The Argentina of the 1940s Is Gone, But Much Is at Stake for the 1990s Version

The crowds of movie extras chanting "Evita, Evita" in the Plaza de Mayo, this city's central square, are gone. Pop singer Madonna, perfectly coiffed and tailored to look the embodiment of Argentina's postwar first lady, Eva Peron, can no longer be heard lamenting "Don't Cry for Me Argentina" from the balcony of the Casa Rosada, Argentina's executive mansion. After weeks of filming this spring, Hollywood has left the citizens of Argentina's capital a tad worried about their image.

Reviewers are predicting a boffo reception when the movie "Evita" reaches American theaters in December. But this vision of an Argentina ruled by the mob, with an unrestrained welfare state that guaranteed a job for all, is as out of date as the severe suits and tightly wrapped hair bun Madonna wore.

The Argentina of the late 1940s no longer exists. To be sure, Argentine President Carlos Saul Menem and Economy Minister Domingo Cavallo must cope with the consequences of misguided Peronist economic policies. But, for good and for bad, Eva Peron would not recognize the Argentina of the late 1990s.

*Blue and white billboards across this city offer phone hookups in just 48 hours. Before the telephone system was privatized in 1990, it could take years to get a telephone installed.

*McDonald's restaurants trumpeted a recent round of price cuts. In a nation once beset with hyper-inflation, where prices rose 3,000 percent in 1989, the cost of living actually fell in the first two months of 1996.

*On the outskirts of Rosario, Argentina's third-largest city, TV journalists recently filmed jobless slum dwellers roasting stray cats. Nationwide, official unemployment reached 17.4 percent in 1995, and economists here see little prospect of it declining any time soon.

This is the new Argentina. It is a nation evolving from a closed, state-dominated economic system into an open, market-driven economy, with all the bright prospects, frustrating shortcomings, and unfinished business that one might expect of a society in transition.

After enjoying East Asian levels of economic growth in the early 1990s, the Argentine economy shrunk 4.4 percent in '95. A return to modest growth is expected in '96. But the future is murky.

Much depends on the government's ability to execute a much-needed second phase of structural economic reforms: privatization of public entities at the provincial level, further consolidation of the financial system, streamlining of labor laws, and a rooting out of corruption. The US stake in Argentina's success could not be greater. After the recent debacle in Mexico, where a peso crisis required a US bailout, Washington cannot afford any more failed reform efforts in Latin America.

Mr. Cavallo was an early adherent to what Argentines call "the Washington consensus": a strict regimen of US-supported deregulation, privatization of state-owned enterprises, and cuts in public spending. Moreover, he pegged the Argentine peso to the dollar. If Argentina's recovery from last year's recession stalls, it will send a message to Latin American countries that US-supported reforms don't work.

In 1995, Argentina entered into a customs union with Brazil, the last bastion of state-dominated economic thinking in Latin America. If an economically foundering government in Buenos Aires falls under the sway of such policies, Washington's hopes of creating a free-trade area in the Western Hemisphere, with all its potential benefits for the US economy, could be doomed. Moreover, the Brazilian real is dangerously overvalued. If it takes a tumble, as Mexico's peso did, it will pull down Argentina as well, creating new demands for American financial rescue operations.

In "Evita," the movie, the chorus chants a refrain: "A new Argentina cannot be and will not be denied." In real-life Argentina, President Menem and Cavallo know it will take more than the roar of the crowd in front of the Casa Rosada to create a vibrant and sustainable Argentine economy. In the months ahead, policymakers in Washington will be watching the Argentine leaders' act with rapt attention, judging their performance as closely as voters for the Academy Awards will be assessing Madonna's Evita.

If Madonna bombs, she may lose a chance at an Oscar. If Menem and Cavallo mishandle their role, it could result in another bout of hyperinflation and economic stagnation. Not since Evita bled the Argentine economy dry a half century ago has so much been at stake, both for Argentina and for the US.

*Bruce Stokes is a senior fellow at the Council on Foreign Relations and a contributing editor to the National Journal, from which this piece is adapted.