After These Elections, Don't Cry for Argentina

Article excerpt

Last Sunday's elections were strong evidence that democracy is taking root in Argentina. Most striking about the elections was how unremarkable they were. This in a country that had not in recent memory witnessed the transfer of power from one elected administration to another, until Raul Alfonsin turned the presidency over to Carlos Menem in 1989.

The elections were fully free and fair. Opposition candidate Fernando de la Rua, the mayor of Buenos Aires, won handily and will take office without protest or fanfare.

The majority of Argentines now agree on the political rules and share a common outlook on economic issues. This is good news for Argentina's future, though politically and economically there is much progress yet to be made.

The past decade produced Argentina's best economic performance since World War II. It has grown by about 5 percent a year since 1991, nearly double the average for the rest of Latin America. Out of 20 Latin American countries, only Chile did better. Inflation in Argentina has been the lowest in the region; this year it will be less than 1 percent.

These achievements did not come easily. They required the remaking of the Argentine economy, the revamping of policy, and the rehabilitation of the nation's financial institutions. During Mr. Menem's two terms (1989 to 1999), nearly every state-owned industry was privatized; barriers to imports and foreign investment were dismantled; and, for the first time in generations, discipline was imposed on government spending.

The cornerstone of this reform program was the so-called "convertibility" plan, which pegged the Argentine peso to the US dollar one-for-one, and allowed for the free exchange of the two currencies. Nothing was more crucial to the country's fight against inflation - or to building confidence among foreign investors, who provided the capital that fueled Argentina's economic expansion.

Despite these changes and the impressive gains they produced, not all is well with the Argentine economy. First, it is too vulnerable and volatile. In 1995, the Mexican peso collapse sent Argentina into a tailspin; this year it was the Brazilian currency crisis. Both provoked an economic contraction of some 3 percent.

Second, the nation's economy is not generating enough jobs. Unemployment has not fallen below 12 percent of the work force for the past half dozen years, and has been as high as 18 percent. …