By Anthony Faiola
Washington Post Foreign Service
Wednesday, December 8, 1999; Page A01
NUEVE DE OCTUBRE, Argentina—First of Two Parts
Horacio Hinojosa crossed a ruined tennis court, startling a stray horse
grazing on tufts of wild grass pushing through cracks in the red pavement.
Undeterred, he walked on through this deserted town where he had once
flourished, pausing at an abandoned movie theater to pull at the branches
creeping up the walls.
"I took my wife to see 'Planet of the Apes' here once," he said, and
recalled a scene of desolation from the movie. "Remember all the buildings
covered in vines and weeds? Well, you see we lost our world, too."
Hinojosa wandered down an overgrown path, passing a church whose
ruptured doors were marked with graffiti. "Happiness and pain, for
returning to the place of my best memories," read one scrawl in heavy
black paint. Hinojosa nodded, then climbed the metal staircase of a nearby
apartment building, where his family used to live.
It was inside the apartment, after touching its mold-covered pink walls
wandering the floors covered in rodent droppings, that the portly,
46-year-old former truck driver began to cry.
"We had a cake for my son's first birthday on this spot," he said, weeping.
"And over there, we used to move the furniture to one side and put on
music for dancing."
The music stopped in 1992. That was when this workers' village, 35 miles
east of San Salvador de Jujuy in far northern Argentina, was shut down by
the new private owners of Aceros Zapla, the formerly state-run steel and
mining company that was the industrial pride of Argentina's northwest.
Bought by a partnership that included New York-based Citicorp, Aceros
Zapla became part of Argentina's $35 billion sell off of state enterprises,
one of the developing world's most ambitious privatization plans of the
1990s. It marched this country into the new global economy, bringing
fortunes to the quick, the skillful and the well-connected, but also exiling
thousands of working-class families like Hinojosa's to a world of poverty
Founded in 1945, Aceros Zapla had been one of the symbols of former
president Juan Peron's vision of Argentina as Latin America's middle-class
society, a place where the continent's traditional chasm between rich and
poor would be filled by working men and their families. Although the
decades that followed were wracked by economic and political instability,
workers like Hinojosa with less than a high school education enjoyed
wide-ranging benefits, such as swimming pools and private gymnasiums.
But in the free-market revolution that swept through Argentina and much
Latin America in the 1990s, all that suddenly changed. The world that
blue-collar Latin Americans like Hinojosa grew up in--where a job,
especially a government or a union job, was a job for life--suddenly
vanished, as long-closed economies from the Rio Grande to Tierra del
Fuego adopted privatization and free-market reforms.
Instead, Hinojosa was promised a new era in which a dynamic private
sector would provide a better standard of living though the engines of
globalization and foreign investment. For some, the new era has lived up to
its promise, and then some. Business elites and politicians clinked
champagne glasses with foreign investors as reforms sent Latin stock
markets soaring and sparked unprecedented economic growth.
Argentina embraced the free market more zealously than any other nation
in Latin America. In upscale neighborhoods of Buenos Aires, new
branches of Tiffany & Co. and Cartier have provided the labels of
prosperity for slickly dressed entrepreneurs who cashed in as the value of
the Buenos Aires Stock Exchange rose from $3.2 billion in 1990 to $45.3
billion last year. The powerful and well-to-do prospered, perhaps best
exemplified by Argentina's President Carlos Menem, who drove a
fire-engine red Ferrari and flew the world in a lavish new presidential jet
called Tango 01.
Most other measurements of the Argentine economy also provided
stunning vindication for the free-market reformers. Per capita income more
than quadrupled in less than a decade, to $8,970--more than twice that of
Mexico. The gross domestic product jumped from $181 billion in 1991 to
$331 billion in 1998. The peso, sickened by inflation of 300 percent a
month in 1989, was tied to the dollar and cured, with the inflation rate
down to 0.2 percent today.
Yet the party has been exclusive. Although everyone benefited as new
economic policies licked hyperinflation and brought new efficiency to
formerly state-run companies, there were also many losers in Latin
America's decade of reform whose stories are not told by the glowing
statistics. Most of the new wealth fell into the hands of an already rich elite.
The gap between rich and poor widened in virtually every nation that
As a result, the richest 10 percent of families in major Latin American
countries now earn on average 47 times more than the poorest 10 percent,
compared with 38 times as the decade opened, meaning the free-market
reforms have intensified what the Inter-American Development Bank calls
the most unbalanced income distribution in the world.
In addition, periodic recessions--one in 1995 from the Mexican peso crisis
and another from Brazil's currency devaluation in January--tended to wipe
out whatever gains were scored in the fight against poverty. Poverty rates
in a number of countries--including Argentina, Mexico, Venezuela and
others that carried out painful reforms--soared in the second half of this
decade, some to levels higher than they were in the 1980s, according to
the development bank and government statistics.
Economists point out that government corruption and faulty implementation
of reforms in Latin American countries played a large role in their failure to
provide wider benefits immediately. They also say the shakeout in places
like Jujuy province will prove healthy in the long run--after globalization's
growing pains subside. But right now, the frustrations across Latin America
are manifested by a growing number of paralyzing general strikes and the
rising popularity of a new group of politicians who are promising slower,
more controlled economic change.
Many Latin Americans trapped in poverty by reforms fail to see the light
because they can only feel the pain.
Here in Hinojosa's home region, a mountainous province of 600,000
people that lies 800 miles northwest of Buenos Aires on Argentina's
frontier with Bolivia, the losers sit in anguish, watching their lives fall apart
in a globalization purgatory. Like Hinojosa, the province earned its
livelihood from state-run companies and protected industries such as sugar
and tobacco. Privatizations and the lifting of tariffs burned through this
place like a forest fire, with no new jobs or social welfare system.
From 1991 to '99, the number of jobs in Jujuy province's steel and metal
works fell from 6,000 to 1,500; in the construction industry, from 10,000
to 2,000; in the mining industry, from 2,000 to 700; in the sugar industry,
from 12,000 to 6,000. Particularly in Argentina, where Menem has been
criticized for implementing reforms too quickly, many of the low- and
medium-skill private sector jobs that the government hoped would absorb
the unemployed never materialized. Instead, the jobs went to places such
as India or China, where labor is cheaper.
The poverty rate ballooned in Jujuy, from 35.5 percent in 1991 to 54
percent today. In some towns in the province, the percentage of people
classified as living in poverty--for an average family of five, that means
living on less than $800 a month--now stands at over 65. The provincial
government went broke from its lost tax base and began printing its own
currency to meet payrolls.
"Entire families are now sifting through trash cans in the streets to feed
children," said the Roman Catholic bishop of Jujuy, Marcelino Palentini.
"We weren't living in paradise before, I'll admit that. But it was never as
seemingly hopeless as this."
'We Had Dreams'
Back in his dank former apartment, Hinojosa touched what remains of a
rose his wife had laminated onto a mirrored window pane, a looking glass
he would like to crawl back into. Like so many others in Latin America
who feel that the benefits of a decade of free-market reforms passed them
by, Hinojosa said he sees his best days behind him.
"We had dignity here. I earned a decent wage. I worked eight hours a day
. . . and we had dreams," he said. "We were going to send our two sons to
the university! They weren't going to be truck drivers like me, no way. My
youngest wanted to be a lawyer! Yes, he was going to be something better
than his dad."
When the private partnership including Citicorp bought Aceros Zapla, it
started a still unfinished campaign to trim the company down for global
competition, reducing the work force from 3,700 to 900 and still falling.
Among the first to go were employees in the iron ore operation at the
Nueve de Octubre mines--where Hinojosa had worked 17 years, his
With the layoffs, the Hinojosas sank into the ranks of Latin America's
poor. Hinojosa and his wife, Gloria del Carmen de Hinojosa, left the
workers' village and bought a two-room, particle-board house in a
burgeoning slum with a small down payment from the severance he
received from Aceros Zapla. But like most of the people in this
neighborhood, a tableau of government housing projects and shantytowns
in Jujuy that exploded in population from 9,000 to 60,000, he cannot keep
up with expenses.
Unable to find steady work, Hinojosa makes $400 a month driving his
battered blue 1991 Peugeot as an impromptu taxi. That barely covers the
food and light bills. It is less than half what he made at Aceros Zapla.
There, he had worked his way up to $13,000 a year driving truckloads of
ore to the steel plant. Maybe a pittance in Buenos Aires, but in rural Jujuy
it was enough to dine on fine Argentine beef and sock away a bit for his
But the savings are gone, and--in the midst of Argentina's worst recession
of the decade, which has caused many people to take the bus instead of
Hinojosa's taxi--the family is four months behind on the mortgage. If there
is hope for the moment, it lies in the local supermarket. Hinojosa's elder
son, Daniel, 20, has applied for an opening at the local grocery chain,
recently bought by a European conglomerate. He has been called back for
a second interview as a stock boy.
"This is a real interview for a real job," said his mother, sitting in
house. "You don't know how rare that is around here."
But Hinojosa buried his face in his hands. "Stock boy? My son should be
at the university," he moaned.
"No, no. It's just not right," he sobbed. "This was supposed to be the
country of the middle class, right? What happened?"
The disparities intensified by reforms have been particularly difficult
in Argentina, a country of 36 million that has long had the highest standard
of living in Latin America. The average worker here lived more like his or
her counterparts in Prague or Warsaw than those in Mexico City or Lima,
giving Argentina the distinction of being one of the most egalitarian
countries in the hemisphere.
But today, the wealthiest 10 percent of the population earns on average
times the income of the poorest 10 percent, compared with 15 times in
1990. In a country that has always considered itself a European nation in
Latin America, many Argentines are now referring to the effect of
globalization as the "Latin Americanization" of Argentina.
And it is a process that has not hit bottom yet.
In the recession sparked by the devaluation in neighboring Brazil in
January, companies like Aceros Zapla have reduced hours and increased
already painful layoffs. In 1992, when the company closed the mines
where Hinojosa worked, it argued it could import cheaper raw materials
from Brazil. But when Brazil devalued its currency, once relatively on par
with the Argentine peso, finished Brazilian steel became almost doubly
cheap, and doubly hard to compete against.
After posting profits of almost $4.5 million last year, Aceros Zapla is
staring at losses this year of almost $21 million. Citicorp, according to
officials at Aceros Zapla, decided to sell its interest in the company in
October. "They couldn't take the ups and downs anymore," said an
Aceros Zapla official, who asked not to be named. "The foreign investors
come, they get scared, and they go."
Another result was the firing of 300 company managers in April. Many
thought that at their level they were secure from layoffs, but now see
Hinojosa as the ghost of their future.
Presentacion Puca, 48, is one of the recently fired managers. He sat down
recently in the teachers' lounge at Jujuy's Mining High School, a brown and
gray 1960s brick monolith, wearing the same khaki uniform he wore for 13
years as a chief geologist at Aceros Zapla. For the last eight years, he has
also taught an evening class on the local economy for $20 a month. But
what he has not told his students about the economy is this: He has been
laid off by the steel company.
Gone is his $38,000-a-year salary. Puca's severance pay--one year's
salary--is already half gone as well. There was the mortgage on his home in
one of San Salvador de Jujuy's finest neighborhoods. And he spent part of
the money on a technical class in business administration and computer
His other prospect--that someone, somewhere is looking to hire a
48-year-old geologist who knows a lot about rocks in Argentina's
northwest--does not seem all that promising. So he plans to take more
classes. Meanwhile, he buys newspapers from cities such as Buenos Aires
and Cordoba, hoping to find a break in the want ads.
He feels time running out. To cut expenses, he is planning to sell his
Renault. He already disconnected his phone. And the strain on his marriage
has gotten worse.
Hinojosa regrets the upheavals here, but also remembers the days in 1989
and 1990, before the government, as part of its free-market reforms,
pegged the peso to the U.S. dollar to end hyperinflation. Back then, his
sister and brother-in-law, who worked at Aceros Zapla as well, were
saving for a larger house in the city. They were not keeping their nest egg in
one of the special bank accounts designed to defend against inflation. In
the course of two months, they lost it all.
"Those were ugly days," he said. "Nobody wants to go back to that."
Hinojosa said he understands that times have changed and that even the
old days at Aceros Zapla were in some ways a false paradise. The bloated
company was inefficient and losing money. "I know it wasn't perfect, that
we had too many people working there," he said. "But what's the answer?
Putting everyone out on the street?"
One of the hardest parts, he said, is living without the medical coverage
and social security benefits he enjoyed at Aceros Zapla. "When you got
sick, you got taken care of," he said. "That was it."
Two months ago, he came down with pneumonia. He spent six hours in the
emergency room at the local public hospital waiting to see a doctor. The
doctor gave him two pills and a prescription for antibiotics. But the family
could not afford to get the prescription filled; before, they would have been
covered by his health plan.
"Medicine is a luxury for us," he said. "It's the pills, or it's dinner."
The educational system is suffering as well. As in so many other provinces
in Argentina, the government in Jujuy last year ran out of money and
stopped paying its teachers and other state workers. It began printing
certificates to pay them instead. But the certificates could not be used to
pay the electricity or telephone bills, and they could not be spent at all
outside the province.
As a result, most teachers went on strike. At the school of Hinojosa's
younger son, Alvaro, classes were canceled on all but 42 of 200 school
days. The spindly 17-year-old, who once wanted to be a lawyer, has since
decided to quit school to look for work.
"I've given up on justice," Alvaro said.
'Pray for a Different Future'
The Hinojosa family finds solace in Saint Barbara, Jujuy's patron saint
miners and steelworkers. One evening, five weeks before the feast
honoring the saint, Hinojosa began gathering green felt, plastic, paint and
wood to build a replica of the old workers' village where he and his family
It would be the second year that the Hinojosas would join other families
from the Nueve de Octubre village to carry a model of their lost world
mounted on a pedestal in front of an image of Saint Barbara to the shrine
they have set up on a carved boulder in a corner of Hinojosa's slum.
Mounted on the shrine are plaques bearing the names of the men who died
in the mines.
"We remember them," he said. "And we give thanks for what we had. But
mostly, we pray for a different future--pray that Saint Barbara can help us
get our lives back on track."
On a recent evening in the Hinojosa home, it seemed the saint was
listening. Daniel, the elder son, returned smiling from the job interview at
the grocery chain. He gave a thumbs up to his parents. His mother looked
moved. His father exhaled, and smiled.
"Thank God," Hinojosa said. "Thank God."
NEXT: A political backlash.
© Copyright 1999 The Washington Post Company