Argentina: New Future or Status Quo Ante

The April 27 presidential election in Argentina is an event of great importance, because it could point the way to the future global, hemispheric and area role of Latin America’s second largest economy. The following is an analysis of several aspects of Argentina’s political and economic profile, which appears in a forthcoming issue of the Council on Hemispheric Affairs' (COHA’s) highly-regarded biweekly publication, the Washington Report on the Hemisphere.

Argentina: New Future or Status Quo Ante

Following the massive financial and economic collapse that visited Argentina at the end of 2001, the country exhibited marked instability. Immediately after President Fernando de la Rua resigned under pressure in December 2001, he was followed by four successors in less than a fortnight. Although the country’s overall economic situation has improved as this month’s presidential election approaches, the Peronists, traditionally the most influential party in the country, appear more divided than ever with volatility plaguing Argentina’s political landscape.

The country’s economic collapse traces its roots to Carlos Menem’s presidency (1989-1998) and his economics minister, Domingo Cavallo, whose shortsighted measures stimulated a temporary economic boom during the 1990’s. But, ultimately these reforms led to a profound recession. Among them were the pegging of the Argentine peso to the U.S. dollar, privatizing state industries, and liberalizing foreign trade. Along with successfully subduing hyperinflation, Menem hoped these programs would yield sustained economic prosperity. Initially, the scheme met with some success; the country posted impressive levels of growth in its GDP, generating an improved standard of living.

Political and Economic Breakdown

Despite efforts to sustain the country’s now flagging economic boom, Argentina already had begun exhibiting symptoms of recession when Carlos Menem reluctantly vacated the Casa Rosada. His successor, Fernando de la Rua, inherited Menem’s legacy of an inflated external debt and a dogmatic adherence to a currency board that stifled export opportunities as the dollar appreciated and neighboring Brazil’s real plummeted. A deepening recession, a paralysis of policy making, and an insupportable repayment schedule prompted Argentina to default on its private foreign debt and to subsequently devalue the peso, which precipitated a dire political crisis. De la Rua, who was forced to resign as a consequence of the country’s economic breakdown, triggered a political parade, as each presidential pretender failed to successfully curry the favor of an estranged Argentine populace. High unemployment rates, rampant poverty and severely limited access to their bank accounts left half of all Argentines without the resources to buy even basic foodstuffs.

The crisis continued unabated until Eduardo Duhalde, leader of the Peronists, was selected to be president by Congress on January 1, 2002. Duhalde was slated to stay in power until the end of October 2003, when de La Rua’s term was scheduled to finish. But fresh elections were instead moved up to April 27, in the hopes of calming the volatile political climate.

Peronist Party Divided

Argentina’s descent into an economic purgatory has deepened already calamitous fissures within the long ailing Peronist Party. Its fault lines stem from a deadly mixture of political rivalry and personal odium between the party’s two heavyweights, Menem and Duhalde. They had been nominal allies under the umbrella of Juan Domingo and Eva Peron’s vehicle, the Peronists, but a developing rift widened after Menem had amended the constitution, which enabled him to stay in power for a second term and grew more fiery when he flirted with pursuing a third. The upcoming election reveals the split among the Peronists and the proxy war being waged between Menem and Duhalde, where the former, along with three other Peronists, is vying for the presidency.

Deriving his strength from Argentina’s middle class, Duhalde’s man, Nestor Kirchner, has crisscrossed the country to bolster support. Meeting with workers and businessmen from various provinces, the left-of-center Santa Cruz governor hopes to fulfill their demands for higher wages, protection for domestic industries and eased access to personal and commercial loans. He also exhibits some statist tendencies, including championing the national oil company and opposing the privatization of utilities.

A Clutch of Candidates

The second Peronist candidate is a familiar figure in Argentine politics: Carlos Menem. By contrasting the bleak economic situation currently gripping the country to the delusion of opulent times experienced during his administration, along with marketing his glitzy charisma, Menem hopes to siphon votes away from the relatively drab Kirchner. However, by playing that card, the former president runs the risk of undermining his own candidacy, for the collapse of the Argentine economy can be directly traced to his own neo-liberal proclivities.

Adolfo Rodriguez Saá is the third noteworthy Peronist running. After his abbreviated, one-week presidency, the would-be semi-populist is looking forward to a more permanent tenure. His 125-point election manifesto includes investment-conducive tax reductions and pledges to raise the minimum wage and the value of retirement pensions.

Among the presidential aspirants outside the Peronist fold is Elisa Carrio, who represents the strongest alternative to the Peronists. A member of the Republic of Equals Party, which represents dissident Peronists, socialists and ex-Union Civic Radicals, Ms. Carrio stands as a welcomed relief for those tired of the bent stalwarts being offered by the traditional parties, which have come up with few solutions to Argentina’s pervasive economic problems. Her platform stresses extensive political reforms, uprooting Menem-era excesses and rejecting IMF prescriptions. With the Peronist party badly divided, Carrio’s independent orientation theoretically should help her in attracting disillusioned voters, but in practice, she has no more support than any of the other candidates.

According to the Argentine Constitution, a candidate needs 45 percent of the votes, or at least a 10 percent margin over the closest rival, to become president. Recent polls indicate a deeply disenchanted and skeptical electorate that has yet to focus overwhelmingly on any one of the candidates, none of whom are tipped to muster more than 20 percent of the vote, as of now. However, candidates advocating neo-liberal policies are deemed to be at a disadvantage. In what amounts to an annus horribilus, Argentina’s 2002 macroeconomic figures testify to the extent of the country’s decline: the economy ministry reckons 58.5 percent of the population is impoverished and that its GDP contracted by 10.9 percent. External financing is all but unavailable, preventing Argentina from exploiting a highly competitive currency and an under-utilized productive capacity to jumpstart the economy.

Central to redeeming the country’s credit is the need to successfully restructure payments on the more than $100 billion in debt owed to private lenders. Of even more immediate concern is the fate of tens of thousands of bank deposits and loans. One of Duhalde’s legacies was the forced conversion of dollarized bank accounts into pesos. Economy Minister Roberto Lavagna announced that the controls on bank accounts were to be lifted and account holders would have access to their funds, except not all of them, and not immediately. On March 5, in the first of many lawsuits brought by account holders, the Supreme Court ruled in favor of thousands of depositors who were challenging the decree. Yet, a March 28 agreement by the government to return 80 percent of claimants’ funds has persuaded many to drop their lawsuits and accept the settlement. Argentines are due upwards of $10 billion, with much of the bill to be footed by taxpayers, another blow to the government’s credibility and its coffers.

Imperative Political Renovation

Clearly, the economic crisis has deeply affected the public and there is a pressing need for uplifting Argentine leaders to restore credibility to government institutions if they are to effectively administer the painful measures requisite to pull Argentina out of its current malaise.

For the next Argentine president, the pace of economic reform will hinge upon improvements in the country’s abject political situation. So far, however, no single candidate appears able to fully unify the nation. In this most trying hour for Argentines, at least a minimal consensus amongst politicians needs to be achieved, if the ubiquitous cry of so many of them—Que se vayan todos (Kick them all out!)— is to be averted.

This analysis was prepared by Grant M. Nulle and Juliana Guaqueta, Research Associates at the Council on Hemispheric Affairs. The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being “one of the nation’s most respected bodies of scholars and policy makers.” For more information, go tot or contact COHA's  Washington offices at

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