NEWS ANALYSIS : Argentine Leader’s Reelection Won’t End Nation’s Woes : Latin America: Voters rewarded Menem’s success in reining in prices. But joblessness and credit squeeze persist.

President Carlos Menem’s impressive election victory was an endorsement of his economic policies, and it strengthens his hand for dealing with Argentina’s economic problems. But Menem and his country still face hard times with high unemployment, a credit squeeze and a looming recession.

“I believe the coming period will be very, very tough,” economist Nicolas Dujovne said Monday.

As late returns from Sunday’s election trickled in from the provinces, where Menem enjoys widespread popularity, his margin over runner-up candidate Jose Bordon increased. With more than 90% of the votes counted, Menem had 49.7% to Bordon’s 29.5%.

Menem’s Peronist Party also won the absolute majority it now lacks in the lower house of Congress, giving the president potential legislative muscle for pushing through economic measures.

Analysts agree that voters were rewarding Menem for his economic performance, mainly his anti-inflation program. Inflation dropped from 5,000% in 1989, the year Menem took office, to less than 4% in 1994.

Stability was the buzzword in Menem’s successful campaign, and no one doubts that was what Argentines voted for.

Bordon had said he would stick with Menem’s stabilization program. But voters apparently concluded that the best guarantee of stability was to stick with Menem himself.

Menem has privatized most of Argentina’s government-owned companies, opened the economy to imports and adopted other free-market measures that have stimulated economic growth averaging more than 7% a year since 1991.

“Argentina has been transformed,” he boasted Monday.

But not all is well in this nation of 33 million people. Menem’s free-market policies have brought belt-tightening and cost-cutting in the public and private sectors; that has pushed unemployment above 12%.

In a victory declaration Sunday night, Menem acknowledged unemployment as a “real problem” and promised to give it priority. “That is where we are going to aim our cannons,” he said.

During the campaign, he announced a five-year plan for investment that he said will create 330,000 jobs a year. But some economists say that number barely equals the annual increase in the labor force. And projects in the plan are mostly ones that existed before Menem’s campaign announcement.

“What he was doing was taking a lot of existing programs, and even taking private-sector programs, and lumping them together,” a foreign diplomat said.

The diplomat added that billions of dollars in private foreign investment scheduled to pour into Argentina in coming months and years undoubtedly will create jobs.

In the short run, however, Argentina faces recession. Some economists are predicting zero economic growth this year, mainly because of a serious credit crunch that began with Mexico’s financial crisis in December. Depositors, fearing replication here of Mexico’s peso devaluation and other troubles, have pulled more than $7 billion from Argentine banks.

One foreign economist estimated that emergency mergers and closings have reduced the number of operating banks in the country from more than 170 to about 130 since January; he said that the number could drop to 70. Such critical circumstances and the fear that a change of government could cause more financial uncertainty undoubtedly discouraged many voters Sunday from voting against Menem.

Meanwhile, with tight credit and high interest rates, many businesses are starved for short-term credit to meet payrolls and pay suppliers. Retail sales are in a slump, and business tax revenues have shrunk. With reduced revenues, the government is being forced to cut spending, deepening the recessionary trend.

International lending agencies have allocated several billion dollars to help Argentina through the crisis. But until that money begins flowing through the economy and deposits begin returning to the banking system, continued recessionary pressure is likely.