The trek into abject misery for the Mercosur bloc does not end with Argentina. It only begins there. South American economies have never conducted themselves as examples of stability and responsibility. The Mercosur states (Argentina, Brazil, Paraguay, and Uruguay) have especially sordid financial legacies. These economies have rendered themselves capable of taking the concept of boom and bust finances to completely new levels.
But why all the trouble? The land is fertile; there are endless opportunities for business to flourish. At some juncture corruption and mismanagement always halt progress. Argentina has adopted so many austerity plans that Venezuela recently hired one of Mr. de la Rua's former economy ministers to help develop an austerity plan in case lower oil prices cause severe damage to the Venezuelan economy. Actually Mr. de la Rua has quite a few former economy ministers who no doubt are more than willing to give advice to any government except one led by Mr. de la Rua. Since his election in 1999, Mr. de la Rua has replaced his economy minister four times. Three of them were replaced between January and April 2001. The current economy minister Domingo Cavallo probably has joined the ranks of those former ministers who now spend a good bit of time shopping their services. Mr. Cavallo's days at Mr. de la Rua's side now seem quite few.
Governments generally adopt the principle of collective responsibility - until a particular minister publicly utters some statement that does not conform to official policy. Then collective responsibility becomes collective isolation, and the isolated minister must defend himself. This is what seems to be the fate of Mr. Cavallo. During his last stint as economy minister in 1990 he developed the financial arrangement by which the Argentine peso was pegged to the US dollar. This involved establishing a currency board. Although the currency board solved Argentina's last recession, the board has caused the current set of circumstances.
