Argentina's presidential elections are scheduled for April 27, 2003. In theory, the elections represent an opportunity for Argentina to implement the political and economic changes necessary to reverse a four-year-long recession. But the circumstances of the election and the legacy of Eduardo Duhalde's leadership will make progress difficult.

The major issue in the election will be how to reverse the worst economic decline Argentina has seen in 50 years. Gross domestic product (GDP) has been dropping since 1999, and rampant inflation in 2002 has caused the price of some food products to nearly double. Overall, the price of basic goods rose 75 percent, one in five Argentines is unemployed, and the combination of inflation and unemployment has left many scrambling for survival. Starvation has become a major problem, with citizens forced to the streets to beg or scrounge for food. There is no sign of recovery.

Argentina’s economic problems began in the mid-1990s. As the value of the US dollar rose during the US economic boom, the Argentine peso, at that time artificially pegged to the dollar, also began to rise, resulting in massive trade deficits. To cover the deficit, the government began to borrow money heavily, which caused interest rates to rise. Business began to slow down, and with banks increasingly reluctant to lend money, the entire economy began spiraling into disarray. By November 2001, Argentina faced unaffordable interest payments on its debt. With GDP sinking at nearly 10 percent per year, President Fernando de la Rua and Finance Minister Domingo Cavallo turned to the International Monetary Fund (IMF) for assistance. However, the IMF, which had for some time financially supported Argentina, refused a new loan, citing major needed reforms in the Argentine economy and poor economic management by the government. Argentina was forced to default on its payments; soon after, President de la Rua resigned in response to public pressure.

His successor, Eduardo Duhalde, inherited a country on the verge of collapse. Argentina had lost fiscal credibility, had seen its currency dramatically devalued in the span of a few weeks, and was, quite literally, broke. Duhalde's initial rhetoric was promising, but his administration has done little to fix Argentina's problems. While the economy has recently stabilized, it is still far below its mid-1990s levels, and poverty rates have not improved at all.

The Duhalde regime, besides being unable to resuscitate the economy, has set two poor precedents for the next Argentine administration. First, it has used defaults as a means of forcing loans from the IMF, instead of building investor and international confidence by implementing reforms. In November 2002, it defaulted on over 90 percent of an US$880 million payment to the World Bank, and in January 2003 again defaulted on payments due to Inter-American Development Bank. Finance Minister Roberto Lavagna stated that Argentina would make no more payments until the IMF agreed to a loan, a policy that amounted to blackmail. While the IMF did roll over billions of dollars of due payments until after the elections, the strategy has severely damaged Argentina’s reputation. As the IMF clearly stated, Argentina still has major long-term problems, and the roll-over is only a temporary reprieve. In Argentina, though, Duhalde has trumpeted the deal, and his blackmail strategy, as a success. Future administrations will be tempted to follow his example.

Second, and perhaps just as importantly, the Duhalde regime has lost the trust of the people, partly by failing to undertake economic reforms, and partly by expending a lot of energy playing political games. Duhalde stated early on that he would not run for re-election. While he has kept that promise, he also tried to prevent his personal rival, Carlos Menem, from winning. Menem was president of a corrupt administration from 1989 to 1998 and is distrusted by many Argentines. Like Duhalde, he is a member of the dominant Peronist party. Menem has been trying to secure the party nomination, which would help him in the general election. Duhalde, who recognized early in 2002 that Menem would likely succeed, spent months convincing party members that the Peronists should skip the primary election and let all candidates go straight to the general election. In January 2003, at a meeting that Menem's supporters walked out of in protest, the Peronists voted to forego the primary. Menem and his supporters have turned to the courts in an effort to overturn the decision as unconstitutional.

However the battle turns out, though, its effects have already been felt. For one, Duhalde has spent so much energy on the dispute that he has done little to address Argentina's real problems. For example, Duhalde's government has not addressed the ineffective and in some cases corrupt leadership in Argentina's provincial and central governments. More directly, the battle within the Peronist Party has so thoroughly disgusted the Argentine people that many have stopped caring about politics. Menem has suffered in the polls, and by some measures has only 16 percent support. But the other candidates have also had trouble engaging a frustrated electorate; as a result, no candidate is polling higher than around 20 percent.

An October 2002 survey quantifies the disgust of the Argentine people. Eighty-eight percent of Argentines said they had no faith in their political leadership, 95 percent are dissatisfied with political parties, and approximately 90 percent are dissatisfied with banks, markets, and the judicial system.

Many citizens have stopped looking to the government for solutions and have instead crafted their own. For example, food shelters have sprung up on the streets to feed the homeless and the hungry. In other cases, bankrupt businesses (and there have been many) have been handed over to their communities instead of being liquidated. In such companies, profits are being distributed equally, and as a result workers are more inspired and effective. Over 10,000 Argentines now work in companies that have been converted in this manner.

Such innovations, while speaking volumes about the resourcefulness of the Argentine people, cannot restart an economy. Argentina needs change, but this highly politicized, bitter, and divided election is unlikely to provide it. Eduardo Duhalde inherited a difficult situation, but has not left his successor in much better shape. Duhalde's legacy of debt defaults and political infighting, coupled with the Herculean tasks of reforming the government and repairing the economy, will make progress as difficult to achieve for the next administration as it was for this one.