53 percent of federal spending on indivisible public p o d s spent in the Federal Capital in 1983 was the mast efficient distribution. Perhaps inertia, incompetence, eormption, hvoritism, porl"eI;ilo ectnspiracy, or some other reasan explains the capital" large share of federal spending, On the other hand, perhaps the most efficient spatial distribution of spending on indivisible pub'lic p o d s would be still more concentrated than was in fact the case, This might be so if the interior's palitieaf power permitted it to farce excessive spending in the interior. The issue is simpIy beyond empirical demonstration. Federal Spend@ on h a I Needs

The kgentine government also spends money in ways that benefit specific loc;llities rather than the nation as a whole. Provinces of the interior together received one-third of all national government spending on local needs in 1983, slightly higher than their share of the populatian (derived from Gnejero and Dominpez f'orthmming, 12-23). Per capita spending on focal needs was lowest in Buenos Aires Province, and a r d o b a Province came in seeand, Federal per capita, spending an focal needs was highest in the Federat Capital, but it was the pampean care, not the interior, that subsidized the Federal Capital, Furthermore, the interior, as has been discuslied abave, received far more than its per capita sbare of other kderal funds such as caparticipation (Gnejero and Doninguez forthcoming, 7). Arlding together federal spending an local needs and low1 spending financed by federal funds, one finds that the interior aecaunted for 45 percent of the total in 1983, far greater than its share of the p o p ~ l a t i o n . ~ The conclusion that the interior is not subsidizing the federal capital is mrrobrated by other st.udies af the regional distribution of federal spending. The Gonsejo Federal de Inversiones found in the late 1950s that the federal district was subsidizing the rest of the country (cited in FIEL, 1991b, 296). The sfudy by PJGfiez Mihana and Porto using data for 2978 s h w e d that the Province of Buenos Aires outside the suburbs of the Federal Capital subsidized the rest of the cnuntry. The subsidies went to both netropoli-

tan Buenos Aires ( h u t $55 per capita) and to the other provinces taken as a group (about $25 per capita)? Since 1978, as was noted above, the thrust of hgentine public finance has been to increase the bias in b o r of the interior; this has included specific effarts to dispromote the economy of the fcderaleapital, Therefore, although there has been no carehl study of this isue in the last twelve years, it is most unlikely that the residents of the federal capital are receiving any subidies from the interior. As the seat af the national government, any federal district (be it Buenos Aires or Wilsfiington, B.C.) is farced to bear expenses that no other jurisdiction must. To finance these expenses, capitals must receive national government assistance, since much of the their real estate is under federal jurisciiction and not in the focaI tax base, Moreover, people who live outside a federal capital, most especially in its wburbs, take advantage of services that the federal capital provides (far example, hospitals, theaters, museums, and rods). mus, national governments, including those in the United States and Argentina, routinely subsidize their federal districts. The existence of these subsidies is neither remarkable nor avoidable, At any rate, the evidence indicates that in kgentina the interior is not the region that supplies these subsidies, Instead, the interior receives a slight@larger share of federal spending on Iocal needs than its population warrants, Federal Transfers and Provincial Tax Efirt, As the number and size of federal transfers to the provinces have grown over the last half century, the share of provincial spending financed by provincial twes has declined, Besides this secular trend, there is a cyclical variation, The provinces have financed a smaller share of their own spending when the eeanomy eotfapses. Moreaver, m i l i ~ gclvernments q have been more likely than civilian to enforce fiscal discipline an provincial governments. In 1900, provincial tawes financed 93.5 percent of provincial spending. By 1960,just over half of prwincial spending came from provincial resources, During the economic chaos of the sewnd Per6n administration, the provinces collected less than a third of the dollars they spent. The military government that followed at first reduced its wntributions to provincial governments, but the economic eolfapse at the end of their rule forced a reversal of this poliey. Alfonsin reestabtished a sense of fiscal di~iplinein the provinces in the early years of' his &ministration. As the emnomy lurched tsward hygerinflatian, however, the fiscal sirnation in the provinces deteriorated. E3y 1988, the Iocalily generated share of provincial revenues approached the historic lows of 1975 and 1983 (Porto 1990, 112; FIEL 1991b, 278). Only modest improvement has been achieved since then ( h r n 31 pereent local in 1988 to 34 percent in 1991) PIEX, 1993,89).

As federal mntributions to the provinces rose and as these contributions became steadily more repessive (favoring to the poorer pravinces), WO things happened. First, the poor provinces found that they did not need to tax themselves so heavily. At present, the wefy poor provinces collect almost no t a e s and exist almost entirely on federal largess, Second, as federal contributions to the poorer provinces mushroomed, their spending grew seemingfy without restraint, Table 11.3 presents data that demonstrate the feeble tax effort made by most of the provinces of the interior. Tax effort is a measure of a jurisdicthn"s tax milections wmpared to its ability to collect taes, that is, its tax base. A province that collects more taxes than a comparable jurisdiction with the same tax base is said to be making a greater tax effort, As the first column of Table 11.3 shows, all of the core pampean provinces raised a larger share of their government funds through taviengtheir own residents than did any of the provinces of the interior in 1988. The core pampean provinces raised 46 percent of their resources through provincial tawes. If the federal capital is included in the pampean care (not shnwn), the pmportion rises to 55 percent. The provinces of the interior, however, raised only 11 percent of their resources through provincial tawes. The proportion ranged from 20 percent in Mendoza, the most prosperous of the provinces of the interior, to 4 percent or less in La Rioja, Catamarca, and Formosa, which are among the very poorest provinces. By this measure (provincial tluces collected as a share of total provincial resources), tax effort had fallen in the quarter centuify prior ta 1988. Since 1988, however, the Menern administration has made remarkable progress in forcing provincial governments to increase their tax collections. The first two csfurmns of Tabfe 11.3 show that in every province but one (Santiago del Estero), provincial resources as a share of total spending rose bemeen 1988 and 1992, in some cases by substantial amaunta Salta, Jujuy, Mendoza, and the Patagonia provinces made the greatest increases in tax effort, and the average for the muntry as a whole rose from 31.4 percent to 44.8 percent. There are some provinces, however, that lag far behind the others, Formosa and Santiago del Estero still collect in tmes less than 10 percent of their hnds. Catamarca, Corrientes, Cham, La Rioja collect less than 15 percent, The third wlumn of Table 11.3 gives another measure of provincial tax effort in 2988. Xt is the result of dividing each province" share of totat provincial tax collections by each province's share of the total provincial tax base (as measured by an index that takes into account provincial grass product, automobile ownership, and housing stock) and subtractingone. For example, Buenos Aires had 42 percent of Argentina's provincial taw base, while Jujuy had 1.8 permnt, On the other hand, Buenos Aires received 48 pereent of all taxes collected by the provinees, so it bad an above-averap tax effort ( [47.8%/41.6% - l] x 100 = 14.9). Jujuy collected 0.8 percent of the

TmLE 113 Tax E@art,1988 and f 992

@R

h m p Buenos Aires Santa Fe ardoba

Noahwest Salra Tucum%n Jujuy La Riaja Gatamarsa Santiago CL~O Mendoza San Juan San Luis

Noflizeasr Gorrienles Misianes Formosa Cham

P@agon& NecxquCn Chubuit

Santa C m Rio Negro All Provinces

Suvces: Columns one and three, derived from FXEL 1991b, 281, 291; G l u m n two, Gxlzziano 1993,8A,

provincial t a e s and so had a less-than-averagetax effort (f1,81%10.77%- 11 x 100 =. -5'7.5). A positive number in the third column indicates that the province had a tax effort that was above average and a negative number indicates a below-average tax effort, All of the core pampean provinces had a positive index; the average for these three provinces was 12.8. NI but three of the provinces of the interior (Rio Negro, Tierra del Fuega, and San Luis were the exceprions) had a tax efEort that was less than average. Jujuy, Gatamarea, arrientes, Chubut, and Santa Cmz were putting out the least tax effort by this measure, and Misiones, Salta, and San Juan were not far behind, One way to Ioak at the carnbined impact an the Argentine eGonomy of the weak tax effort in the interior and its Xow level of eeonornic development (and thus low tax base) is to calcuiate what would happen if the interior provinces had the same tax effart as the pampean provinces, In 1988, 46 percent of the pampean-core provincial government funds came from taxes levied by those provinces. If each province of the interior had also raised 46 percent of its Eunds through provincial taxes in 1988 (instead of the 11 percent or so that it did rake), the interior could have forgone about $1.1 billion in federal cash transfers {kom coparticipation, other revenue-sharing programs, national treasury mntributians, but not including industrial pmmotion) used to make up the shortfall in their revenues (calculated from mEL XWlb, 278). 'This amounted to about I percent of the country's GDP. If one includes the federal capital in the parnpean core, the proportion rises to 1 2 percent. Federal Trilnsfers and Provincial Spending The federal government has given enormous sums of money to the provinces, mast of it without any strings attached. By simple reference to experience,the provinces knew that if they spent all of their federal cash and then same, the national government would bail them out. The fact that most provincial governments are patronage machines fueled by large injections of cash to finance the hiring of ever more employees meant that the provincial g~vernments\~ould be Ecrrever cash hungry, Moreover, provincial economies have spiraled downward since the 1960s and 1970s. Without restraint on their spending and with ever growing demands, prnvincial governments have seen their budgets grow explosively in recent years. The provincial share of totat government spending has grown steadily over the years, from 38 pereent in 1950 to 53 percent in 19% (Porto 1990, 88). Beween 1950 and 15179, per capita real spending by the federal government grew 22 percent, while the same figure for provincial governments grew 248 percent (World Bank 1985,6243). Much of this was because provincial governments hired many more workers and paid them very well, Beween 19CiO and 1985, the number of federal government employees increased by

40 pereent, while that of provincial government employeesgxw by 140 percent, Provincial wernment employment as a share of total public employment grew fxom 26 percent to 49 percent (PiEfano 1.988, 8.19)" B e ~ e e n 1983 and 199'1, subfederal public empjoyment grew by almost SO permnt, despite the emnomic crisis and repeated attempts by the national government to impose austerity (Rouco 1992, 22). From 1955 to 1981, federal lifovernmentwages v e w 15 percent in real terms, but provincial pvernment wages grew 50 percent." Not only have the provindal pvernments m a whole gained on the federal government, the growth in the interior provinces has been far mare rapid than in the pampean provinces. In 1900, when federal financial assistan= to the provinces was minimal, the most advanced provinces (Buenos Aires, a r d o b a , Santa Fe, and h"fend0z.d)spent five times per cqita what the most bacbard provinces spent (La Rioja, Gatamarca, Corrie~es,Jtxjuy, Mkioncs, Ghaeo, Santiago, and Formosa), By 1960, they were spending roughly the same amount per capita. E3y the mid-198h, the poorest provinces were spending almost tufice what the most prosperous provinces spent on each citizen. La Rioja spent five and half times as much per capita as Buenos Aixes Province (which had the lowest per capita spending), and Tierra del Fuego over seven times as much." Most spending by the provinces is for wages and salaries; the growth in spending in the interior has produced a. commensurate growth in the public ernpwment there. Whereas h e n o s Aires Province in the late 197Qs had 6 police officers for every 100 citizens, the most underdeveloped (and far iess urbanized) provinces averaged almost 13 (Porto IW0, 148). They also had more than mice as many judges per capita as Buenos Ares P r w inee, The latter province had 23.3 students per teacher in 1987 in primary schools, while the cauntry average was I'7,8. Santa Fe and a r d o b a also had very high ratios. Mendoza was the only interior province to have a hi& ratio (UNICEF 199'1, wadro 13). The employment mlls of some provincial governments of the interior grew spectacularly in the 1980s. For example, b e ~ e e 1987 n and 1990,public employment in Rio Negro rose hy nearly 40 percent in these faur years of crisis and supposed fiscal austcriv (Artana 1991d, 911). In Formosa, public employment grew by 68 percent bemeen 1983 and 1992, and in Misiones by 57 percent, Nevertheless, during those years, publie employment in the provinces of the interior as a group grew about as much as on the pampas (about 45 percent) (Naszewski 1993, 7). What distinguishes the interior from the pampas is not recent growth in public employment rolls but the proportion of the population employed by the provinca'at gavernment and the proportion of provincial spending altocated to personnel.Table 11.4 shows that the proportion of the provincial population employed by the provincial pvernments in the interior in I992 was double what It was in the core pampean provinces, The three mre

T B L E 111.4 Provincial Government Emplayment and Wages, 1992 As a, Perantage of Provincial Population

Gore Pamps Buenos Aires Santa Fe firdoba

N~trlIz west

Salta Tuwrnhn rujuy La Rioja Qtarnara Santiago CUP Mcndoza San Juan San Luis Norlleasc Qrrientes Misianes Formosa Cham

Faago~k Neuqu&n Chubut Santa C m Rio Negro Zerra del Fuego A~feragefar all Inferior Provinca

" Ilnweighted, Sottree: Adapted from NaszewsG f 993, 7,

As a Permntage of Current A m u n t Provincial Spnding

me Fiiscal O g t of rhe Infen'or's1Elacbafd~ess

247

pampean provinces had 2.4 percent of their residents working for the provincial government; all of the provinces of the interior had higher praportions. It exeeeded 7 percent in Caramarca, La Rioja, Formosa, Neuqu&n, Santa Cruz, and Tierra del Fuego." The second column of Table 11.4 shows spending on personnel as a proportion of total mrrent a m u n t spending by provincial governments, In the core pampean provinces, the f i p r e was 55 percent; in faurteen of the eighteen interior provinces, the f i p r e w e e d e d 60 percent, and in five provinces it exweded 70 percent. Formosa, Chaw, and Salta tied at 72 perwnt for the highest ratio, Thus, the funds that the interior provinces receive from the national government go ta hire workers rather than build the infrastmcture that could spur economic development, Once workers are hired, their salaries eannot be paid, so the provincial governments clamor forstill mare firnds, and the cycle repeats itself (Ganejero and Daminmez forthcoming, 4). Reducing provincial labor casts at this point will be exceedingly difficult since there are so many government pensioners in the provinces, In Catamarca, far emmpfe, 20 percent of the population is either on provincial or municipd payrolb or is a retired p e r n m e n t worker receiving a pension (Mercado 1993). A onequarter drop in the number of provincial pvernment workers would mean that there w u l d be one pensioner for every worker (FIEL 1993, 175).

In the last W decades, a umber of federal systems including Argentina have devolved activities from the federal government to subfederal levels, In 1970, the federal government turned over the operation of public hosgitals to the provinces, and in 1978 mast of its primary schools; in 1992, it devolved operation sf secandary schools and the rest of the primary schools ta the provinces, One reason for doing so rested on the belief that local government is closer to the eitizency and thus more in touch with their needs than the remote federal bureaucracy. Moreover, the federal government has grown supposedly tou big to be efficiently administered, The evidence in Argentina, however, is that provincial administration is far less efficient and more subject to mrruption rhan the fcderal gavemment, especial& in the interior (World Bank 1985, 8&-89). These provinces have weak budgetary and accounting wntruls over spending and inadequate reporting systems on how money is spent. In 1976 the military government disbanded ar rendered inoperative provinGiaf government rcchnical bodies responsible f o g budgetary and financial planning, The least dcvcloped provinces have trouble attracting qualified personnel who mu1d conduct the needed financial analysis and who are willing to live and work in remote provincial capitals, Investment planning and prnject evaluation capabiliv does nut exist, so investment decisions respond mostly to political pressure. Fiscal Merajism in Argentina

248

?lie

Fbcal C m of the I~rterri,r"sBachardaess;

may produce government that is closer to the citizenry, but on@at the cast of increased inefficiency and corruption. A Summary Measure of Federal Tmnsfers

T%is chapter has discussed the resources transferred to the interior by revenue sharing, national treasury cantributions, industrial promotion, the inflation tax, and federal spending. A usefuf way to summarize this chapter would be to add together the estimates of the size of each separate federal transfer ta give a rough idea of the total impact on the entire economy of fiscal transfers to the interior, In 1988,revenue sharing and national treasufy contributions transferred to the provinces of the inferior about 1percent of CDP more than if these programs had distributed the same per capita amount to the interior that it gave to the care pampean provinces. Industrial promotion schemes transferred to the interior about 2 percent of GI)P between 1987 and 1990 amrding to the official fipres but perhaps mice as much if all the msts are counted.)' Provincial governmental deficits in the late 1980s averaged 1.7 percent of CBP, about half of whieh was incurred by provinces af the interior, Sinw the national government backed up mueb of this debt and the provinces were able to collect much af the rest through the inflation tax, most of this muld reasonhly be seen as a transfer of wealth to the provinces, Together with national treasurycontributions, these fiscal meehmisms

transferred at least 4 percent of W P , and perhaps S or 5 percent, to the interiar in 1988, Ta put the 4 percent figure in perspective, the entire public sector deficit for 1988 finctudingpublic enterprises and provincial and local gsvernmeats) was less than I1 percent of GDP (FIEL 1991a,23), Over one third of this deficit arose in the interior provinces or resulted from federal fiscal transfers to the interior provinces in excess af a per capita distribution, which were a consequenw of the interior" bbacbardness. And it was this deficit that was the primary rnator of the inflation that was mining the economy. This 4 percent, however, was only a part of the transfers h r n the national to the provincid governments of the interior. m e interior provinces received a b u t 0.4 percent of national CDP as royalty payments for the extrstion of minerals, but this was not induded in the 4 percent since some have argued that: royalties should have been still higher. It does not include the disproportionate federal spending for focal needs in the interior bemuse of estimation difficulties. *er 1 percent of CDP went to federal subsidies of credit for private businesses; a large share of thefe subsidies went to the interior. The 4 percent figure does not include this subsidy, again because af problems of estimation.

Furthermore, this 4 percent does not include any of the costs to the Argentine emnomy of the distortions that most of the cash transkrs provoked that eannot be measured. For example, one costly digortion aeated by these transfers is the increae in rent-seeking behavior that they encouraged, Moreover, this estimate does not include transfers from the pampm to the interior by means other than through the federal fisc. The consumers of the pampas paid for the trade protection offered the economic activities af the interior by means of higher prices for cansumer p o d s * Furthermore, the estimate does not include the eclsts imposed upon the pampean economy by the millions of penons who have fled the collapdng economies of the interior and live in squalor in the shanqtowns around the major pampean cities, The fiscal burden of the interior on the Argentine nation increased substantially over the 2980s, beaming an important part sf the crisis that forced R d l Alfonsin to resign in disgrace in 1989, For example, spending on industrial promotion sehernes in 1987 was two and a half times what it had been when Nfonsin took office and it continued to grow through the end of the decade, Royalties to the mineral-producing provinces of the interior grew twelvefold befvveen 1973 and 1988, atthough the international price of petroleum in real terms was roughly canstant (EEL. 1981b, 279). Mineral royalties under Nfonsin averaged three and a half times what they had been under the previous military government. Revenue sharing and national treasury contributions during alfonsl'nk administration averaged 15 percent more in real terms than during the previous military gavernrnent and far mon: than during the early 1970s and was just shy of the previous peak in 1975 (FfEL 1993, 159). As pointed out above, these programs became m c h more redistributive in favor of the interior during the 19a.3' The hgentine emnomy has many g a v e problems (far example, industrial inefficiency, corruption, lass of productive capacity due .to chronic malnutrition, etc.). Each af these problems may have cast the kgentine emnorny more than 4 pement of its CBP in the late 198h. The argument that f seek to make here is not that fiscal transfers to the interior or even the underdevelopment of the interior in general were the only or the most important cause of Argentina's difficulties, I do arwe that they were one of several important causes, and one that deserves extended discussion because they are so communly ignord or denied, The Menen government has made progress in reversing the fiscal disaster of the late 1980s. The government has no longer apprwed new industrial promotion projects since 5991. Revenue sharing grew rapidly until 1993; but since then the rate of increase has slowed and vigorous efforts have been made to instill a sense of fiscal restraint in the interior. h mineraf resources are privatized, royalty payments will vanish, On the other hand, the collapse of many regional ecanomies has produced enormous political pressure to reverse these reforms. The provincial fiscal deficit gxw

in 1993 and was expected to grow further in 1994, The process of restme mring provincial finances has on& just b e p n . By mid-1995, government officials and editorial writers gronaunmd the provincial fiscal erisis to be the major challenge facing the Menem government (for example, see %a Naei6nI Juiy 2, 1995, Emnomia, p. 1). 'The normally invisible inkrior was n w thrust into public awareness. The cost of ignoring the interior for so many years threatened to undermine the stability of the national economy. Notes 1, The federal government and the provincial governments muld have just agreed, as is common in mast federal qsterns, to tax the same revenue souras instead of resarting t o revenue shaxing. Moreover, the wnstitutional prohibition against tmes on internal esmmerw muld have been enfarad without any specid a m r d . In ha, the agreement to end thew taxes was onIy parlially s u a s h f , It was nat until the 1950s that a wmpact among the pravineial governments eliminated most provincial tmes on internal cammerm. Even today wme such twes remain despite the wnstitutional ban (FIEL 1991b, 289). 2, Whether a r not it did depnbed on differenms in tax eEfofl (tax callection as a perent of the tax bawl, for which no data are available. 3. me= were the provincial tax bast=, provincial expnditures in the previous year, provincial tax eolledions in the mrrent year, and the federal tax revenue eolleaed in the provinm in tmes that were part of the revenue-sharing program. 4, Albefia Port0 has supplied me with his ca'lcu1ar;ions showing that a 12-15 perent retail mIes tax would be required ta replace the tmes deemed offensiw by the federal government. This is in addition to a federal 18 permnt value-added tax, In Patagonia, however, taxes on produaian (petroleum, fish, wool, fnrit) generate substantial revenue, but retail trade is meagr. The sages tax wouXd have to be much higher than in the rest of tbe interior to m&e up for the lost revenues. a n s q u e n t ly, the Patagonian provinces stout@ resisted the reorgankation for frfiwn months a&er its announantent, The deal was mveetened in Deeember 1993, and Patagania finally signed on. 5. 'This asurnm that the taxes subject to copaaiGipation =re proprlional to provincial gress produet, Doubts about this assumption some to mind. For exanplc, one might guess that in a cauntry like Argentina, where tax evasion is rampant, the fadher from the national capital one gets, the harder it is to eaIXed the taxes that are owed. If so, the B p r e s pmsented here u n d e ~ t a t ethe bias in favor of the interior. Unfofiunately, the gwernment does not mlXm data that would allow us to h o w each provinmls contribution to the federal fix. 6. The index of development far 1982 and per capita eopafiicipation far 1980 appitred in FIEL (1993, 165). 7, There is some evidence that this redistribution away from the pampa may be slowing, During the first half of 1993, FONAVI"sEunds far Buenas Aires and Santa Fe pravinees moire than doubled, even though disbumments for the nation as a whole rfmjined (1dicadore-s ecodmieo-sockfes,No. I4 [Aupst 18935: 67, and No, 13 [June 19933: 67).

S. "The underdevelopd interior of Argentina has a distribution of pemnal income more unequal than on the more developd pampas. The areas with less inequaEv are thus subsidking the areas with more inequali-fy, Revenue sharing may actually w o m n the ~atianaldistribution of p m n a l incxtme if the wealthy aonies of the psXiticriarzs in the interior reaive the larges share of the benefits of revenue sharing and the middle and w o r ~ n gc l a w s on the pampas pay a disproprlionae share of the tmes ( a p p e s 1984, 6.35). 9, m e w cafculations aaume that revenue-sharing Eunds other than coflartidpation were distributed in the same proportion as eaparticipation Eunds. In fa&, they favsred the intefior prolvinms even more than eopartieipation, 10. BPi;ved &am FXEL 199Lb, 280; Indicadores econcjmim-sociales, No. 9 (July 1992): 27, 40, $4; and INDEC 1991, 19. This asumes that total, revenues t o be distributed throu& revenue-sfratim programs are the same under the caunterfadual wumption as a a a I l y happened, Xn fa&, if the interior provinces were as developd as the pampas, there would be far more funds available for redistribution under the prevailing tax eode. Of course, if the interior were as developed as the pampas, the tax code would surely be very difkrent, since a major p u y o s of revenue sharing is to subsid& the impoverished interior. 11. Incrlicad~r~s ecolTlrimica-sociales, No, 16 (March 1994): 45, 61; No. 9 (Jully 1992): 25,40,42;and No, 7 (Dewmber 1991): 37,53, (me= fipres exclude transfers to the city of f-luenos Aires and supplemental distributions to its suburbs.) Sin= 1991, the share of revenue-sharing funds going to the pampas (again, exduding the elty of Xfuenas Aires) has grown by one permntage point (1"Eadorm econdmicosocki.s, No. 9,1Ju& 19921: 2, and No, 16 [March 19941: 38). Bemuse the size of the federal revenue-sharing program has grown shavl;v siner: 1991, the absalute amount of resources transfened to the interior has continued to gow. 12. National treasury contributions are more redktributlve in y e a s when the total contribution b small, as in 1988, 13, Guerberoff 1989, 36. This is probably an underestimate. Guerberaff used provisional data far 1")8"1hat greatly understated the fiscal deficit, See FIEL I981a, 23. 14. Provincial governments also borrow money to meet their budget deficits by faiting to pay their employees for work done and their suppliers for gmds or s w i m s delivered, S i n e these adions (30 not expand the m n q supply, their impact on inflation is minimal, 15. El Cm&, Uemmber 17, 2993, p. 7; and Btrenm Aims Heralni, January 23, 15294, p. 2, January 8, 1995, p. 4, and May 28, 1995, p. 2. 16. atablishing the international price of petroleum is fairly easy, but no international market for natural gas exists, The gas-producing provinces have calculated a value b a s d on caloric equivalents with other fuels, a p r m s that leads to suspi&mly high estimates of royalties they are owed. Deregulation of ptroIeurn should bring domestic prices in tine with international ones, and the dispute should be solved (FIEL 1991b, 285). 17. "Ilere are wme notable easajs in whi& mineral wealth led broad-bawd economic dc=\pelopment (far example, the Ruhr Vallie;y and the Pittsburgh, region), Qpialliy, however, rents from mineral earaction are sucked out of the areas in which they are generated. Goal did not produce development in West Virginia nor wpper, in Colorado or eentral Africa, Neither did nitrates in northern Chile, tin in

Bolivia, or guano in Peru. Industrial devebpment rred in Sauth BErica and Australia, but not in the mining re@ons, Even if the rents eaa be retained lwlly, emnomic development is still not automatically produced, Again, examples are manifold, Kuwait, Dubai, Alaska, and Saudi Arabia are a few. Even if one a m p t s "Fe pprjndple that the liwaliq that produces the mineral r e w u r s s should retain the bulk of the rents generated by exploiting t b w resources, ambipilry remains. What does '7ocali~y'kmean in this moantea'? For example, the town of G t ~ e generated l SSO pe;rwnt of the petroleum and 30 perant of the gas produmd in Rio Nego in 1986, but r e ~ i v e djust over 2 p r a n t of the royafties paid by the national government to the provinw ( a r n t i n i l ~ i11)87,25). The "loealiir-y,lt in this me, rwived atmost none of the rents that it generated. One should note that provindal boundaries in Patagonia were drawn explicitly to spread royalties among provinms instead of cancentrating them in one or two. 18, It is no accident that the first industrial promotion =heme was devefoped by a rniititary government and its BM target was Patagonia. See Chapter 10 for it dkcussion of the role af geoplitical eoncems in the development of the intehor and Patagonia in particular, 19, H e measures the cost of distortion by comparing the wst of investing in a promoted acrtivity with the cost of investing in an a c t h i ~not remiving thew subsidies, but holding the return fs the investor canstant. In many activities, to reeeivve the same return as an investor not rewiving the subsidies, 2 or 3 times as much capital had to be invested in the promoted activity. In gamhot it was 3.8 times as ~ much, and in tobacm it was over nine times as mueh (Aaana 1 9 9 1 ~20). 20. It may a p p a r strange that a military government interested in mntralking p w e r and eager ta establish fixal discipline in provines would approve a b m n d o g gle like the industrial promotion s h e m e for La Rioja (Schvamer 2990, 86). And it is equal@ strange that the economy minister who presided aver the program's eestablishment would fifieen years later still be braging about it (Mafifnez de Hoz 1991, 115). One muld s p a l a t e that the militaxy w a interested in shoring up its weakest Xiink along the 3,000-mile frontier with Chile. It was during this period that the military came to the b r i k of all-out war with Chile. We migbt also note that similar geopalitical motives behind industrial promotion have been found in a number of other countries (Boneo 1985, 9). 21, Some ptants in Tuwmhn reported lower oprating wsts than in similar factories in Buenos Aires (Boneo 1985, 124). Thus, static efficiency cannot be the only ansideration in plant location. 22. a v a l l o and Zapata, arwe that Misiones has been the only province to e x p riencs: rapid industrial g o w h withauf any industrial promotion (1986, 149-158). As a frontier province that only began developing in this mntury, they arwe, its pioneering spirit explains its industrial progress. m e i r claim Is demonstrably false, Of all of the industrial promotion projects approved by the Ministry of Ilndustitry b e m e n 1973 and 1985, Misiones (with 2 prcent of the country" ppopulation) remived 22 prcent (FIEL 1988, 161). In addition, it has receiwd substantial h n d s from other promotional Eunds, the most important being one for yerba mat&. So much for pioneering spirit, 23. This is based on an intemiew with tic. Raquef E, Massacane who managed a work team in the Subwcretnria de Finamas Pirblieas in 1'390 and later was a pra-

ject mrdinator for the Industrial Promotion DeparZment of the "United Nations Development Propam. 24, h r i v e d fmm QvaXlo and Zapata l%6, 103 who cite anejjero and Dominp e z . Ndkez Mi8ana and Porta (1984,491 mme up d t h an almost identiml fipres using 1978 data. 25, f)e&ed k m N6iiez Miriana and P o r b 1984,49. a v a l l o and Zapata (2986) did not pre*nt data for the suburbs of the federal capital, scl. that an estimate for 1983 cannot be made, Their study does give data for the entire prsrvhm of Buenos Aires. The provina, plus the federal eapitd, a w u n t e d far 71.8 perent of indivisible federal spending and 45) p r m n t of the muntryk poopufation in f 983. 26. It is true that the federal capital alw remived a similarly dispropaionate share (16 perant) of the national tatat, but, again, it is the prosperous pampm that are disattvantaged on this score, not the interior, 27, B h v e d kom PSlifiez Mifiana and b r t o 1%4,46, The federal government did spend more (just over M m as much an a per capita basis) in metropolitan. Bueaos Aires than it did in the prwinms other than Buenos Aires, but it also eolleded more tmes per capita in metropolitan Buenos Aires than it did in all the rest of the country outside of Brxenos Aires Province (half again as much), 28, Sin= that time provincial wages have dropped in real terms by 15 permat (Ar"Eana 1981d, 94). 29, Parto 1990, 144, 146-147; see Piffano (1988, 8.15) for slightlty different numbers, 30. The public w a o r abmrbs over 30 perant of the provincial emnomy in aam, Formosa, La Rioja, San h i s , San Juan, Santiago del Egero, and Tiema del Fuego (BuenasAires Hem&, May 28, 1995, p.3). 31, An imprtant share of thew funds did not remain in the interior but ended up in the p k e % of investors in Buenos hires, It was the trzachardnes of the; i n t e ~ a rthat was the rationale for industrial promotion and in this was the cause of this transfer, even though the interior may not have ultimately reaived ail of the benefits, 32, The f i ~ a 1erisis of the interior pur similar strains an the previous Peranist government of 197&19"7. In the last full year of military rule before the Peronim asumed pwer, total federal transfers to the provinms were just rnrer $4 biflion (in 1992 dollam) (REC 1993, 159). By 1975, transfers to the provinws reached $11.3 billion, an amount not exmeded until the 19912s. n e s e trimsfers surely examrbated the ewnomic crisk and helped to bring dawn the hronist government, paving the way for a military coup.

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PART FIVE

Summary and Conclusions

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The Other Argentina The purpose of this chapter is to summarize briefly the principal findings of this research, to suggest areas for future research, and to indicate policies that flow from what has been learned by this exercise. M a t Have

VVe kamed?

A great geographic, cultural, and economiccleavage has divided Argentina into the pampas and the interior. Historians of nineteenth-centuly Argentina recognized this fact and made it a central theme of most works on the period. Scholars in the present centuly, especially economists, have paid scant attention to the regional divide in Argentina. The interior has largely disappeared from social science research. The regional schism within Argentina, however, did not vanish in the ~ e n t i e t hcen-t.ury, and in many ways it has become more profound. The purpose of this book is to illuminate the economy and polity of the interior and to reintroduce it into the analysis of the national economy. The first part of the book is a detailed study of the economies of the interior, One pupme af this mrvey is to catatog the region's resouxes. In part, this is an exercise in physical geography, addressing such variables as rainfall and soil quality. The physical characteristics of the land, however, are not of ultimate importance. It is the economic value of the land that is the focus of this study. If no one wants to buy what the interior can produce with its resources, then it has no resources in an ewnomic sense, Morom would be a rich countly if there were a strong international market for sand. Alas, evely country has its own sand or a reasonable substitute. An understanding of the economic geography of the interior, then, requires a careful analysis of the domestic and foreign markets in which the products of the interior are sold. One dimension of a product's marketability is the amount of trade protection and subsidies required for it to be produced and sold.

The conclusion of this sumey is that the economies of the interior of Argentina possess a meager and precarious resource base. The region was poorly endowed with agricufmral rewurces when the Spanish colonists first arrived, Most of the interior is desert or semi-arid; other areas have excessive rainfaif, Seasonal patterns of rainfall are inappropriate for the crops being grown. mcemive dope encourages erosion. The temperature is too hat or too eofd. The soil quality is paor. The growing season is too short, The soil has fittfe organic material and paor stnrcmre. These meager resaurces have been degraded since the Spanish Gonquest by atbuse and ovensse, especially in the last half century, Mast of the re@anfsforests have been clear cut. lrreversble desertification has impaired the carrying ~apacifyof the Iand. Wind and water have swept away the soil. Bcessive irrigation and industrial contamination have ruined much of what remains. In many areas, this has led to a shap drop in the groduc=tive apacity of the land. Indeed, a substantial amount of land in all corners of the interior has been so abused that it has been abandoned without any hope of productive use. Enviranmental degradation in the Argentine interior cannot be easiIy ended since the abuse of land is built into the stnrcture of the emnomy. n e r e is almost no profitably ellplaitable Iand in the interior that is not currently in use; thus, expanding the agricul~ralfrontier is not a solution ta the fack af resources. Although there are a flew important exceptions, mast of the interiorfs products were sold in protected domestic markets until the liberalization of the emnomy in 15191, and protection for some important praducB continues ta the present, The prevalence of tariffs and other farms of trade protection for the interior's products is frequently ignored, denied, or deprecated by authors writing on the Argentine interior. The following are two examples of Argentine tarifE blindness. Mter reading dozens of articles and books abut wine production in Cuyo, I could find only three sources that even mention a tariff on wine, and they were in English written by. non-hgentines. Nwertheless, the evidenw presented in Chapter 5 clearly indicates that the tariff was cmcial to the sumss of the industry, As anather eexampte, ane analysis of tea growing in Argentina Bserts that the remarkable growth of the industry rook place in a framework in which the rules of the economic game were essentially free and competitive (PmMisianes 1988, 29)- However, tea prodetion was minuscutle until the gov"ernment prohibited tea imports and heavily subsidized the industry (Quiroga forthcoming, 23,29-32).

Despite the widespread belief in Afgentina that the elites have run the econony in a way that eqloits the interior and piles up riches on the pampas, this research shows that most of the interior's crops have received substantial subsidies from the national government. Without subsidies and

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protective tariffs, much of what the interior produces could not be sold in domestic or foreign markets. Even 14th substantial subsidy, only a small portion of the agri~ularal prodwtion of the interior can be exported, since it is undersold in world markets, With demand in the domestic market that is unrespansive to price changes and with little foreign trade, any supfly variations (usually caused by weather) are translated into even larger price fluctuations. In good years, surpluses cannot be eqorted, so the domestic price collapses. In bad years, the import of cheaper alternatives cannot prevent price increases. Government regulation attempted to cape with the highly unstable prices that resulted fPom the protectionist tariff policy, Once the government intervened to prop up priws in a bad year, the inevitable tendeny was not just to dampen phce ffuctuations but to raise the average price over the long run. Higher prices, in turn, created overproductionthat the narrow domestic market could nat aborb, Most of the products of the interior, therefore, have been racked by recurrent crises of overproduction and suffocated with government regulation, but both the overproduction and the over-regulation wfe a reElwtion of the government's attempt ta subsidize the interior by supporting otherwise nonviable activities. Domestiedemand far most of the products of the interior has slagnared in recent years or in reeent decades and in sornc: notable cases has fallen precipitously. Similarly, exports of most of the products of the interior have ,with imptovernent in the fallen in the last decade. Since- the early l; world economy*a few products of the interior have eqerienced =me sue=ss in eqort markets. The most important produrn of the interior (such as sugar and cotton), however, are now experiencing dramatic declines in eqorts and productian, The Menen administration has ended or reduced trade p r o t ~ i a nfar m s t ~f the produds af the interior. The severe economic diEficufties that this has generated in many parts of the interior merely confirm the above analysis. In short, the interior of Argentina has a meager resouree base that Gannot sumssfulfy produrn goods to be sold in the narketplaw withouf substantial subsidy. Nevertheless, from every editorial page, every political speed, every taxi drker, and almast Etvery social scientist in the country, one hears the same mantra; hgentina is a country rich in resources. The presumed rich resource endowment then automatically poses the paradox, why has Argentina been unable to grow? 'This study shows that the kgentine interior is resource poor, It is tme that the pampas are fertile and weltwatered gaslands, The world, however, na Ionger wan& what the pamprts can produce, at least in the quantities that made the nation so ppcospernus at the turn of the mnmry, The interior, on the other hand, has few agricultural resumes, and, Eor the moa part, rhr: wrld never wanted what the interior can produce.. It is a mistake to continue t s think of Argentina as a

resaurce-rich cauntry. This misunderstanding produces perpetual bafflement, a sense of having been cheated, and a belief that the country has failed. It does not produce a search for safutions.

A s ~ a r ~ iof t yeeonomialb valuable resources does not by itself make a cauntry poor or prevent g x ~ ~ Nevertheless, h. a country that is resaurce poor and also has a highly skewed distribution of income and wealth confronts almost insurmountable dieiculties in its quest to develop. Not only does the kgentine interior have a meager r e m r m base, but a== to those remurces is very unequal, Thb research documents the eaent of this inequality in all parts of the interior. A few wealthy families or ~orporations own the majority of the land. The minority of the Iand is farmed by a multitude of ehronicalIy poor rninifi~dht~s, sharecroppers, cash tenants, squatters, migrant workers, and tenants who pay their rent with labor sewims, Just a half-century ago, the most evloited of these workers were being driven in the fields with the lash by supervisors who carried sidearms. The use of coercive violence has fallen dramatically, but canditions for the poorest strata of wrkers have othemise persisted with little change. At mid cenhrrgr, mirtif;und&tasin many parts of the interior eould achieve an exceeding& modest, threadbare e~stence,Now, the land has been divided among their children and gmndchilbxen, Prices far their products have fallen. The Iand is e f i a u ~ e d , The rninifinhtas hwe been pushed into desperae poverty.. The jack of resoures and the inequality in their distribution hw a number of important cansequencesfor the interior itself and for the Gauntry ;ars a whole, m e poverty af the smdl farms of the interior makes them unproductive. meir poverty means they do not have the resourGes to make the farm more productive. The farmer must m d n i z e eash flow to survive; this prevents witching to craps that are less abusiwe of the sail or letting the land fig: fallow to rejuvenate. Thus, the skw in the distribution of the land awelerates the physhl degradation of the environment, Machinery that could enhance productivity is too evensive to purchase, New techniques are too risky to adopt for a farmer at the margin of survival. Interest rates in the informal meidit markets to which the small farmer has a m % are usuriouis. At the hawest, the mall farmers are so desperate: for cash that they must self immediately instead of waiting for better prices, They have m little bargaining power in the marketplaec?thH the prims they receke are subsrantially jwer than those enjayed by the biger grawers. The small b m e r is often a tenant or quatter with insecure propefty rights that dimurae;e investment in or car&] husbanding of the land, In short, the unproductive-

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ness of the small farm means that the incsme of the farmers is IOW and their poverty reproduced, year after year, The fack of resources and the lack of a w s s to more than a tiny share of those resourms by the majority of the rural population have encouraged millions to leave the interior. In the most backard pmvinees where rewurces are the m s t scarce and inequality the greatest, this emigation began in the middle of the nineteenth centuy. In otherj, the great exodus did not begin until a century tater. Emigration has only just begun in Patagonia, wfiich until r e c e ~ f yhas received migrants from other parts of the interior. Quite apart from the pemnal heartache entailed in tearing apart scr many families, emigration has imposed substantial economic casts upon the interior. k f the best: and brightest leave to seek their forrunes elsewhere, the human rewurms needed to fuel the development prowss have drained awq, Much of the interior has been left with a hi& dependency ratio ats the young, old, and less capable are left behind, Poverty and inequaliq have alsa produced an impoverished fisc in the interior. The poor are too poar to pay much in taes; the rich who d m i sate the loeal and provincial governments choose not to tax thentsehres too heavily. The result is that p r n m e n t s in the interiar have been starved for funds. With few resources, the governments of the interior muld not build the mads and other infrastnrcfure crucial to the process of economic development, Since the mid-~entiethcenmry, the national government has incre;lsingfiymade up the shortfall, and now the governmentsin the interiar provinces hiwe mare money ta spend per resident than do governments on the pampas, Nevertheless, the poverty and joblessness of the interior are great, and the governments there are weak and ineffective.. The firads received from the national goverment have been spent, not on badly needed infrastmcmre, but an sinecures for canstiituen&. Mushrooming government payrolls have been used to palliate unemployment, forcing the posponement of investment in the future. Thus, public poverty waf caused by and continues to reinforce the private poverty af the interior. The pwerty and inequality of the interior have pradueed a bachard political culmre and political system, The political syljtem that prevails in most of the interior is founded on dientelism and patronage. In the traditional parts of the interior, povery, physical isolation, and ewnomic and political marginalhation are the ideal seed bed for the patron-client relatian. In the towns and cities, a ystem of governance based on a political machine is cammon. 'The political culture in most of the region embodies a set of vabes that is antithetical to ecanomic dwelopment. The political system there enwurages rent-seeking behavior in general and mrmption in partio ular. The syrjtetrn favors instability in the system of property rights and therefore hinders efficient investment, work effart, and gavernanm, NI of this contribiaes to economic: stagnation and inflation,

The lack of resources and the inequality in their distribution produce a backard emnomy and policy in the Argentine interior with want possibilities of mbstantiaf hprovenent in the near term. The bacbardness of the interior, however, has important consequencesfor the rest of the country as well, Sin= most of the products of the interior have Been prodiiced for the d o m ~ t i cmarket behind substantial tariff walls until wite reeently, the oonsurnm of these goods (most of whom are on the pampas) have subsidized the interior through the hi&er priss they pay fur the sugar, tobarn, wine, and other products that the interior prodams. Moreover, the federal government has b i b subsidized most of these products, Amrdingly, Argentina's t q a y e he lnajority of whom are on the pamp to subsidize the interior's products? The rnillians af the poor who have left the interior and moved to the pampa not only drain the interior of the humart resources needed far development, they also impose significant burdens on the receiving areas. mey crowd into the shianvowns ringing the major cities of the pampas. This leads to congestion, social disarganization, mine, and environmental degadation md encaurages the spread of disease. mus, poverq imported from the interior imposes important msts on the pampean ecanamy. When the immigrant from the interior arrives an the pampas, he or she brine his or her culmre in tow. The bachard political d m r e of the interior is authoritarian, antidemocratic, pem~nalistic,and wrrzlpt, and this reinforces rather than eounters negative apeets of the national political culture, In particlular, it. strengthens tendeneies toward militarism and earruption, deepens support for recurrent military takeovers, and encourages abuse of authoriv,

One wnclusion supported by the evidenee marshated in this book is that the interior has political power in the national government out of proportion to its population or e~anomicimportance. The current president, for emmple, is from one of the most bachard provinces af the interior, and he has surrounded himself with advisers and officials from the interior as well. In the past, many important membem of the executive braneh have came from the interior. The interior controls the Senate and is not. far short of a majority in the House of Deputies. The interior has played an important role in the Radical Party and a pivatat role in the Per~nistparry. There are several important consequences of this presence of the interior in the national government. First, it is not just the poor migrants wha carry their eutmre to the pampas; the elites of the interior also carry their crulture when they take positions of power in the national political system. The political culture of the rich in the interior mirrors that of the

poor: a disposition toward rent seeking and corruption, a contempt for democxacy, and an openness to authoritarian, persondistic, and militaristic governance. The interior's presence in the national government reinforces the warst tendencies of the Argentine polity, The emnomy of the interior is faunded on trade prote~rionwhereas agriculture on the pampas has always prospered under a liberal trade regime. The interior, facing what are perceived to be hostile neighboring countries, has tended toward nationdism, The pampean oligarchy has favored close ties with &@and or the United States The disagreement hfween the elites of the interior and the pampean oligarchy over issues of economic and political nationalism has increased the diffialties in forming a stable allianw at the top of the elm structure. This conflict over Fundamentals has contributed to the political stalemate that has plagued Argentina for so many d e d e s and confounded the seareh far a a n d t e n t set of pc>liciesto overcome ecxmomic stagnation. h o t h e r important Gonsequenee of the interiork polithI pouler wer the natisnd government has been its ability to mmmand resources from the national government. The national government first began transferring disproportionate quantities of public funds to the interior in 1946, and the amount has grown since then, slowly at first, but then more rapidly. Militaly governments have tended to restrict the flow of funds to the interior, whereas civilian governments have been more generous. This was partiwfariy true of the Radical government in the 1980s. By 1988, tridnsfers to the i ~ e r i v r throu* revenue sharing, untied cash pants, subsidies of industrial pramation, and the dimunting of provincial government debts were easily more than a third of the federal deficit, and these categories a w u n t for only a poftion of the transfer of resources fa the interior, The fisal deficit wsrs the primary motor of inhation that in the early months of 1989 went out of contml, The hyperinflation ended when the Radical president, Raril Nfonsin, resiped in disgaw, n u s , the interior has used its political power to bleed the national treasury. The bankntptq of the economies of the interior and their ability to demand subsidies from the rest of the economy to make up Eor their insalvency farm an important part of the explanatian far k g e n tina's frlilure to keep up with other countries such as Canada and Australia.

To help the reader evaliuate the csncIusians of this book, I will point out what I think are the parts of the argument that muld profit from further research, I have characterized most of the provincial governments of the interiar as political machines. The basis for this judpent is a survey of the political science literature that describes the nature of governance in muntries whose emnomic and weial stnxcmre is comparable to that of the Argentine interior. Furthermore, I have read the newspapers in Argentina

264

The Other Argentina

on a daily basis for several years, paying particular attention to articles about the interior. I have also talked with political scientists knowledgeable about the interior, with provincial government leaders, and withprovincianos about their government. Academic political scientists, however, have paid virtually no attention to how government works in the interior. A careful study of candidate recruitment in Mendoza published in 1968 could not find any previous academic analyses of provincial government processes (Strout 1968, vi). I have been unable to locate any since then, and Argentine political scientists with whom I have spoken confirm that their discipline has neglected the topic. There is obvious room for more research on this matter. Clientelism plays an important role in my analysis of the political culture of the interior. There were several careful studies of the patronclient relation in Argentina in the late 1960s and early 1970s, when the concept was first gaining considerable attention from social scientists. I could not locate any careful studies of clientelism since then. Several studies mentioned it in passing in a way that suggests its continued existence is not in dispute. Studies in other parts of the world, however, discuss circumstances than can produce a weakening of clientelism. Based on these studies, there is reason to believe that clientelism may also be weakening in Argentina. Our confidence in the analysis of patron-client relations presented in Chapter 9 would be strengthened with more information about what has happened in the last two decades. In Part Two, I argue that pollution, erosion, and desertification have degraded the agricultural resources of the interior. The business executives and leaders of industry associations in the interior with whom I spoke downplay, although do not dismiss, the significance of the deterioration of the region's resources. Since environmental consciousness in Argentina is so poorly developed, I do not fully trust these business leaders' statements. My belief in the sharp deterioration of the interior's resources is based on a number of articles and books, most of which were sponsored by the highly respected Instituto Nacional de Tecnologia Agropecuaria (National Agricultural Technology Institute). Nevertheless, the work of INTA often catalogs degreesof environmental degradation without explicitlyrelating this degradation to declines in the productive capacity of the land. There is an obvious need for more research to find out precisely the extent to which environmental problems have prejudiced agricultural productivity. EiLplaining Argenh'na'S Failure

One motivation for writing this book was to help solve the purely intellectual problem that Argentina's failure poses for the social sciences. Can Argentina be explained by the same theories and concepts that allow us to understand other countries, or is Argentina the exception to the rule, as Simon Kuznets would have us believe? How could a resource-rich country

that had an ecanomic strucmre similar to those in Canada and Australia and a stable democratic government, it was asked, fail sa spectawfarly to keep up with the other modern, industrialized nations in the ~ e n t i e t hcentury? The research in this book resolves the apparent paradox. This research shows that Argentina is not a resource-rich country and that a significant part of it has ahvays had an economic structure much more like those of other poor Latin American countries than those of the other "new countries? Moreover, in most of the interior-and, to an important eaent, even at the national leveCthe government is not modern and is democratic in form only. Argentina is thus not an exception to the rule; the country can be analy~edusing the traditional tools of economics and political science. m a t Can Be Done?

These conclusions shed light on the way out of the Argentine morass. Many people in the interior have a chip on their shoulder. Even in casual conversation, one Gain sense an almost pafpabie feeling of anger and resentment at the abuse and exploitation of the interior by the pampas. This is not new; the animosity goes back more than 200 years. This book shows that the interior has failed on its own, despite considerable assistance from the pampas. Getting rid of this sense of entitlement and resentment would allow dearer thinking about how the interior can find its own solutions to the nearty overulhdming problems that it faces, I have been encouraged to meet in many parts of the interior leaders who are open to opportunities to make the economy more productive rather than looking for handouts from Buenos Ares, but I fear they are still in the minoriv. It may be difficult for the reader to understand, after finishing this book, that anyone in the interior muld believe that the region has not received subsrantial benefits from being a part of the Argentine nation. The political culhlre in Argentina, however, has encouraged the notion that ewnomic activity is and should be the creature and ward of the government, Tariff protection and subsidies are seen as normal and unremarkable; failure of the government to provide this assistance is seen as malfeasance. The support that the national government has given to the interior becomes invisibfeO2This attitude can be tramd back to the Spanish, mercaotilist origins of Argentina; six decades of import substitution industrialization after 1930 have provided powerful reinforcement. All of this is quite at odds with the liberal Anglo-Saxon belief that ecanomicactivity should come fundamentally from the private sector and that governmental economic actions are, without extraordinary justification, unwarranted intrusions into an area where it has no business. It is no accident that government actions are catfed intewenrions in English; the presumption of the supremacy of the private sector is built into the language. This perspective is only now achieving same currenq in Argentina.

Manufaaring in the interior doer; not make much eeonomic sense. The inte~oris thinly populated, and the middle class is a much smaller share of the population in the interior than on the pampas. Therefore, the internal (internal to the interior) market is vely narrow. Goods shipped to markets on the pampas or abroad must traverse vast distances. Similarly, industrid inputs other than unprscrtssed agrieulhlral produrn are a r R , and most of the interior does not have ready aocess to a port to obtain imported inputs. Land transportation over the inadequate highway and raihvay systems is eqensive. Most of the interior lacks the water or energy resources that m;my factaries need. The fragile enviranment in most of the interior is rapidly degraded by industrial pollution. The educationd system and health care delivery are poor and other amenities are lacking, thus it is difficult to recruit management and professionals to move to the interior. The national government has heavily subsidized industry in the interior, often paying investors more than they invested. Despite these incentives, industrial promotion in the interior has failed to ignite a process of selfsustaining industrialization. This is eloquent testimony to the lack of the interiorfr;comparative a&antage in manufacmring, If manufacmring opportzlnities in the interior are mree, then is there hope for agriculture? Clearly there are na easy answers to the interior's pliljht, and there must be a great deal of careful thinking about opportunities rhar the interior faces. Some products af the interior are now doing very well. Lernan production in Tucum%n is an example. Output has grown rapid& in recent years and, thanlrs to Tucurngn, Argentina has bemme the world's fauah largest lemon evarter. Lemons, however, wnnot seme as a model for the rest of the interior. Tfie federal government heavily subsidized the lemon-processingplants who= growth led the industry (rather than lemon production inducing the building of factories). The national government no longer has funds to subsidize new industries that would seek to cow Tumnx%nfssumess with lemons, What then can be done? As an emmple of the kind of opportvnity that may prove s u a e s h l , the foilowing obsewation was made to me by the CEQ of a company that. g o w h i t in Patagonia and manufacmres h i t based produGts sueh as jams and jellies. The Alto Vafie is farther south than the major fruit-producing areas of Chile. At least for n w , Chile has a lock on the counterseasonal fruit market in the northern hemisphere, Patagonia, however, with its cooler dimate, wuld find a profitable niche at the end of the vowing season if it specialized in late-maturingvarieties of fruit. I offer this example only to illustrate the degree of sophistication in investment and marketing strategies that must be attained in order far the interior to meet with suwess.

Can Be &me far tlte

Pmr?

It must be the prkate s e a r that provides the principal thrust to the interior's development. The national government was bankrupt in 1989, when Menem began to liberalize the economy. One stratagem aftc3r a m h e r had been tried for decades and none could stop the downward spiral. In the end, there were no other viable options: the nation& gavernment had to piay a sharply reduced role in the economy. The provincial governments have even h e r rewuras than the national. Nevertheless, the rapid pace of reform has posed untenable strains on the economies of the interior. If Argentina's failure is to be reversed, agricul~rein the interior must be modernized. Trying to restructure in two or three years the economies of the interior, which were formed by a century of bad policy, has produced dramatic dislocations, Popular anger has boiled over into violent riots that have destroyed lives and property and paralyzed provincial governments. Pushing inefficient minifundirtas off the land and into shantytowns surrounding provincial capitals is not a constructive solution. Slowing the pace of restructuring in the interior would in the long run, and maybe even in the short run, be mare cast effectbe. Mendom should serve as a model for other ewnornies of the interior, When wine production collapsed in the early 1980s, the province began a profound and apparently successful transformation. The government is honest and efficient and has sober& faced the task of rethinking the pmvince's economy. The transition has been effected by a generalized decline in incame rather than placing the msts of transformation on those least able to pay, The rni~ifitndistczseqefled from the wine industry were large@ a h r b e d in other activities, n e r e have been no riots or demonstrations or outraged cxies for more assistance from Buenos Aires. Nendoza, however, is not like the rest of the interior. The cn"oI10 population of cattle barons and gauchos was overwhelmed by a tide of industrious and profit-oriented immigrants from Europe in the first half of this century. Most of the rest of the interior's provinces have a more unequal distribution of income and wealth, a, more traditional culture, and an inefficient political machine for a government. It is highly unlikely that most of the interior's provinces will be able to follow Mendoza's Iead. Cutting these provinces adrift in a single stroke is likely to hasten rather than slow or reverse their downward spiral.

A constant theme of this baok has been the inequality in the ovvncrship of land in the interior, which produces and reproduces poverty there. If the

problem is lack of awess to the land by the landless or land-poor, then does it not follow that the government should give land to those who need it? Land reform in other countries has had few suGcesses in spurring agrimltural

production or even improving the living mnditions or incomes of the rural poor. TmEy suwssfitl land reforms have been imposed by external powers (for e ~ m p l eJapan , and the United States in Sauth Korea, Japan and the Kuomingtang in Taiwan) or throu* violent revolution (China). b n d reform elsewhere, and in particular in Latin America, has been largely a failure, kgentina has never had any eqerience with land refcrrm. mere have been government programs since the early lW70s that have subsidized the eqansion of the agri~ulhtratfrontier, These programs, however, w r e not designed to assist the minifundista or landless poor, and they received none of the land. Instead, the newly developed land went to large corporations, wealthy familieq or urban middle-class investors. The government is now without the resources to buy land for redistribution to the poor, and confiscrating land to give to the poor is politically unimaginable. Land reform would be programmatimlly and ideologically at complete d d s with the current thmst of reform in Argentina. Sinee land reform is now impossible, other avenues to progress must be found. In the 1970s and 1980s in many parts of Latin h e r i c a , integrated rural development whernesc attempted to address the failures of land reform. mey included companion progams that dealt with credit, health, education, housing, nutrition, marketing, and the pravision of inguts and consumption goods. Brazil, Mexico, Ecuador, Costa Rim, and Colombia are examples of eountries that pursued this strategy. Tpically, these programs were overly ambitious and did not live up to the hopes of their proponents. None of this, however, took place in Argentina, The muntry is not, in its own eyes or those of foreim aid donors, in the R i d World. l 3 e idea that a large wath of the country lies firmly within Latin h e r i c a is simply denied. Qnsequently,rurat developmentFrogtarns in kgentina that are apprapriate for developing muntries have been unthinkable. Argentina must change its self-concept and realize that the problems of the interior are the same as those in the rest of the Third World. Many policies used successfully in the rest of the Third World to promote agricultural devefopment are appropriate in the Argentine interior. T'here are now only a few, very modest efforts to employ these poiicies in Argentina, A n outstanding emmple is the work of Fundztel6n para Desarrotlo en Justkia y Paz, an Argentine foundation that receives funding from local and international donors and tries to encourage community-based development. For emmple, in one rural area in Santiago del Esrero, it helped to organize farmers into groups that could discuss local problems and solutions. It financed a small dairy to make goat cheese and introduced daily goats to subsistence farmers who had previously raised p a t s only for their meat. It taught them how to breed and care for the goats to keep them healthy enough for use as dairy animals, and it helped with marketing the cheese.

m e Other Aqenfina

2@

A variev of activities were directed especially toward the wmen of the mmmunity to help break down the isatation that mral poverty breeds. The foundation also has projects in Cham, Santa Fe, and Salta, mese effor& to promote carnmunit.y-bsedeconomic and saciaf development, while suwessfiul in the few communities in urhich they operated, are dwarfed by the magnimde of the: poverty found everywhere in the Argentine interior, In the past, the natianai government wasted billions of dollars subidizing useless factories in the interior that only enriched investors in Buenos Aires. With far less money, the government mn promate the kind of developmentde~rr"bed in the above paragtaph, The government can also aggressively pursue international donors to support these efforts.) To think in these terms, hawever, Aryentines must. reorient their perception of themselves and their country. Many economists have arped that even though the small farmers in developing countries are u n p r o d ~ i v eand their farms unprofitable by traditional measures, it may be efficient to promote small farm agriwlture from society's point of view.' If the minifundirtas left their farms and moved to urban areas, their contribution to sociery's production mi#t acfually decline. Navvking pencils at a stoplight:or eonpeting mrce unskilled jobs away from others is unlikev to add very much to what the emnanny is producing, Furthemore, there may be significant msts imposed on the econonny by the migration of indkiduals from small farms to the cities if the migration emwrbates urban congestion, pallution, and crime. From this perspective, the minifindbta should be enmuraged to remain on the land. 'Kke impossibili~of land reform or an eqansion of the agficulrural frontier in the Argentine interior means that the pvernment Eannot improve the lot af the rniinifindktas by giving them more land, Indeed, the size of the Wial minrifindio is likely to shrink ais the land is suwividecf through inheritanw. PaIicies that are sugested by the analysis of the first half of this book are the encouragement of mare efficient marketing, the provision of credit at less than usurious rates of interest, and improvement in the hedth and education af the population. Agrieultural extension services should be b a s e d directly on the small farmers. Orgmie methods of farming that do not require expenshe pesticides, fertilizer, and the madinery to apply them should be emphsized, mere are, however, dangers in a program to help the rninifinalbfa, The poverty of the small farmers in the hgentine interior h c e s them to abuse the environment more than large farmers. In parts of the interior, small Earmers use the land more intensivefy than larger farmers but also w e up the land mote rapidly. In all parts of the interior, the impoverished small Earrner cannot afford to use practices and techniquesthat would presenre the land's fertility, nerefore, policies that favor small hrms may awlerate the already alarming degradation of the agricultural rewurces of the kgentine interior,

Since land will not be redistributed from the wealthy owners of large farms to the impverished small farmers, maintaining the small farmers on their land means freezing the present skew in the distribution of income and wealth. This skew produces a technologically static rural economy, since the poor cannot afford to adopt new tecfinologies. The wealthy have little incentive to innovate, given the low rural wage that is a product of the universal poverty of the small farmers and the mrcity of land. Immense disparities between rich and poor generate a political system that is corrupt, inefficient, ineffectilve, and undem~cratic,The msts of this to the interior and to the nation as a whole have been discussed at length in this book. Despite these dangers, my own judgement is that helping the minifundirla is the appropriate policy and that the government must slow the pace of adjustment in the intedor.

WW rthe Government Slmukt Not h The government should dimntinue its efforts to devolve federal activities to the provinces. Decentralization of the state has bemme a new fad that is supposed to produce democratization, poplar participation, social justim, equity, efficiency, a r c k t i o n of the bureaueraey, increased national unity and political legitimacy, more effective coordination of local planning, and an end to eeanamic bacbardness (Mattos 1989,339-.340). Somehow, it is never clearly eqlained how all of this will happen. In Argentina's case specifidly, the results will almost sure&be the opposite. As, this book has arped, the provincial governments of the interior are, with some notable exeptions, less efficient and more corrupt than those on the pampas or the national government. In this cirrrumstance, it is difficult to see how deeentralizatian will achieve any of these laudable goals.

This book sheds some light on the origins of the corruption that plagues Argentine society. A t hough its causes are complex and multifaceted, corntption in Argentina is encouraged in part by the bacbard emnornic and political stmcmres of the interior. One frequently hears the =seaion that corruption is now at histon'cafly high levels. The statement is inherently incapable of being verified; but the fact that it is made so ofien at least shows that corruption is alive and well in Argentina, Unformnately, Menem has led the way in what some have alled the Itzhojanhcidn of the gavernment, Menem and the friends with whom he surrounds himself brought with them from their native province of La Rioja attitudes and behaviors that have encouraged widespread corruption? Menem displayed his indifference toward honest, responsible government as soon as he took office. Soan after his arn'val in Buenos fires, he was seen driving a bright red Ferrari around town (he often daes not use a chauffeur).

Journalists immediately asked him how someone on the government payroll for years muld afford a car that cost more than his annual salary. Who gave him the car? He said that it was not important and refused to diwlge the name of the donor. After being hounded by the press, Menem apeed to raffle the car for charit)i, The permn with the winning ticket still does not have the W, which remains parked in Menem%garage, and the public still cfoes not hour wha was buying influence with the president with the gift, The president of the republk by his actions told Argentina that even the appearance of.propriey was unimportant, Following Menern's lead, recently appointed government officials displayed their newty q u i r e d wealth astentatiously and without compunction, One reason there has been so much corruption in the last few years has to do with the privatization af most of the government's enterprises. Outside the socialist w d d , Argentina had the hi&est share of gavernment ownership. Thus, there w r e very many enterprises ta priwtize, and eaeh privatization offered manifdd oppsrtunities for br%es, Corruption quickly became rampant within the close cixde of presidential advisers and cabinet officials, Perhaps the mast notorious ease wlas that of Menem's appainlments secretary, h i m Yam ne of several of Menem's in-law invoked in wrruption scandals., She was amsed of laundering drug money. The Supreme Caurt justice: in charge of her case ilkgally csnsulted with President Menem over the litigation and was fined $611 by her friends on the Supreme a u r t , h o t h e r relative and presidential d mnbaX was charged with eaorting a bribe adviser in the s a ~ l l e Swifrgate from a U,$,wrporation seeking permits to import machiney for its ourn use. He is a Eugitive from justice. The amser was the hi@& respected U.S.. ambassador to kgentina, h o t h c r official who directed the government telephone company while it was being privatized has been charged with numerous irreptarities and is being investigatedfor living an earwagant life style that dearly cannot be Einanced by her government salary. A presidentid adviser and the president's personal secretary were amsed of selling tons of spoiled powdered milk to the government for a propam designed to pronrote maternal and child health. The administrator in charge of the gavernment's steel manufaearing company (SOMIW) was charged with a variety of irregularities. The mayor of the city of Buenos Aires appointed by the president resigned after a storm of charges of mrmption. A deputy minister of education resigned after he w;ts taperemrded attempting to bribe the head of the teachers' union. The h m e r vice minister of public worfcs was arrested aEter being amsed of laundering drug money, The economy minister, Domingo Cavalla, admitted receiving a $10,000 monthly stipend from various businesses to supplement his government salary, N o r m e r economy vice minister was arrested for financial irregularities, The presidential chief-of-staff,previously minister of the interior and minister of health, was amsed of selling overpriced shoo1 smo& to the government when he

was minister of health. Another minister of health was accused of bribing a pravincial official and was forced to resign when she could not account for $40 million in her budget. Menem then appointed her to head the heath

care system for government pensioners. She resigned this post when it was learned that she was operating a multi-million dollar kick-back seheme. This is only a small part of the total; space limitations prevent a fulf awunt. A reccent b o k needed nine gages of fine print ta list the alleged crimes of Menem's cfosest amciates f Verbits& 19523, 417425). None of these people has been convided or even tried for his or her crimes, although years have passed since the initial accusations. Menem rammed thraugfi. the Congress a bill to ewand the Supreme Court, which he then packed with his friends. m i s in turn gave him a majority that has upheld a variety of questionable presidential actions. Judicial independence has thus been compromised, and the impunity continues. With this kind of stonewalling at the top, the criminal justice system has been unable to effectively punish the corrupt. The corruption extends right through the Supreme Gouat, several members of which have been amsed of operating a business of selling decisions to the highest bidder. The flagrantly unqualified judges appointed by Menem-including the son of his tarot card reader-hsrve fife tenure and will curse the judicial sptem with their incompetence for years or decades into the future (BumasAires Herald, October 2, 1994, p, 14). These cases get the headlines, but the real story is the day-to-dayrakeoff made by tens of thousands of bureaucrats. An individual who has reeently had an important position in a government ministry described the system. to me. menditures axe routine@overstated so that officials can hold back some of the appropriated funds for their own uses. Some uses of this money involve subverting the will of the Gngress or others in the executive branch and some of the money is for the persclnal uses of the official. It is impossible to know how much money is involved, but the following story s u ~ e s t that s it is not a trivial mount, A government oEicial called a professional consultant and asked for a bid on a small research project. He worked up a budget and submitted a proposal for about $20,000. The government official called back and said that the figure was not high enough. So the researcher recalculated the wsts of the. project and put in another bid for a few thousand dollars more. The government oEficiaI callled a third time, quite irritated at this point, and said that the researcher did not seem to be getting the point, He wanted a bid in the area of $200,Q00. The project, of eourse, would still cost only $20,000. The researcher would get a couple thousand for keeping quiet, and the government official would have the rest to go into his office safe. The researcher refused the request, but clearly this kind of corruption is not rare in Argentina. The most important countenveight to the laniojanizacidn of the Argentine government is a free and vigorous press. Since Menem's inauguration, however, there have been more than 200 incidents in which journalists have

been beaten up, threatened with violence, or arrested. During six months in late 1993 and early 1994, there were 100 death threats against journalists.6 Mast of these threats were against those who had been reporting an mrruption in the gsvernment. Nenem has been indifferent to this intimidatian, and none of the attackers has been indided, althou&hsane have been identified by the victims. Rather t b n prosecute the criminals iwoked, Menem has reeeatIy proposed a law that would increase the penalties for l h l and thus raise the cost of aiticizing the government, Moreover, journalists are routinely bribed to print stories favorable to their benefactors or, just as often, to keep stories that are unfavorable from being published (Gafii 195>3, 2; Mead 1991). The kgentine people's patienee with wrmpti~nis wearing thin, En April 1934, the Menem gavernment Iost the ciq of Buenos Aires in an election Eor delegates to a constitutianal convention. Politjeal analysts l which a Menem appointeebelieved the Isss was a result of a ~ a n d a in who was running as delegate to the convention--was amsed of presiding over a multimilfion-dollar kickback scheme (N;ew York Thes,Apn'l 14, 1994, P*M)* Corruption is dead weight on the kgentine eeanofny, Vast sums are diverted from their proper use to private ends, Corruption undermines citizens' faith in the government and leads to instability, f i r example, the crurrencydqreciated against the dollar by 50 permnt just after the Swiftgate scandal broke (Erro 1393, 214). Perhaps even more important is that the exisknee of cormption encourages unproductive, rent-seeking behwior. Corntption reinforces the already widespread belief that the gavernment is far the benefit of the politicians and their weakhy benefactors; this darnpens incentives to invest and work hard, adds to the demoralization sl the &gentine spirit, and undermines support for demacraq. Argentina is standing at a point in its history where the road divides. There are many Argentines who are wrking with great energy to ensrxre that the country Ghooses the correct path, Unfor~nately,the ba~kvvardness and underdevelopment of the interior cast their shadow over this decision and make h o s i n g the Gorrect path mare difficult,

1. The pampas a w u n t e d for 77 prmnt of the nation" GDP in 1985 and pmsumably a commensurate share 'eof the tax base ( d e ~ v e dfrom FIEL 1993, %), The nathnal gavemment, of mu=, gave wbstantial subsidies to the pampas througfx its support of import substitution industrialization, espcially beween 1945 and 1975, Nevertheless, most of the nation's taxes were oollaed on the pampas and not in the hterior. Thus, it is l&ely that few if any resources were transferred fmm the interior t a the pamp;ts to finanm XSI,

2, Just as one example, MamnaE has a r p e d (190, 142) that the interior has rmived xxo qstematic or mnthuous help for the mrd par from the nationat &caries of w p f l for the sugar, yerba mat6, a r tabam produars, &lomd at a mnsiderabte cost to kwp the srnaE.4ckonicaw p r growers ntinuous help tx, the rural poor. that not ady is m d pertl)l h~sible ouaide the muntry as weU, and tktm donon iS to obth, and &e 1979,16-17; Sea 1975,143 and KuQher and b n d h a IW1, 4. 100, 5. Ia May 198%a U.S. jamwarMng in &gentha d e d a fa'oreim bushew e x m t b e whether he was waded b a u s e of Menem's reant el-oraf .vl"lctory. The was negative. " "' It's very simple," be aid. "Pero&@ are much cheapr than the R a d i d m d onw you pay them at bast yau h o w &at thin@ get done" (Mead 1991, 15). Tmm, April 11,1894, 6. Barns A h Hemld, March 6,1994, p. 3; and New p. D5.

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~ d pug slitraj .~q% sedouttd *sa.r!vsauang 8~1prmoans~ e p!uxnq

Appendix

The Extent of Poverty in the Interior Poverz)u in the Argenthe muntryside is genera@ thou@t to be in ''pkets,'% wttered, blated, and Xmited areas. Summary memres of the e m n t of m d paverty in the hterior of hgentina that are pmwntd in this a p p a d k s h m clealy that this notion is a mimnwption, that ~despreadpverty is nearly evevhere in the hterior, Unfoflunately, data that dhe&ly measure p e q in &gentha do not mist. "lXs apwndirs:u s s tvrro approaches to dmment the eaent of p v e m in the interior af &gentha. The flmt munts the number of minifindhg, mipmt f a m w r k e s md their fantllies. The second w s indiatom of pverty suck as deficient houshg, p r education, and diwm am&ated with pvert;y-.

Xn 1%9, there that were and -0 (Rohan 1985, 118) permnt due to the subdivision of the land and the fdling pdws of mop, wGch meant the be larger to support a family. By 1980, then, about 154,000 1721 this area, To this vve r n add ~ about 9,000 shepherds and about in irrigated aghaEture in Patagonia, mare than 70 p r m n t of ail farms or ranches in that region (1MTA 1986,9,29,40,52,&1). mus, &together in 1980, about 170,OQOmin?"fit&hs were in the h t e ~ o of r Argentina.' A s o a ~ n r a t k eestimate is that each mingwdio was farmed by a farnib of five peapie, and thus lleatty 850,000 pmns were fiving on rnini&ndir;Jse2 me mmt caireful dudy of migrant f a m Iabor in the Argentine interior hdieates that there w r e in the early 1980s about 107,500 hamest workers who were l w l s and another 93,100 who raipated kom other provinas or &om another muatry (Reboratti 1989b, 120; see atso Neffa et al. 1985, 33). In the past, there were a substaatiiil number of w p l e who lived in the interior of Argentina but mipakd to the pampas for hawest work this has decliined dramatidy in the last two or three d m d e s (T&ougm&os 15190,107). In 1959 there were 67,000 temporary f a m workers on the pampas, but many af"them did not come from the intedar. It is likely that the flw of migant harvest workers from the interior to the pampas still numbers in the thousands or tens of thousands, but the data that would p m i t me to isay more p m k l y are lae~ng,Same of the local hamest workers are landless

that a m o t hlly emplq their labor, but X m find no and same live on guess as to what the proporlion is, Some of the p grant wurm wWng to f a m workers were fornipem, but at the =me t h e it is also true that anmy of these foreipem are more or lem pemanent residents of Argeaina and thus are proper& p a r of Argentina? Again, the m m a proportions are the dart at the board, let us mum+I QeIim mnrslervatthew hmest workers of the i n t e ~ a rdo not Eve on miniina, m a t m * ~ mother 100,000p r m d workens, vvith their f a d i e % perbap 3(120,000." The 1969 mnm r e p m d wer 120,OQO =jaded a g d w l ~ a land forwty vvorkers in tbe htedor of Argeatka who had p m a m n t jabs (INDEC lf189,3253%). The 1980 cenms wun&d over 350,000 al;rirwltur& wage workers in the h&rior (Grballo 1992,155), If we subtraa b r n this fipre the 200,aOQ d p a n t workers &hated by Reboragi, then them were in 1980 about 150,000pemanent wage warkers in @&We liYing in the intedor? Together &h thek f m a e s * upvvatds of 3W,080 more mrd poor m- be added -to the totaIP mug, we have a very rou& estha& of at lemt 1.5 milfian p m n s who were minifirndistrxs or landles p r in the rural i n k ~ o af r Argentina in. 1980. About 8 d i o n p p l e lived in the hterior of the muntry in that year, so the rural p r were about 18 p r a n t of the total ppubtion of the interior, md well over half of the mral ppdation. These numbers are b w d on pople actively tyorEng ia. m e r e are many others h the muntqside of the hterior engaged in m e r w , sewicc;, manufa patioas anduary to a @ d t stmaion.. M M of them have a mndard of living no betkr than thofe who work the lmd. It is clear that mo@ aE the mrat gapulation of the htedor lives in pverty. Mareaver, rural p v e m exerts steacfy damwad presure oo urban wages and cont ~ b u t e sa large a m b e r of impve~shedmigrants to the urban ppulation in the interisr. Shce: 1980, the mm1 econogly in the hterior has detefiorated, and, by all a m u n a Pthe dist~butianof hwme has bewme mare &med. The decfine in the p a w a n emnomy that has r e s t ~ a e dthe d e v valve of emigration, falling product p~ms, which imply that a h m has to be larger to supprt a family, and hfiher subdivision of the l a d thmugh inhefitan- have surely raised in the last d m d e the proprtion of the inteI.iiorfsppulatian that is p r . To speak of this as E r e "poclkets of perty,"" as is %a ofierz done, p m f y distorts the e ~ e n and t naare of the problem.

.

Qther Methods of Counting the Pmr Table AA,l presnts eight measures of the esent of p e r t y in Argentina. T%e data are prewated far each provhm, groupd by re@on. This way of prewnting the data understates the impaa of the bacbard intehor in meathg a problem of p v er@ for the mmtry. MilEan%of natives of the inte~orhave been formd to move to tke pampw b a u w of the lack of emnomic oppomnities in the hterior, About a m h of the p m w a n population is either native to the interior or their children, Immigran@from the intefior amd into vast slums and slranwowns surrounding the major pmflean cities, espdal& Buenos Aires, where the ghools are inadequate, unemployment is high, pubEic health fadlities are erribk, and =wen water are

Perantage With Unsatigfied Basic Needs Tot& Rurd Pop. Pap. 1990

CW

Mendoza San .Juan San h i s

Paliagoniir Neuquka aubut KONego S a t &C m mema del Fuego

1980

In&denm of a a g s a

h o w Drafimq 15381-1983

Permnag@ of Total Population Without SuEdent Fd,1980

22.7 '20.4

26,O 27.7

30,9

33.9 29.8 32.8 22.7 25.6

" Permnt of 18 year old draftees testhg wropositive fox T v p m g o m c w i . Source: Fmt caium, UNICEF 1991, wadro 3; s a n d column, de&ed from IFJDEC 1985b, aiidro B Qr each pravinm; t ~ r dclolumn, defived from XNREC ISISSa, p.121; fourth wtunzn, Rafman and Marqu6s 1988,44.

for natives of the rare? Ideally, we would like to have indieatom of p r w h a s of the intedor wherwer they live, but such data do not exist. The most widely m d indicator of p v e q in &gentin% is homes with UnsatisBed Bmic Needs, Ta be classified ;3s UBN, a horn@=UShave at feast one of the chaxa-ristia: weraowding (more than t h e e peopb per rooml); bad houshg (for ezampfe, a rented rmm or a shanty dwefling); lack of a swer; a wbm1q e child not in ghm1 or a head of houshold with no more than two ye= of s h m k md feu or more pemns for each w a r k g memkt of the fmiw. The first w l u m of Table A.1 show the propofifon of the ppulatbn with ZIBN h each prmhm, In the p m p a n care, 18 perwnt of the ppulation fives in UBN homes, In the hterior, the propaion is hi@er, althou* not much hi&er in Mendoza and wuthem Pabgonia. In six provhmq the propfiion exeeded 40 wrwnt and averaged 42 perml?r in the Nofiheast, the p r e s t regon. Poverty is much higher in m r d areas than in the foms and cities. Pis can be m n kom the the pmpm core, 32 flerant of the m&ppulaitiorx Eved in UBN homes. In aye and Patagada, half the mral ppulation was p r , and in the Northeast and Northwest about WO-thirds. the h 4 d e n a of C h a g a - i ~ among ~ T'he tbird column of Table A.1 disam is inwrabb, debilitating, and o&en fatal. It is d k a of lly of bad hawhg, where the h- that transmits; tbe diseam Eves. The disc:= t b ~ v e hest s h warn, semi-arcid climate% hen= there Is a low hcidenee: of the disaw in a ~ e n t asiones, q Entre Rim and PatagoRia. Xn the pampan wre, less than 3 pt=rwnt of the draRees were S e a e d , and mmt them probably ~ p a t e dwith, the disease: from other pro*oes. In Smtiago del Btero and a a c o , r the eighten-yeardd makes were infected. Formobewwn a m h and a q u a ~ e of sa, San h i s , and atamarm also had a hi& h d d e n a of the dies*. The fouah oolumn of Table A.1 show the proportion of the population with inlrmEdent fmd, In the core pmpaxr re@on, 18 perms were deemed hungq. @er half the ppulatiort in the Northwest md Nofibeast were urithout sufficient over a third of the ppulatian fmd, and in Jujuy Wo-thkds. Xn Patagonia and WO$ were bunm, and h San Juan three-mhs, of Table A.2 de&be the efient of subHandard housing in Argentina. In the: pampan wre, 22 permnt of the ~ p u l a t i o n lived in defident housing h 1991, Mendoza and parts of Patagonia had levels dose to thaw found on the pampas, In other parts of the htedor, the inddenm of substandad hausing was far ~ e e r In . a a m , nearly tbw-quafiers of the ppulation gved h deficient housing, and for the Northeat as a whale, 64 permnt. @er half the population of the Northwest fefl into this category. One e s e a l l y amte farm of substandard housing has only dirt for the floor. In rural areas in the core pampan provinces, 30 permnt of the population lived on a dirt floor. In Jujuy9 atamarea, F o m m , and aam, at l e a three-quaifters of the rural ppulatian Ised on dirt. Tn the Narthwest as a whob, wer 70 prmnt had such a housl=, and in the Northern 64 prmnt, In the rest of the rural intefior, 44 gercr=nt lived a housa with a dirt floor. As one indimtion of tbe esent to which rural p v e q spills over into urban areas, the wventh wlumn shms the prapofiion of the urban ppulation in dirf-Emred housing. Only 6 p r m n t of the cxlre pampan urban ppulatian Eved on dirt. In the rcliolrtheast, the fipre was aver s third and was nearly that high in mos

Permntage of Total Population Xn k f i ~ e n t Housing, 1991

G m f""amp 22.0 Federal Opital 5.1 Buenos Ahes 25.5 Santa Fe 25.2 ardoba

PedpkmI Pampas Entre Riw La Pampa N o ~ wmf h Sak nmmh Jujuy h Roja Qt amarm Santiago Mendoza San Juan San Luis

_t")a&gonia Neuqubn aubut Rio Negro Santa CM Zerra del Fuego

21.2

283 31.4 16.3 513

47.8 43.2 544 49.4 57.2 68.9 z.9 23,8 333

3.0.5

24.9

22.0 25.3

29.6 16.7 22.7

krcentage af Rural Pop, Wmg h Wirt-Hwr Housing, 1980

Perw~tage of Urban Pop. fiving in Dirt-Hoor Housing, 1980

Pximax)r Sebool Droput Ratee 1991

29.7

6.0 0.5

103 5.3

28.4 27.1 34.2

6.5 9.4 8.2

14.2 14.0

43.9

45.2 39.0

17.0 17.3 15.6

18.5) 20.0 16.1

70.6 71.4 53.9 75.1. 85.2 74.8 80.5

29.0 31.4 22.0 36.1 38.1 34.8 28.2

213 21.1 18.0 17.9 15.8 18.6 31.2

klrl.0 34.5 59.6 67.5

16.3 11.4 28.7 158

17.2 17.5 16.1 16,7

44.7 62.4 37".1 44.2 7.4

13.9 18.5 11.2 16.7 34

17.0 17.7 f 6.7

9.5

20.0 9*7 6.1

a m s Is the children aged 3-24 wbo attended but did not oompkte primary shoot as a perantage of children aged 3-24 who have attended s b m l but axe not now in a h m l , & m m : Fir& column, unpubhbed data &om INDEC; d and third mlumns, derived from Gatto 1990, cuadro 22; fourth mlunm, de~vedfrom unpublished data suppjied by fNDEC,

uf the Noahwest and in San Juan. myo and Patagonia had double the h&dena of th.e m m p m p a a re@on, The fousth p h q x h m l d r o p u e under the age of Weny-fom, regions is lem mmbd for t h m who we older.) In the p m p a n mre, 10 p m n t dmppd out before wmplethg p h q s h m l , Ia the Noaheill~t,newly one-t&d of youths did not ample& p h a r y and in the Northwa over a =h, Xn -0 and Patagoda, 17 perwnt of =h-l, youth did nat somplete p h q s h w l . In shafi, p e r t y is kdeqread in the h%fiur, e ally h the m a l hkrior of &gentha, and far hiaer thrzn in the core p m p a p r o h m s ( m e ge~pheral pmpm p r w h of ~ Entm M m and La Pampit were d d m by m m mewures to a y o md Pawoda.) If we wuXd fdter out the native of the h*rior and their Mdrerr &am the Epres fur the pmpm, the d a e m m s betweRn the pmpais and the h&fiar would be SifX m r e d There is mbstantid v ~ a t i o n~ t the b intefior, The N ~ a b e ais clear& the mre& redon, but the NaahweS is not far beund. me= two m ~ o n sare near& a tKrd of the ppulation af the inerrior. rity in the interiox": Mendma and muthem mere are phts of relative p Patagania (wMch h a a very s m d ppulatian) have poverty levels not far abwe t h w on the pampm, me= data clearly h d i a t e that m o of~ tbe inerior is &ed in md that the p h r w ' p k e t s of v e r t y " is a p m ddisortion.

.

1, M m a n J (11)88,323) states that there were a qumer of a nri;llbn m i ~ 1 minion

h the entke country fiscgudhg the pampasl) in 1970, or about

was about 20 perm 2, la 19W, the average deked belm) had five mrd fadlly is l a r ~ than r tbe average urbm one (de&ed &om unpubfished data suppiied by ZNIDEC), 3. Reboratti 198%, 134; and Sabafain and Reboratti lB2,161-162. 'The 1880 fsmd m r SO,QOQ BoliGans l i ~ ing the Northwed, dmmt all in <a and Jujulj? (Mmamino 1987,78,80). 4, Sin= many migant h a w a workers are women and children, I have follmed Rebaraaib lead (198%, 120) and have asumed that each migmt worker suppfled WO m p l e . 5. tive approach, shce some of the ~ g a nworkers t wodd have been inipndios when tbe censw was t&en and were not at that gme 6. Sina rural wage warkern are mare lkely t s be umarned, X have mu-ltipiied the number of wage w o r k s (150,000) by 2 to get the number of mraf p r supp ~ e by d wage WO 7, M m of the i to Greater Buenm Air- for example, have ettled in these areas 443 permnt the outer &g of more of the families have tbfied basic nmds (defmert belm). In the womt distfi* more thm half are in pverty by this memure, Xn contrast, mast of the d b t ~ d in s the inner ring of subwbs have fewer than 10 p r m n t h this ategory (Solo, Gutman, and Dam1 19fXI, 12)*

T

Banm de AnaSm y @mputa&bn. 1982. Rebvamie~foc3stadb1ico Ile la ecommh argenfi~t W&1980. Buenos fires. a n t r a de Sdud NRO 21. c. 15192. "&ea de Villa NRQ 21-Vaa Retiro," Buenw Ares. m N m E ( a n s j o Hadand de bmnoilo), 1964, Tenemk de Ia rkm: Ape&$ de la a m c m a p & y su ineideneia en el d m a m b a g r r p c u h a VOX.1, Part. Comisi6n de Tiemm Aridas. 1978. "Pxograma de inversiones en tierras e d a g 19791982." Blsueass Ares, November. C H ( a a s j o Federal de Invemiones). 1990, Mach. Sparate bmk fox each pro* . 1dlbsl.a;.'Qpartidpakbn federd." &v&& de ecowmfa mghmf, Vol. 2, No, 2,

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&l, pp. 171-195. Buenw firm: a w j o hthoameand h a n o d u Editares, 1975,@ b & c ~ a familiar y acmuhcidn de capia1 en el c a m p a e e a h , Buenw &a: Si@o Vehtiuno Hitor= 1974, mpde mnoaaiai, obgaalm a]; eapiWm y odeatadon= g e n e r d ~de l- mlanos del nortt; de Santa mlb econdmica, VoI. 14, No. 53 (Apa-June), pp. 151-179,

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al. 1988, "hexpansibo de la frontera ma en la prwhda de nmmh," In ambkn& en la Agentijte, pp. 2 2 S B 2 , Buenm f i e s : Gniro Par&la Promddn de fa maservad6n del Suela y del Awa,

kadon?

1 ~fInfer~Arnen'c~n Studim, Vol. 5, No, 3 (July), pp. 357-370.

About the Book and Author In the early part of this century, Argentina w a one of the mast affluent nations in the world. Sin= then, the kgentine economy has eqerieneed long periods of stagnation and recession. Larry Sawers linlts the countly's emnomic failure ta the backardnea of the interior, which comprises 70 perwnt of the area of the muntry and in whiGfr nearly one-third of the population resides. The interior's paverty, according to Sawers, is caused by the warcity of agicultural resource8 and by serious inequdities in the distr%ution of those remurces. The region is poorly endwed, the land has been degraded through abuse and overuse, and most fanners work tiny, unproductive plots, Moreover, most of the products of the interior are produced for the highly protected domestic market and face stiff campetition and fafling prices in the world market. Recent reforms in Argentina have dramatically aaravated the economi~crisis of the interior. Sawers shows how the poverq of the interior has mntributed to the dismal perfomance of the Argentine emnomy as a whole. He emphasizes the deleteriouseffects of extensive emigration .Eram,the interiar to the major urban areas that are unable to absorb the human tide. Mdiriondly; the national government has taxed the more prosperous regons in order to stlbsldize the interior, plaeing a severe drain on the federal budget and worsening inflation. The effects of the interior" sovery on the nation axe also gafiticaf. Sawers arpes that the bacbard political system in the interior emcerbates the worst k a ~ r e of s the national political culhlre and governance, which in turn pose profound obstacles to ecsnomic progress.

h r y Saulers is Professor and Ghair of the Department of Economics at The h e r i c a n Uniwrsiv in Washington, D.C.

Index aguardr'enle, 19-20, 81, 85, 275 dberdi, Juan$ 6, 177 afcohol, 59,237, See also wine deoholim, 105, 145, 184 dfalfh 24-45, 56, 6&7, 82, 86-7, 127, 1.51, See also pwture Atfonsfa, Ra&l,29-31, 192, 205,211, 217, 226,238,241,249 Atto Valle, 93, 127-8, 136, 147, 150, 266 animal traction, 85, 144, 148 aquifer, 89 Awncibn, Paraguay, 19,97 Australia, 3, 8, 10, 26, 42, 44, 6.2, 135, 152,217-8,230,263,255 authorititrianim, 13,44,46-7,174, 177, 201. See aho government,

G m p a i ~of the Desrtrt, 18,52,54,81-2, 98,127,129,156,192

Canadit, 3,8,10,18,26,424,126,

189,

217,263,265

capital i m p a q 32,365 cabin% 18 Catmmcq 22, 25,33,51, 6&7,69-70,72,74,86,

55, 58, 54, 114, 152-3,

157-8,16~1,169,1173,176,191-3, 195, 200, 219,221-2,225, 237-8,242-7,279-81

232, 235,

cattle and degadation of land, 70,72-3, 132, 144

e x p a s of, 17-20,22,24,51,

107, 113, 118, 127, 185, 191-2,205. See ako frontier baycott, 26,4Q, 45, 117 Brady Ran, 31-2

53, 55, 116,154 in aye, 81-2, 85, 87, 154, 267 in Nofibeat* 97-9,102-3, 113, 115-6, 120 in Northwest, 23,51-2,2&3,235 on pampas, 17-8,24-5,45,7%3,129, 165, 183 in Patagoniay 129, 132, 134 and rradidonal ranchin& 17-9, 22-4, 51-2,5S, 70-2,81-5,87,97-9, 102-3, 113, 115 caudillo, 13, 22-3, 199, 275 Cavallo, Domingo, 8, 30-2, 34-5, 84, 93,

Brdl competition in exprt mmkets with, 62,

106,20&8,229-32,23&-9,271 cellulose: paste, 112-3. See alse papr;

authorithan beans, 9,53,74-5,143, 147 Boliviq 19-22,51-2, 81, 86, 154,185, 191, 230

Bolivians, 58, 64, 66, 86, 153, 168, 228 boIt weevil, 116, 119, 150 border, 8, 29, 55, 81, 92, 98-9, 103-5,

68,75,119

government in, 210-.1,217,268 nzigant workers from, 105,107, 112 territafid competition with, 20, 97-8, 104, 291

trading rdations with, 20, 24, 34-5, 53, 60, 62, 92, 99, 104-5, 109 Bfitdn, 3, 7, 20-2,25, 29, 38, 40-& 45-6, 15)2,2QS, 253

budget deficit, See deficit; inflation 'tax

81-2,99,

pulpwood a a ~25,~ 33,, 52, 54-25, 66, 73-6,97-8, 112-20,126,143, 146-7,149-50, 152-3, ISS,158,16;0-1,167,173,195, 222,225,242-3,245-7,259,275, 279-81 a i l e , 3,20, 91, 108, 125, 236 cattle trade with, 51, 55, 81-2, 85, 87, 92-3, 154

am,

and competition in exparts mwkets

with, 68, 82, 133, 256 mipmt tabor from, 86,92, 128, 191. See also GhiIeans militav threat from, 28-9, 46, 127, 131, 191-2,235 @hileas, 19, 86, 128, 131, 191 choler% 185-6 anbut, 125-6,132, 134, 156-7, 16e-1, 157,173,195,222,225,229,236, 2434,246,276,279, 281 citrus, 27, 52, 65-9, 74, B-101, IOW, 147-8 C i ~W lar,U,S., 23 civil was, hgenrine, 6, 21, 97 clienrelisw 9, 57, 165-71, 173-7, 193, 209-10,261,264 climate, 8, 42, 45, 51, 61, 67, 73, 75-6, 88, 92,99, 11!5,11&20, 125-6,1324, 266, See als.8 flooding; hail; rain; snow coalition, 40, 47, 198-9, 202 werdon, 9,24, 55, 57-8, 105, 172. See also violence colony, 17, 19, 21, 67, '74, 103-5, 107, 109, 114,126-8, 256,167,258 Cangfess, 30, 57, 63-4, 190, 292.8, 200, 207,212,221,226,272. See also deputy; srenatox cowu&iadora, 1%-9,54 caatmination, See pollution conrrarktm, 85, 148 convertibility plan, 30, 54 coparticipation, 218-24, 226-7, 240, 244. Set. also revenue sharing ardoba, 4, 7, 19, 51, 81, 157, 159-61, 195, 199,219,221-2,224-6,234-7, 240,243,245-6,279, 281 Qrrientes, 19, 22, 25, 27, 52, 68, 97-104, 107, 111, 114, 117, 119, 143, 148, 152, 155, 160-1, 173, 193, 195, 222-3, 22SS1, 242-6,279-82 corruption, 3, 13, 28, 30-1, 174-7, 209-10,235,240,247-9,261,263, 27&3

cotton and degadation of land, 1153, 149 demand for, 68,11&20,259 difficulties in growing 118-9 ear& powtb in, 25, 27, 9%9, 115-7, 155-6 law productivity in, 119, 143, 147

and minifi~diss,103,117-8, 142, 149 in Northwe&, 52,65-7 price of, 104, 117-20, 143 mbddif;?s of, 27%47,67,11&-7,237 in U-%,9,23 coup #&tat,7, 26, 57, 193, 198, 207, 249. See a&@governmeat, m i l i t q credit, 74, 101, 509, 129, 245, l4&50, 266,232,248,260,26&9. See afsrt debt

CRYM,106-8 eulture antidevelopmentd, 4, 13,434,52, 150,174 Hispanic, 44, 47 politicd, 9, 13, 44, 47, 165, 1'74-5, 177, 187,189-90,2014,208,210,212, 261-2,264-5,267 See also mthotitacianim; fatatim; pemaaltlism ~ Y O 19,22, , 24-5, 27, 51, 72, 81-94, 97, 110, 121, 126, 131, 133, 142-3, 148, 152, 154-6, 15&61,195,222,225, 243,246,258,275,277,279-82 debt, 24, 3&1, 34-5, 54, 58, 101, 119, 168,228,248, See a&:, credit; deficit decree, presidentid, 31, 54, 57, 60, 107, 196, 198, 2068, 212, 226, 238. See a h government, authoritarian deficit, 13, 27-8, 31-2, 35, 37-8, 85, 259, 1"9* 226,22&9,248-9,263. See also, debt; inflation tax deforestatian, SS, 70, 112, 115, 144, 154 degradation, of en~ronment,69-70, 73, 76-7, 87-8, 100, 112, 115-6, 119, 125, 134-6, 144,184,258,26O, 262, 264, 266, 269. See ako, land, abandonment; deforestation; desertifieatian; erosion; pollution; salinizittion; waterlogging demand biological ovgen, 90 far products of the interior, 11, 53, 59, 62-5, 67-8,75, 87-8, W%, 93,100-2, 106, 108-9, 115, 119,221,1314, 152, 259 democracy and developing countries, 208-9 ineffectiveness of, 13,206-12 lack of mnrppoft far, 3.65, 174, 177, 2014,263, 273

Index praspects for, 209-12 return of in 1983,29, 106,220 dependency, 4,7-8,23,41-2,157,155, 168-9, 174,202-3,261 deputy, 13,30, 192-8,204,206,262,271 dmaparecSos, 28, 185. See a&@,p r m a ~ de*r~iBcation, 55, 69-71), 73, 115, 117, 133-4, 144, 151,154,258,264 a b excbmge dwaluation, 27,365. Sea r rate; wervdued exchange rate di&ng Sick; 144,147 diseae, 24, 51, 55, 87, 99, 145, 184-6, 262,277,2&0 dispromotion, iodtlstrial, 234-5 diversification, 9, 12, 52, 59, 84, 86,92-3, 104,107, 117 dynasty, 173,200 education, 6, 145, 158, 226, 230, 268-9, 271,277. See a h s h o d dection, 3, 7, 23, 30, 41, 193, 197, 199-201,203,211-2,273. See a&@ democracy emigration, See migration England, See Britain Entre Rias, 7, 51,59, 68, 97, 100-2, 116, 159-61, 395,222,225,243,246, 279-82 erosion, 68-70, 73, 76, 87, 89-90, 100-1, 106, 113,115, 119, 131-2, 134-6,144, 258,264 mfancia, 23-4, 45, 72, 98, 102-3, 115, 130-1,151,165, 183,275 exchange rate, 29,31, 130, 191 ovewatued, 27,29, 31-2, 35, 65, 68, 74, 91,111-2, 120,132, 135, 151, 156 undemalued, 31, 55, 62, 83, 105 See a h convertibaify; devaluation

expm fram Argentina as a whole, 4, 18-27, 30-1, 35, 37, 4Q-2, 46, 51, 75, 156, 189,237 of alfalfa, 127 of beans, '74-5 of cattfe 51, 71, 81, 116 of citrus, 57-8, 100,256 of cotton, 11'7-20 of fruits and vegetables, 93, 132-3, 151 of riee, 102 of sugar, 53,58-9, 61-2

of tea, 110-1 of tobif~c~, 63, 65, 111-2 of tun& 108-9 of wine, 81,581-2 of wool, 23,12%3Q, 134-5 of yerbs xnat4, 1107-9 Falkland Islands, 29, 131 fatalism, 44, 169, 174, 177, See also culture favoritism, 176,241). See aka cormption federal ystept, 194, 217-9, 247. See a h fiscal fderatism fence, 17, 613,72, l15 brrari, 270 fertiUty, 73, 76, 88-9, 99, 112, 119, 126, 135, 14%-5,269 feftilizer, 62, 76, 89, 101-2, 110, 129, 244, 247,269 FET, 62-3, 10Q, 111 fiscal discipline, 27, 29, 331, 33, 235, 241 fised federalism, 217, 247 flooding, 6,9-10, 32, 53, 70, 90, 99, 101, 119, 126, 131, 136,155-4, 156 FOXilAVf, 223-4 forest~y,25, 69-71, 73,90, 98-9, 104, 111-7, 125-6, 131,144,234,278 Fomasa, 25, 29, 54,97-8, 107, 1fS20, 146,149-50, 152-3,155-7, 159-61, 185, 191, 195,221-2,224-5,236, 242-3, 245-7,275,279-81 France, 22 fraud, 26, 193, 19% 211, 233. See atso cormption free trade, 22, 25, See a k 1iberal;ization; ~ tariffs Frondizi, Arluro, 193,199,207, 211 frontier, 44-5, 74, 75, 128, 235, 238, 258, 268-9. See ako border frost, 75-6, 91, 118, 147 fruit, 33, 47, 52, 66, 81, 88, 93-44, 125, 127-30,132-3, 150-1,221,266, S= also citrus, g a p s , wine garlic, 91, 93 gaucho, S, 7, 275 geoptitities, 191, 231, 235 government authoritarian, 13, 39, 47, 165, 201-4, 208-12,252-3 mititary, 8, 25-30, 46. Sea a h coup

#&rat;process spending, federal, 226, 231, 239-41, 247-8; provincial, 241-5,247 See a h plitical machine grapq 25,59,6&7,72,81-9,9&3,1 lQ, 127-W, 133, 143, 148, 150-1. See a&@ wine Great Depression, 3, 8, 26,42, 57, 52, 82, 84,207,213 Cuido, Sod Mitda, 195 hail, 91 hides, cattle, 17,22, 81, 99 hi@way, 219, 131, 159, 170, 176, 200, 224,265 histow, imprtmce of, 10 hospitd, 158 bunger, 142-3,145, 169 hunters and gatherers? 18, 51, 54-5, 97-8, IS@,185. Sea a h Indians byperinaation, 28, 30, 88, 208,2267, 241,263 EEiq Aaura, 207,211 immigration, See migration; litbor, migrant irnpoxlts, 19-20,22-3, 25, 29, 31, 35 of capital, 10, 32, 35, 59, 74, 151, 175, 271 of cotton, teailes, and gaments, 117, 128,135 of fruit, 133 and ovenralued currenq, 31,35, 120 of paper, 112 of sugar955, 57, 60 of tea, 109,258 of tobacco, 62 of wine, 82-3,91-2 %e also impart substitution; tariff import sahtitution, 25, 27-8, 30, 3742, 46-7, 62, 67,101, 117, 127-8, 152, 162, 183,2C)W, 262,265,275 Incas, 54 Indians, 54, 114, 156, 167, 185 hostile, 17-8, 24,52, 54, 81, 98, 126, 1251,192 as Iaborers, 19, 22-3, 51,54-8, 105, 114, 117, 131, 147, 150 and missions, 97-8 precolumbian, 10, 51, 54

See also Campaign af the Desert indigenous population, See hunters and gatherers; Inew; Indians industry, See dispramotion, industrial; manufacturing; promotion, indu~rial infant mactality, 152 inflation, 13, 27-31, 35, 38, 43, 46, 63, 83, 91, 106, 177, 210, 2269,238,248, 261,263, Sae a b hprinflation inflation t a 226-8, 248 infrastmcture, 13, 69, 91, 105, 141, 158-9, 362,170, 176,217,240,247,261 inheritance, 54-2467, 103, 107, 118, 126-7,269,278, See also lmd, subdivision of instat)ility, 26,40,45,91, 176-7, 205-7, 261,273 intepated rural development, 268 iatementioa, 53, W, 19&8, 201, 209, 265 irrigation, 23, 25, 51, 55, 60-1, 65-3, &1-4,85-91,93,101,125-8,131-2, 135, 1434,146-7,258,277 isohyet, 75-6, See a&@rain isolation, 29, 51, 103, 159, 167, 169-71, 205,261,269 Italy, 44, 166, 203 jerked beef, 17,22 Jewits, 97-8 journatism, 211-2,270-3 Jajuy, 12, 19, 23-44, 27, 33, 51-2, 56-8, 60-6, 58,72-3, I l l , 114, 133,146-7, 151-3,160-2,173, 185, 191, 195,219, 222,225,233,236,242-6,27%81

Xabar afieultural, 25, 53, 54, 56-8, 63, 63-7, 7@2,74, 85-6, 102-3, 108, 117, 119, 128, 147-8,170,260 contractor, 168 forced, 9, 11, 18, 22-3, 55-7, 105, 167. St3e also wereion; vliolence l a m s of, 12, 24 industrial, 54, 56, 203, 236 intensiriy, 53, 63-4, 74, 85, 100, 202, 120,131,142-3,146,149,166 law, 35,56,71,86,115,206, See a&@ Statute of Perha migant, 11, 25, 55, 64, 86, 114, 168, 260, 277-8. See also Bali,Iivians;

aileass movement, 4,40,5&7 producti~ty,Set? uaproductiveness shonage, 56, 66,85, 170 skiIle4 37, 236 mwlus, 8,56, 70, f70 See also fadiaxls, as labarers land abandonment of, 76, 89, 102, 112, 126,128,132,244,258 refom, 267-9 s h disl~butionof, 11, 54, 57-9, 64, 6 ~ 77a,72,74,77,85,102,104,1~)7, , 110-1,114-5,118, 126-8, 13@-,l 142, I52,196,260, 270,278 mbdi4sion of, 54, 103, 107, 127, 204, 259. See afso iakeritaace tenure, 12, 43, 54, 57-8, 64, 67, 70, 72, 85,102-3,105,112, 117-8, 126-7, 128, 130, 145, 148, 151, See also

quatting litngage, 167,171,265 I;a P B ~ P & 51, 160-1,194-5,2W, 222, 225,236,243,246,279,281-2 La Riaja, 19, 22-5, 29, 33, 51, 55, 58, 66-7, 69-70, 72,86, 107, 146, 152-4, 16%1,1?3, 192-3, 195,200-1,219, 221-2,225,227-8,231,235,237-8, 242-3,245-7,270,279,281 lafifundia, 54, 275 lemons, 65-h,68,266. See aka fmit IBeralization, 3, 8, 11-2, 29-30, 33, 39, 52, 62, 65, 75, 84, 102, 1Q7,120, 190, 229$258, 267, 276. See a h free trade;

privatimtioa Lima, Peru, 19-20, 184 linwed, 24, 99 loaia, See debt X o ~ i a gSee foreary mdnutrition, 245, 169, 184, 186 nrsnufacturing in Argentina as a whole, S, 25, 27-32, 41-5, 115,152-3,183-4, 189,203, 208,235-6 in the interior, 22-3,25,29, 33,46,52, 69, 89-90, 93, 113, 130, 141, 154, 191, 231,236,266,271,278 and pollution, 89-90, 113, 131, 135, 256

in U,S,, 9,45, 55, 110 See aho citrus; divromotion, industnIal; i m p & substitution; papr; promotion, industrial; sugar; tmnin; tea; tesiles; tobacco; wine; yerba mitt4 Mmlnez de Ha& fad, 91,132,206,210, 235, See abso procao mmhanimfion, of a@eulture, 53, 53, 74, 86,110,118, 144,147-8,150

Mendozq 12,19,81-93,128,154,25861,173, 195-S,f99,201,222,224-5, 227,229,24%3,245-6, 264,267,275, 279-82 Menem, Cartas, 11,3&1,33,35, 59-CiO, 52, 64-45, 93, 107, 173, 193, 198, 2Q&1,20fi-8,212,22&1,226,22&-9,

234,238,242,249-SO,2f 9,257,27&3 MERCOSUR, 34, SO, 1Q9, 133,275 Mexico, 34-5, 68,268

migation may from Argentina, 3,88, 126 within Argeatina, 4,9, 13, 27, 59, 98, 106-7, 110, 114, 120,141, 152-7, 152, 174, 18W, 2004,223,262-2,269 creaming, 157 from Europe, 1, 3-4, 6-8, 24-5, 47, 85, 88,98,110, 116, 171-2,267 from nei@bol-ing countries, 66, 122 See aka Boti~ans;Oileans; fabor,

migrant mining 10, 12, 19, 45 69, 75, 93, 141, 156,191,218, 229-1,249 Misioaes, 25,27,29,52, 97-42, 103-15, 143, 145, 149, 152, 155, 157, 159-61, 167, 173, 191,195, 222-3,225,238, 243-6,258,279-81 mission%Jewit, 97-8 Montevideo, Urnpay, 22 mule, 18-9, 105

national treasufy contributions, 218, 225-7,231,244,24%9

nationalism, 7, 37, 46-7, 191-2, 205, 263 Native Anrerieans. See Xadians NeuquCn, 27,33,125, 227,131, 152,156, 16h1, 1"r3,195,222,225,229,236, 243,246-7, 276,279,281 "new countries: 8, 10, 45, 189, 265 New aaland, 8, 10, 42, 233, 151 Northeast, 25, 27, 34, 51, 59, 62, 67-8,

Qngmia, fuaa Carlos, 201,235 QrtkRobeao, 7,154,193 overp&n& 69-70,73,87, 115, 117,134, 151 oveqmturin& See overgraing overproduertiao, 11, 52, 56, 58, 68, 84,91, 105-6,108,259 paper, 34,57, 100, 112-3,236 Paraguay, 19-21, 23,344 54, 75,97-8, 1065, 108, 118-9, 126, 150, 185, 191-2,210,275-6 Paran4 River, 22-3, 25, 51-2,70, 98-9, 1l4 pasmre, 24, 45, 73, 76, 81-2, 102 116-7, 128,133-2,134, 142, 144,151, See also alfalfa; overgrdog Patagoniq 8, 12, 25, 27, 29, 33, 51, 93, 125-36,142, 147, 150-2, 1Sti-61, 167, 191-2, 194-6,221-5,230-4,237, 242-3,246,256,276-7,27%82

patron-client relatioa, 3ee elientefism patronage, 165, 271, 173, 175-7, 197, 204, 244, 261. See alsa political machine pans, 22,24, 55-7, 66-7, 103,275 per capita income, W, 25-6, 32, 46, 88, 113, 136, 141 Perbn, Juan Damingo, 4, 7, 9, 28,3941, 45-7,57-8,71, 105-6, 115, 158, 17b2, 194, 199-205,211,219,235, 24l Peronist Party, 8, 28, 30, 3940, 47, 57-8, 106, 119, 129, 158, 168, 172, 194, 198-201,20W, 206-7,212,2152-20, 234,249,262,270 pwnatism, 44, 574-5, 177. See aka culture km,19,185-6,210,230 pesticides, 26, 62-3, 74, 76, SIQ, 100, 113, 119, 133, 144,149-50, 269 petroleum, 12, 69, 89, 136, 156, 199, 221,

229-31,249 plitical machine, 26, 155, 171-3, 176-7, 197,200,236,261,267 pollution, 69, 89-90, 101, l 13, 119, 129, 131, 136, 186,202,258,264,256,269 pork barreI, 172, 190 18, 28-1, 23, 91-2, 97, 130, 237, 266, 276 ~ v e r t y ,4, 6, 9, 11-3,42, 72-3, 76-7, 87, 107,113, 117, 141-5,148-9, 152, l5&-g, 162, 165, f 67-9, 174,177, 1866,189,217-8,26@2,267,269-70, 277-82 mekets of, 6,189,282 prairies and pampas, 8 pdvatizatioo, 12, 30.-2,210, 231, 271. See also liberalkatiaa proceso, 28, 120, 132, 151, 153, 185, 191, 206,209-10,234,276 productivity, Sea unproduetiveness; oft Irzrui, see yields promotion, industrial, 29, 33, 57, 153-4, 156,1f)l,218,231-9,24%9,263, 266, 269 proprty ri&ls, 84, 105, 146, 167, 175, 177,207,209,211,260-.1. See also land, tenure; squatting public health, 158, 162, 185, 191, 226, 278 pugpwood, 99-100,112, 143, See a b forestry; papr mna, 5&8,73,147

Radied Pafty, 8, 41,5S-6, 74, 83, 106, 171-2, 193, 197-9,22Q, 262-3 railroad, 18, 24-5, 31, 40-1, 52-3, 59, 71, 77, 82-3, 85, 91, 97, 114-6, 119, 126-8, 159, 170 rain, 12, 17, 51, 65, 73, 75-5, 81, 87, 90-1, 105,1134, 118-9, 125, 132, 136, 143, 146-7,184,257-8,276 reforeftation, 70, 99, 112 regulation, 20, 28, 31-2, 34, 59, 84, 91-2, 106,170, 175,259 rent-seeking, 38, 174, 177, 204, 249, 261, 253,273 rescrurees, lack of, 10, 12, 258 revenue sharin%22, 85,218-20,22%6, 231,248-9,263 rice, 47,99, 101-3, 148 ~ i aubur, o 125-6

Rio @forsdo, 125, 128-9 Rio Nego, 27,33, 125, 127-8, 131-2, 152, 156,16&1, 173, 193, 195, 222, 225,229-31,243-6,279,281

Rl'a Salado, 66, 90, 147 road, See hi@way Patrbn Costas, Robustiano, 57, 193 Roca, JuEio, 7,23, 28, 41, 54, 192-3 Roca-Runeinran Treaty, 7, 41 rotation of crops, 75, 143 royalties, 37,46, 218, 229-31, 24%9 sdinhtion, 61, 68, 83-90, 119, 126, 131, 144 Salt% 7, 12, 19, 22-4, 27, 29, 33, 51-2, 54, 56-8,661-70, 72-4,76,100,102, 114-5,133, 146-7,151-3,160-1, 173, 185, 191, 193, 195,222-3,225, 223-30, 233,2424,24&7,269,275-6, 278-9,281 San Juan, &7,19,81-3,85-9,93,146, 148, 152,154-5,160-2,192, 195, 222, 225,231,235-8,2434,246-7,275, 279-82 San Ltsis, 19, 69, 81, 87, 152, 154-5, 160-1, 173,192,195,222,225,235-7, 243-4,24&7,275,2'79-81 Santa Cruz, 12,125,131,134,156-7, 159-62, 173,195,221-2,2245,229, 2365,24H, 2467,276,279,281 Santa Fe, 4, 7, 19, 51, 59, 66, 81, 9'7, 1168, 146, 157, 160-1,195,199-2Q@, 22%6,243,245-6,269,219,281 Santiago del Estero, 7, 19, 22-3, 25, 33, 52,53,55,64, 66-71,7%4,76, 214-5, 117-8,14&7,152-4, 197,201, 212, 233,236,242,247,268,275, 280 Samlento, Domingo, 6, 43, 82, 165, 192-3 school, 158, 165, 171-2, 176, 184, 237, 245,247,271,278, 280-2 wnator, 30, 196, 198, 2Q0,206, 262 swers, 58,159, 161-2, 185,237,278 shantytown, 13, M, 71, 153, 183-4, 186, 249,262,267,276,278 sbmp, 22, 25, 56, 73, 87, 99, 116, 125, 129-31, 134-6, 144, 165,275 silver, 10, 19-22, 52, 81 slavery, 6, 17, 20, 22, 24, 54, 57, 61, 85, 97,99,105, 166

snow, 91,114, 132, 165, 172, 199-201

soil structure, 68 S