Argentina stands with one foot on the edge of salvation. The other is stuck on the muddy path that leads deeper into a political and economic Hades.
The South American nation plunged down that trail 16 months ago. Enraged by the government’s continued belt-tightening and its decision to limit the amount that people could take from their bank accounts, tens of thousands of poor and middle-class Argentines ransacked stores, broke bank windows and attacked government buildings. Five people were killed, hundreds were injured and thousands were arrested while five presidents took turns at the helm of government. All this occurred in a matter of two weeks.
On Sunday, Argentines went to the polls and sorted out a ballot of five candidates. Next month, two men from the same Peronist party, Patagonian Gov. Nestor Kirchner and former President Carlos Menem, will face each other in a runoff. Menem simply can’t offer the accountability, transparency and credibility that Argentina needs and foreign banking concerns will demand.
Menem’s supporters note that during his first term, the economy grew an average of 4.4% annually. True. But debt rose more than 12 percentage points. Menem, one Argentine historian says, “is the man who invited everyone to the party, lived it up and then left without picking the tab.”
During his two terms (1989-99), corruption ran rampant. U.S. telephone companies complained that they had to pay $100 million in bribes to take control of a company they bought. In 2001, Menem was arrested for alleged involvement in illegal arms sales to Ecuador and Croatia. A court packed with his appointees released him, but within the year Swiss and Argentine authorities were investigating an allegation that Menem had received a $10-million bribe to cover up a 1994 anti-Semitic terrorist bombing in Buenos Aires.
Kirschner, who is less well known abroad, lacks Menem’s notoriety and that alone makes him the better candidate. Having Economy Minister Roberto Lavagna on his team adds credibility.
Outgoing President Eduardo Duhalde has done a decent job in trying to stabilize the economy. Tax collections are up, the Argentine peso is gaining strength and the government’s economic team is meeting the fiscal goals set out in January’s agreement with the International Monetary Fund. Industrial production keeps growing (the fifth month in a row), and the economy is showing moderate signs of recovery.
Yet, the future seems far from bright. Progress in reducing poverty has stopped and income inequality is deepening. The banking system is in disarray and will have to be reinvented. Renegotiating the nation’s defaulted debt, estimated at $132 billion -- almost half of it held by retail investors abroad -- will be extremely difficult. So will be completing and signing a new package with the International Monetary Fund before the end of August.
Argentina needs to return to a free-market economy that will sustain its struggling economic recovery. Reelecting a discredited candidate would only send the nation sliding back to the unpleasant past.