Ten turbulent years in Argentina appear to be over. Fernando de la Rua of the Radical Civic Union Party won a historic victory in Argentinas presidential elections on October 24, 1999. De la Rua's election marked the end of the Peronist era, as President Carlos Menem of the Judicialist (Peronist) Party will vacate his office on December 10, 1999, bringing to a close his back-to-back administrations running from 1989 to the present. As President, Menem served the longest consecutive term in Argentina history, and he was certainly one of its most colorful presidents.

The candidate of the Judicialist Party, Eduardo Duhalde, had served as Menem's Vice President and later as Governor of the Province of Buenos Aires. His efforts to distance himself from Menem and to distinguish himself from de la Rua with traditional Peronist electioneering and populist rhetoric were rejected by the voters. Duhalde received only 37.9 percent of the vote, the worst result for any Peronist candidate since the partys founding in the mid-1940s.

Menem himself did not help his partys prospects, hardly coming out to support Duhalde. Menem went so far as to suggest during the course of the campaign that a defeat would be better for the party, since it would allow him to rebuild it in opposition and then retake the presidency in 2003. Menem is highly likely to pursue this goal, given his failed attempts to secure a third consecutive term through a Constitutional amendment (as he had done previously, guaranteeing his re-election in 1995).

The Political Front: Electoral Balance

On the face of it, de la Rua's victory appears to signal a strong break with the past. Many voters claimed to be desperate for a change, and were tired of the flamboyance and corrupt aspects of Menems long rule. The prospect of a more honest, conservative and effective government was attractive to voters. Moreover, de la Rua promised to keep most key economic policies intact, more specifically, to maintain the currency pegged to the dollar, and to improve overall fiscal discipline.

However, de la Rua is likely to find that he has limited room to maneuver on the political front, having followed a cautious rather than an aggressive approach that mirrored in many ways the political strategy and persistent pulse-taking of President Clinton. De la Rua will have to deal with the political landscape that lies in front of him. The Peronists still control the Senate; no change can take place there until the 2001 elections. Peronists also continue to control the judiciary and most of the provincial governorships, including the powerful position of Governor of Buenos Aires Province. This position went to another of Menems former Vice Presidents, the popular Carlos Ruckauf. To further complicate his position, de la Rua won the presidency in coalition with Frepaso, a diverse conglomeration of former Peronists, Radicals, and an assortment of left-wing activists. On the one hand, the people's choice for divided (some say, "consensual") government is a welcome change for a country long imprisoned by single party excess. On the other hand, it means de la Ruas ability to make good on his promises in two key areas, fighting corruption and clamping down on loose fiscal policy in the provinces, will be extremely constrained. A de la Rua Administration might work if the economy were to sustain his self-effacing and moderate approach; but under the circumstances, it may make it impossible for de la Rua to enact serious reforms in the way that Menem was so successful in doing during his first term.

The Economic Front: Bottoming Out

The Argentine economy is not barreling ahead at this point. Although some analysts say the economy has bottomed out, it is being held back by a huge budget deficit rising to about 2.5 per cent of GDP, with predictions for next year projecting the deficit will increase to the tune of US $9 billion. Unemployment is high at 12.8 per cent; and overall growth is predicted to shrink to about 2 per cent, half the rate of Brazil or Mexico.

De La Ruas nominee for Finance Minister, Jose Luis Machinea, is a respected economist; and he has promised to steer a steady ship while helping to make important reforms, particularly in the tax system. However, he is best known for his service under Juan Antonio Sourouille, another brilliant economist, who, as Finance Minister under the last Radical government of Raul Alfonsin (1983-89), presided over the countrys descent into the worst imaginable economic morass of hyperinflation. The Peronists, in opposition during the Alfonsin regime, made matters much worse with their control of the labor unions and the call for incessant strikes, until Menem took over and had both the political leverage and the audacity to carry out basic reforms. With most of the targeted privatization projects and key economic restructuring now complete, the much harder task of fiscal reform falls to the de la Rua Administration. The challenge: this administration with its stay-the-course message does little to inspire confidence in its ability to take on powerful and entrenched business interests.

Back to the Future?

Most commentators claim that Argentina has reached a pivotal point in its history. They say the country has survived two important but traumatic water-sheds: the first in rebuilding a political consensus for democratic procedures during Alfonsin's presidency (1983-89); and the second in forging an economic consensus for the free market during Menems two terms (1989-99). Political observers describe Argentina as finally having become a "normal country," convinced that it no longer could live by its own self-styled economic rules or enjoy prima donnas as leaders. Its politics (and its politicians) may be more boring, but that is the price to be paid for stability and predictability. Popular thought is that widespread support for the staid de la Rua, and the rejection of "messianic politics" of the past, proves that Argentina has matured, it hopes, irreversibly.

But this may be misplaced optimism. De la Rua faces an internal challenge. The voters were seeking to ensure a stable environment while improving governmental accountability; but President de la Rua could prove incapable in both style and substance of producing either stability or greater accountability. Rather than a permanent break with the past, his victory may be just a temporal exception. De la Rua simply could be enjoying a brief opportunity to take advantage of widespread exhaustion and unhappiness with Menems character. Like any break from an intoxicating spell, that may not last. Argentina could revert to 1989 when a well-intentioned Radical government appeared too civil for its own good. The party's reputation, going back to its founding in 1910 and its self-perpetuated comparisons to many European social democratic parties, is solid, middle class and cerebral. De la Rua is just the latest in a long series of moderate, composed Radical leaders who win more points for intellectual integrity than for political effectiveness. That sober image may put him and his government out of touch with the populace and the demands of a dynamic marketplace.

The key indicator to watch will be the performance of the economy. Argentina has enjoyed an acceptable, though not stellar, level of economic stability for the last 5 years. However, many knowledgeable Argentine financiers privately caution that this may be simply a "fiscal veneer," calling Argentina's basic economy fragile. The economy's susceptibility to dramatic reaction to downturns could bring economic hardship to a populace very used to seeing strong, abrupt actions taken to stave off such problems by Menem during his past administrations. A conservative but plodding de la Rua regime, which is highly unlikely to make radical course corrections, could find itself in trouble overnight.

For his part, it is true that Menem initiated a new era by revolutionizing the Judicialist Party and its socio-economic underpinnings. After all, the neoliberal policies he enforced once in power took a 180-degree turn from his campaign platform and the working class tenets of Peronism. But there is no assurance that he won't do this again. Like his partys founder, Menem is a multi-faceted political animal. Psychologically addicted to power and now moving into the opposition, he will be hard to marginalize. Thus, despite virtually unanimous predictions of post-electoral stability and much wishful thinking, Argentina could be in for rough waters during the next few years. While many will breathe a sigh of relief when Menem finally leaves office, circumstances could bring him the opportunity to rise again. The specter of Menem is real and present.

For business interests attracted to Argentina based on its location, its size, its population, its strong consumer instincts, or other reasonable business considerations, political and economic issues must always be taken into account. But Argentina, under a conservative, more predictable regime, may be a suitable target for getting a foot in the door to a market that could provide entre to Mercosur / Mercosul and possibly all of South America. Menem or no Menem.

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