[A-List] Uruguay: political crisis

["Michael Keaney" <michael.keaney@xxxxxx>]

Uruguay faces fresh crisis
By Mark Mulligan in Santiago and Agencies in Montevideo
Financial Times: October 30 2002

Jorge Batlle, the Uruguayan president, faced a fresh political crisis on
Tuesday after five cabinet ministers said they would resign over his
handling of the country's economic meltdown.

The five, all from the junior coalition National party, are expected to
formalise their resignations after a meeting of party members this weekend.
However, there is still a slim chance they will reverse their decision,
announced late on Monday.

Either way, their withdrawal of support is a serious blow to Mr Batlle, who
is grappling with the financial fall-out of the Argentine crisis and the
consequent erosion of public support.

Pressure from Luis Lacalle, a former president and leader of the National
party, forced Mr Batlle to dismiss his finance minister in July.

One of the first jobs of the new minister, Alejandro Atchugarry, was to
impose banking controls, after a run on deposits - led by nervous or
cash-starved Argentines - reduced central bank reserves from about $3bn
(£1.9bn, ?3.05bn) to less than $1bn in six months, and only after an
injection of funds from the International Monetary Fund and other
multilateral lenders.

The IMF stepped in with another $3bn package in August, which has helped
calm currency markets and bank depositors. After losing about 50 per cent of
its value since June, the Uruguayan peso has recently shown signs of
becoming steadier.

However, a four-year recession, echoing the chronic downturn in neighbouring
Argentina, has driven up unemployment to historic highs and fuelled social
unrest and increasing industrial action by public service workers.
Economists estimate the economy could shrink by more than 10 per cent this
year.

Monday's resignations confirmed the growing rift in the coalition, which was
elected in 2000. Mr Batlle is serving a five-year term. Tension reached
breaking point on Monday when Mr Lacalle publicly expressed regrets at
supporting Mr Batlle in his campaign for the presidency.

Mr Lacalle's party has grown restive with the government's handling of the
economic crisis, and he charged that the National party was "not appreciated
by the Batlle government".

The two-party coalition is expected to continue working together in
Congress, ensuring passage of economic reform laws. But Sen. Luis Heber, of
the National party, said his party needed a greater say.

"Until now we have had cabinet ministers without any votes," he said,
likening it to "eating the peel but not the fruit".