Argentina's Free Market Victory

The reelection of President Carlos Menem on May 14 has implications far beyond Argentina's borders. It shows that timely intervention by international lenders can work. When the fallout from the Mexican peso crisis threatened to engulf Argentina, a $5 billion credit line was quickly set up by the International Monetary Fund, the World Bank, and the Inter-American Development Bank. Their backing was crucial in shoring up Argentina's battered banking system.

Even more telling, the election shows that Latin leaders can win popular support with political platforms based on market reforms, such as deregulation, privatization, and lowered trade barriers. Argentina is one of the few nations in the developing world where free-market reforms were achieved by a democratically elected government. This flies in the face of those who believe market initiatives can only be launched by dictators, such as Chile's Augusto Pinochet, or authoritarian regimes, such as Mexico under the Institutional Revolutionary Party.

True, Menem's government is vulnerable. Investors may still force a devaluation of the Argentine currency. The wounds from the so-called dirty war of the 1970s have been reopened by new evidence of savagery by the military. Nonetheless, Argentina is looking more like a Latin American linchpin. And it stands as evidence that free enterprise and freedom of choice can coexist in the emerging markets of the world.