Argentine Tangle

During his term as president of Argentina, Raul Alfonsin has done many courageous and farsighted things to help revive democracy and respect for human rights. But Alfonsin was not able to reverse the downward spiral of the nation’s troubled economy, and that cost his Radical Party the presidency in recent elections. Now it may result in his leaving office ahead of schedule.

For the past few days, Alfonsin and other Radical Party leaders have been negotiating with the rival Justicialist Party, whose candidate Carlos Saul Menem won overwhelming voter support in the May 14 elections, to arrange an early transition of power. Normally, a new president would not be inaugurated in Argentina until December. But the economic situation has continued to deteriorate since election day, leading many financial experts to conclude that Argentina cannot afford a leisurely change of leadership. The nation is more than $60 billion in debt to impatient foreign creditors who refuse to lend more money. Inflation is running at more than 50% a month, and climbing towards hyper-inflation. And the value of the Argentine currency has dropped precipitously--from 16 australes to the dollar in February to more than 160 to the dollar last week.

The big question about Menem is whether anything he can do will change the situation. More than a few traditional economists have their doubts, partly because the Justicialists are the party of former Argentine President Juan Domingo Peron (they are so closely identified with him that Menem and other party members are often called Peronists). Many analysts trace Argentina’s financial troubles to the profligate spending and statist economic policies of two Peron governments, from 1946 to 1955 and 1973 to 1976.

It was in his first term that Peron and his second wife, Evita, won the loyalty of Argentina’s working-class and poor voters by creating most of the social programs and state-run industries that gave Argentines a high standard of living in the 1940s and ‘50s. It was in those days that grain and meat from the pampas helped feed a war-ravaged world. Many Argentine voters cast ballots for Menem in the hope he might find a way to lead Argentina into another prosperous era.

But the world’s economy has changed since then and is still changing, and Argentina is one of the nations that risks falling permanently behind unless it takes steps to keep up. That could mean casting aside political sacred cows like some of Argentina’s inefficient state companies, despite the many jobs they provide.

Menem claims to represent a new generation of Peronist thinkers who are not beholden to the old interest groups, like Argentina’s powerful labor unions. Yet during his campaign, Menem was notoriously short on specifics. That coyness may be catching up with him now, for among the issues being negotiated as the Radicals and Justicialists try to arrange an early departure for Alfonsin is the question of how much of the Radical government’s economic policies Menem is obligated to keep in place.

Disagreement on this point is apparently why the transition talks broke down Tuesday. But while Alfonsin announced that he now intends to serve out his full term, the fiscal crisis that pushed him into considering an early departure is likely to continue, and could worsen. That means the last word has not been spoken, and that Menem may yet be forced to make his solutions to Argentina’s financial problems public sooner rather than later.