Barter: lifeline in Argentine sea of red ink

Unrelenting recession has forced up to 400,000 Argentines into an alternative economy.

Susana Cachon spreads her brightly colored woolen sweaters on the table before her and glances at a nearby row of people lining up for food. "It's disgusting," she says. "This country has so many riches, but look how many people are hungry."

Like others here at the barter fair, Ms. Cachon has come to trade for what she cannot afford to buy.

As this nation of 37 million lurches through yet another economic crisis, Cachon and a growing number of others are turning their backs on the traditional economy. Officials estimate that 400,000 Argentines are now bartering. About 800 barter clubs, where members exchange goods or skills ranging from home-cooked food to plumbing services, operate around the country.

"The government used to pay welfare benefits and subsidize services, but that doesn't happen any more," says Floreal Medina, a former businessman who travels the country helping to expand the barter network. "What can people do if they don't have any money?" he says. "Barter is our solution."

Though Cachon has a part-time job as a home-care nurse, many fellow club members are unemployed and, with state welfare benefits pared to near zero, they must find imaginative alternatives to get by.

The Bernal barter club, six years old, has grown rapidly, with several thousand residents now gathering three times a week. On a vacant city block, barterers set up hundreds of wooden stands full of household products, tools or clothes. Some members ladle out homemade soup, others offer indoor plants, fruit or fresh vegetables.

Cristina Cerdero, a mother of eight, says she was desperate after losing her cleaning job three months ago. "When the job ended, I had no money to feed the kids," says Ms. Cerdero, who now cooks pizzas at the market in exchange for food.

Under an agreement with the government, barter club members use an alternative currency known as creditos, which can be used to buy raw materials, food, or even bus rides. For the unemployed, working for creditos is as much about retaining self-respect as keeping food on the table. "In the formal system, you're considered old at 40," says Cachon, a grandmother. "Here, you can carry on doing what you're good at."

Official blessing for barter allows Argentines to avoid paying a hefty 21 percent sales tax. "Pure barter trade is not taxed, but problems arise when people trade with enterprises inside the formal economy," says Enrique Mario Martinez, who heads a government department in charge of small- and mid-sized enterprises. Martinez's department now encourages barter, or trueque, by running micro-enterprise training programs and by pressuring large companies to exchange raw materials for creditos.

Meanwhile, President Fernando de la Rua's fragile coalition government, which took office in December 1999, is struggling to lift a 33-month recession that has seen unemployment grow to 14.7 percent and the national debt rise to $124 billion, nearly half the size of the economy. As Argentina's currency is pegged 1 to 1 with the US dollar and wages are much lower than in North America, prices are often out of reach, even for those who are working.

Just two weeks ago, the president appointed an old adversary, Domingo Cavallo, as economy minister - the third in the post in as many weeks. It was Mr. Cavallo, a Harvard University-trained economist, who introduced the currency-exchange system 11 years ago that rescued the country from hyperinflation.

Cavallo cannot dismantle the currency system he set up - a devaluation would almost certainly cause Argentina to default on its debt, which is almost all denominated in dollars - but he has unveiled a plan to invigorate the economy by trimming taxes, reorganizing federal agencies, cutting red tape, and adjusting tariffs to make it cheaper for businesses to import machinery and raw materials.

Cavallo sought - and won - emergency powers he said were necessary to kickstart the economy. These "superpowers," granted by Congress for a year, will let him sidestep political opposition to his plan, particularly from powerful provincial governments that are against cuts in spending.

Financial analysts are guardedly optimistic that the emergency powers will allow the economy minister to steer Argentina out of its malaise. "There are very strong positive signs that Cavallo is addressing the real issues," says Diana Mondino, managing director of Standard & Poor's Argentina.

But critics say Cavallo's rescue package will actually worsen the outlook for Argentina's poor by increasing prices on a range of consumer goods.

At the Barter Club of Bernal, few members believe Cavallo's policies will succeed in getting people back to work. "This crisis is only getting worse," says Medina.

(c) Copyright 2001. The Christian Science Monitor