Argentina

J

Military Dictatorship

The “Process of National Reorganization,” as the new military junta called its program, proved more repressive than any previous government in Argentina. The armed forces and the police hunted down opponents and imposed a reign of terror on the population in what became known as the “dirty war.” An estimated 30,000 people disappeared into secret prisons and were executed after weeks of torture. They became known as the desaparecidos (Spanish for “disappeared ones”)—people who vanished without trace under the military government.

When a new military government under General Roberto Viola took over in 1981, the Argentine economy collapsed completely. The government devalued the currency, which led to a flight of foreign capital. At the end of 1981 General Leopoldo Galtieri overthrew and replaced Viola. Unable to control the economy, Galtieri feared an outbreak of popular opposition and the resurgence of leftist opposition. Signs of popular protest appeared in 1982 when the hitherto repressed unions organized street demonstrations against the government.

Galtieri sought to deflect the popular challenge by seizing the Falkland Islands, known in Argentina as the Islas Malvinas, territories that Argentina claimed but Britain had occupied since 1833. On April 1, 1982, Argentine troops forced a token British force to surrender and took possession of the islands. The apparent success of the campaign converted swelling opposition to the government into massive popular support. However, Britain struck back and dispatched a large military and naval force to the South Atlantic. Many efforts to settle the conflict through diplomacy failed. In early June 1982 British troops landed on the islands. In three weeks, they defeated the poorly led, often starving Argentine soldiers.

Within days of the surrender, Galtieri resigned. Another junta announced elections while trying to protect military officers from reprisals as they left the government. A year after the Falkland Islands debacle, the elections of 1983 brought an unexpected result. As the Peronistas remained divided, the smaller Radical Party under Raúl Alfonsín gained its first absolute majority since 1928.

---

---

K

The Alfonsín Government

By December 1983, as Alfonsín took power, military rule had been totally discredited. Throughout Argentina, a determination prevailed to make democracy successful. Despite his strong support, Alfonsín faced some daunting obstacles. The economy remained mired in recession, and the country faced a massive foreign debt. To pay the debt, the government had to restrict imports and create a large trade surplus, but in doing so it limited the recovery of the manufacturing sector by preventing the acquisition of necessary parts and supplies.

The government established a national commission to examine the fate of the desaparecidos of the mid-1970s. In 1985 the government supported indictments of the military leaders from 1976 to 1983. Lengthy trials ended in long prison terms for Videla, Galtieri, and several other former military leaders. However, the military opposed these trials, and military protests led the Alfonsín government to pass a law that granted amnesty to lower-ranking military officials for atrocities committed during the “dirty war.”

Alfonsín faced growing opposition from the unions and the church, along with economic unrest. In 1985 the Alfonsín government introduced the Austral Plan in an effort to stop inflation by freezing prices and wages, but labor opposition gradually undermined the plan. Strikes forced the government into conceding higher wages, and inflation mounted once more. Alfonsín’s popularity drained away.

L

The Menem Government

In 1989 Carlos Menem, the presidential candidate of the Peronist Party, won a landslide election victory. Before Menem took office, another wave of hyperinflation struck, and mobs of poor people looted supermarkets in the Buenos Aires metropolitan area. Facing more outbreaks of military unrest and renewed leftist activity, Alfonsín abandoned his office before his term expired, and Menem was sworn in as president.

As president Menem set a new direction for Argentina’s economic policy. Campaigning for the presidency, he appeared to be an old-style Peronista, promising more government control and higher wages. However, Menem changed his position in response to hyperinflation. To rescue the economy, he had to seek external financial support from organizations such as the International Monetary Fund (IMF). He could only obtain such support by promising to undertake drastic economic reform. Menem announced a cabinet dominated by so-called neoliberals, who supported a free-market economy and minimal government interference.

The neoliberals argued that the main cause of Argentina’s long economic decline lay in the excessive role of government in the economy. They argued that cuts in the public sector were essential first steps to restore the country’s economic health. A growing public acceptance of such ideas represented a revolutionary change of attitude in Argentina. From Perón’s time, the country stood out as a model of state ownership and government intervention. State corporations dominated large areas of the economy, including many manufacturing sectors as well as transportation and utilities. National and local governments provided the main source of employment. The government regulated wages and prices and protected manufacturing through high tariffs. The government also influenced social development through numerous subsidies to social welfare programs.

Led by Domingo Cavallo, who became minister of the economy in 1991, the Menem administration wanted to increase foreign investment and economic growth. To accomplish this, it reduced tariffs and subsidies and sought to stabilize federal revenues through tax reform. In an effort to eliminate national deficits the government brought the federal budget more closely into balance, although it put more responsibilities on local authorities, which resulted in spending increases in the provinces. The government also sold numerous state-owned corporations to private investors. Privatized corporations included Aerolíneas Argentinas, the national airline, and YPF (Yacimientos Petrolíferos Fiscales), the state oil monopoly.

Cavallo also sponsored an initiative to try to control inflation. The government linked the exchange value of the Argentine peso to the U.S. dollar on a one-to-one basis. Known as convertibility, this plan attempted to eliminate inflation by linking the supply of local currency to dollar reserves. To make convertibility work, the government had to stop printing money and devaluing the peso.

Privatization and convertibility gained popular acceptance during a period of rapid economic growth in the early 1990s. However, they lost popularity later in the decade as the growth rate fell. Critics argued that privatization substituted foreign-owned private monopolies for public monopolies and that convertibility intensified the recession by overvaluing the peso. Attempts to reduce public spending proved unpopular from the start.

In 1994 Argentina revised its constitution to allow the president to seek a second consecutive term. Menem won reelection in 1995, and he served as president for a longer stretch than any of his predecessors. He displayed great skill in steering the Peronistas into accepting policies directly opposite to those of Perón. Under Menem the standard of living of many Argentines either fell or stagnated. Critics denounced Menem’s government as corrupt and depicted the regime as a new oligarchy, a government in which power is vested in a few individuals. Nevertheless, the president retained much of his popularity until his term ended in 1999.

M

Recent Events

In the 1999 presidential election Fernando de la Rúa, a Radical who headed the center-left Alliance coalition, defeated Eduardo Duhalde, the Peronist candidate. De la Rúa, a former mayor of Buenos Aires, was determined to continue the economic policies of Menem, but he faced growing difficulties as the economy remained mired in recession. The de la Rúa administration remained heavily dependent on external financial support. In August 2001 devaluation of the peso appeared imminent until the Inter-American Development Bank provided a loan of $502 million. At that time, the economy was suffering a third year of continuous decline.

M

1

Economic Austerity

De la Rúa’s government instituted an austerity program, which included slashing government salaries and seizing pensions to pay creditors. In December 2001 protests and riots broke out in the streets of Buenos Aires and throughout the country in response to the austerity program and the country’s high unemployment rate. More than 20 people were killed in the protests. Shortly after the protests began, de la Rúa resigned as president. Three politicians served briefly as president before the National Congress chose Eduardo Duhalde of the Peronist Party as president in January 2002.

In one of his first acts as president, Duhalde ended the practice of convertibility. Many critics believed this practice had contributed to the country’s economic problems by causing the peso to be overvalued. With an overvalued currency, Argentina’s imports and exports became more expensive, and the country sold fewer goods abroad. By ending the practice of pegging the peso to the U.S. dollar the government was able to sharply devalue the peso, making the cost of Argentina’s products more competitive on the global market. Argentina also defaulted on more than $80 billion of its public debt early in 2002.

Duhalde served as president until 2003, when Argentina held a presidential election. In the first round, former president Carlos Menem of the Peronist Party finished first but he did not win enough of the vote for an outright victory. Menem then faced a run-off election against fellow Peronist Néstor Kirchner, the governor of Santa Cruz province. Before the runoff took place, however, Menem withdrew from the race after polls indicated that he would not win. Menem’s withdrawal gave the presidency to Kirchner, who pledged to improve the country’s economy by creating jobs and protecting the country’s industrial sector. Kirchner restructured Argentina’s debt, offering new bonds to creditors on terms favorable to the government.