Buenos Aires Herald, July 8, 2001

By Marcelo García and John Pain

Herald staff

Cavallo is not a Capitalist

Carlos Rodríguez admits, sitting in his office at the CEMA Argentine Macroeconomic Studies Centre, that he finds it hard to keep his mouth shut. Maybe for that reason it has been very easy for government officials to blame CEMA for a rash of market rumours on Tuesday that President Fernando de la Rúa was about to step down.

Economy Minister Domingo Cavallo said on Monday that RodrĄguez, who served as deputy economy minister to Roque Fern ndez between 1996-98, was one of the many "traitors to the fatherland" who were spreading panic by suggesting Argentina could default on its debt. A day after, Rodríguez compared Cavallo with Nazi propaganda minister Joseph Goebbels.

"It has been an orchestrated campaign. Every member of the government has come out this week and accused CEMA of conspiring. I thought those sort of things were over with Goebbels," said Rodríguez in an interview with the Herald.

He also redoubled his attacks against Cavallo: "He is not a capitalist."

Q. Are you a traitor to the fatherland?

A. No (laughs). And I am not a conspirator either. Crying out against conspiracies is this government's method of hiding its political and economic failures. Every time there is a difficult situation, every time there are bad rumours, the government blames its problems on the rumours and not on its own action. And it blames the rumours on a handful of people. We at CEMA are its favourite scapegoats.

Q. But why do you think the government has picked on you?_

A. They think we are ideologically dangerous. They feel the fact we defend the capitalist market economy turns us into extremists. It isn't as if we were talking about savage capitalism, with no social security, no income tax. It is just that they view capitalism as an enemy. enemy. _

Q. Are you saying the government is left-wing, then..._

A. No, they are not even real leftists. They are what I like to call vernacular left-wingers. A very curious thing. They see capitalism as an enemy, but they are not communists either._

Q. Are you saying that Cavallo, for instance, is a strange sort of left-winger who hates capitalism?_

A. Cavallo is different. He is not a red but he is not a capitalist either. Cavallo is very fond of corporativism. He believes he can himself replace the market. He is not a left-wing planner because he respects private property, but he wants capitalists to do what he wants them to do. We have a basic ideological dispute. I believe the best way to run a country is through clear and equal rules for all industries, while he is picking the winners. _

Q. Could you give an example of that? Where is Cavallo picking the winners?_

A. All these competitiveness plans, for instance._

Q. Those plans have covered many sectors of production, though._

A. But he decides which sectors are going to get the benefit and he personally negotiates the terms of the agreement._

Q. Is he ignoring many sectors?_

A. That's not my point. My view is that the best way to improve competitiveness is by allowing efficient sectors to expand and earn money. With these tax benefits, Cavallo is taking money away from efficient sectors and giving it to the inefficient. I just think that is bad economics._

Q. Cavallo recently accused you of having irresponsibly let provincial spending increase 3.3 billion pesos between 1997 and 1999?_

A. I resigned by mid-1998. But what I can say is that the national government does not control provincial spending, it is unconstitutional. Provinces spend what they get, which according to the Constitution, is half of what the national government collects. Between 1996 and 1998 our economy grew like it had not grown in the history of Argentina, tax collection went up and provinces of course spent their share. But primary spending did not go up in that period. In fact, primary spending did go up brutally between 1991 and 1995 (when Cavallo was economy minister)._

Q. CEMA people were in the Ministry of Economy when the current economic recession began. Do you feel partly responsible about the current situation of our economy?_

A. Not at all. The economy suffered two external crises: Russia in 1998 and Brazil in 1999. But surprisingly enough, the economy had already started to pick up by July 1999. FIEL's industrial production index clearly shows that we grew between July and December 1999. Then, with the Alliance's economic policy beginning in January 2000, the economy crumbled. It is a commonplace to say that recession has been going for three years, but that is not technically correct._

Q. Why do you think De la Rúa has failed to get the economy going?_

A. De la Rúa has a political problem. He got to office with an Alliance of the Radical party with left-wing groups. This Argentine left does not believe in the market or in private property. And the Radicals are politically liberal but never had an economic ideology. Both RaŁl AlfonsĄn, who does not believe in the market, and Ricardo López Murphy, who graduated in Chicago, are Radicals. That's why they are unable to run a capitalist economy because they are not consistent. _


Q. Why did you engage in such verbal aggression with government officials this week?_

A. They started first and I had to defend myself. But that does not mean I am a conspirator or a traitor to the fatherland. I have my website and I publish my ideas._

Q. But they say your ideas push country risk ratings upwards?_

A. That's ridiculous. The government does things that send country risk soaring and the only thing they can do is to blame it on us._

Q. Although comparing Cavallo with Goebbels does not seem to be a piece of constructive criticism..._

A. But, I insist, he called me traitor to the fatherland and I had to defend myself. Treason to the fatherland is a very serious crime in Argentina. There is no statute of limitations, it is like kidnapping children or war crimes. It is terrible to see a national Cabinet accusing intellectuals who just think different._

Q. You could have also taken him to court..._

A. Yes, but that man (Cavallo) is going to be a national deputy for the rest of our lives so he will always have legal immunity. Besides, it is not only Cavallo. It has been an orchestrated campaign. Every member of the government has come out this week and accused CEMA of conspiracy. I thought those sort of things were over with Goebbels._

Q. Do you feel politically persecuted?_

A. (thinks) Not yet. But I believe they are using taxpayers' money to discredit an intellectual. And that's what fuels country risk and scares investors away.