Don't Bray For Me, Argentina

Early in his tenure as president of Argentina from 1989 to 1999, Carlos Menem introduced sweeping economic reforms--from privatization to pegging the local peso to the U.S. dollar. The measures helped tame 5,000 percent inflation and boost economic growth. But critics now say the flamboyant leader also left behind massive debt and high unemployment, two of the problems that contributed to Argentina's current meltdown. Last year, after charges that he had led an illegal arms-trafficking operation, Menem was placed under house arrest. Freed in late November, he is now the target of new corruption allegations. NEWSWEEK's Jimmy Langman recently caught up with him in Santiago, Chile. Excerpts:

LANGMAN: What happened to Argentina?
The situation in Argentina, starting on Dec. 10, 1999, began to deteriorate due to bad political leadership. That had a direct influence on the [economy and society].

That's the day Fernando de la Rua was sworn in. What exactly did he do wrong?
What he did wrong fundamentally was to increase taxes and cut pensions and [government] salaries, which subtracted profitability from production and took buying power from [consumers]. Property rights were tremendously affected by the freezing of bank deposits, which left people without resources, resources they had been saving for years. This paralyzed the economy.

Some say your administration shares the blame.
We left a country running smoothly, a country with more than $34 billion in the central bank. My government was criticized because the unemployment index climbed to 12 percent. But let's not forget that in 1995, when I was re-elected president, the unemployment rate was 18 percent. When I took over the presidency in 1989 poverty was 48 percent, and when I left it was 27 percent. The child-mortality rate went from 26 per 1,000 in 1989 to 18 per 1,000 in 1999.

What about the large foreign debt the de la Rua administration inherited?
The foreign debt is not measured by [its size] but by an index. The Argentinean index for foreign debt was 46 percent of the gross domestic product when we left in 1999; when my government received the debt, it was 90 percent of GDP.

Foreign debt is something almost all the countries on earth have. In Argentina, we had a modernization process to create new infrastructure--roads, bridges, etc.--and this required [public capital]. Also, during my term as president we received nearly U.S.$200 billion of investment in newly privatized companies. Some workers lost jobs because we modernized, and that translated into debts, but mainly it brought greater productivity and greater well-being for the people.

What's your prescription for Argentina now?
Strong leadership. Dollarization. The regionalization of Argentina: instead of 24 provinces, six regions, which would eliminate at least half the political positions. Also, a series of reforms to decrease public expenditure and especially political expenditure.

Why do you think many Argentines hate politicians?
For many reasons, but mainly because of a huge campaign against politicians. A very hard campaign that has led to confusion in the people, because there is no relationship between what we delivered in December 1999 and what we are currently living.

What is this campaign?
It is a defamatory campaign. At this moment, there is a total and absolute aggressiveness against politicians and there is no difference being made between the politicians that did things well and those responsible for this disaster.

But isn't the hatred fueled by a long history of corruption?
I think that if there's someone that has fought corruption, it was my government with the privatization of the public companies, which were a permanent source of corruption. We destroyed the structural corruption. And the residual corruption which has remained, which we tried to fight, is an evil that happens in every country. But we investigated and tried to eliminate this type of corruption. I hope we continue down that path of investigating corruption to determine who is responsible and guilty.

You are currently accused of receiving $10 million in a Swiss bank account from Iran to cover up that country's alleged involvement in a terrorist attack in Buenos Aires in 1994.
That's another big lie. I don't have any accounts in Switzerland. But I leave that subject in the hands of my lawyer. I can assure you that when [the courts] get to their final conclusions, the truth of this thing will be clear.

Do you want to be president in 2003?
I'm initiating a campaign for the internal elections of the Justicialist Party [this year]. If we do all right, and I'm certain we will, we will compete in 2003 for the presidency--to finish an unfinished task which was frustrated by the arrival of the de la Rua administration.