ARGENTINA’S last legitimately democratic government was overthrown by the military in 1930. Dr. Arturo I Illía, the country doctor who emerged victorious in the July 7 elections to the relief of all, will now attempt to revive the democratic process in Argentina. At the same time, he must deal with a sagging economy which has virtually hit bottom in recent months.

Dr. Illía will face the same political problems which plagued ex-President Arturo Frondizi and led to his removal by the military. Argentina’s middle class, the largest in Latin America, is still hopelessly divided. The memory of former dictator Juan Perón continues to exert a hold on the lower classes. The unhappy tradition of intervention by the armed forces and their implacable opposition to Peronism casts a constant shadow over any civilian government.

Ideologically, there is not much difference between the major middle-class parties, Dr. Illía’s UCRP (Unión Cívica Radical del Pueblo) and Frondizi’s UCRI (Union Civica Radical Intransigente). In fact, there had been but one Radical Party until Frondizi precipitated a split in 1957 and formed the UCRI. An alliance with the Peronists helped him attain the presidency with 45 percent of the popular vote in 1958.

Peronist disenchantment with his conservative economic policy and Peronist successes in the 1962 elections caused Frondizi’s removal by the military in April, 1962. In the 1963 campaign, Frondizi, from exile in Bariloche, again sought an alliance with the Peronists, and his decision to support the Frente Nacional y Popular succeeded in splitting the UCRI. One faction joined the Peronists in the Frente, while another nominated Dr. Oscar Alende as the party’s presidential candidate. At a postelection UCRI meeting the Alendistas prevailed, and Frondizi has since announced that he will form another party.

The bitter animosity between the military and the Peronists has wearied the country and has created a political vacuum which a strong center party could readily fill. Yet the tradition of personalismo, which centers political movements around individuals rather than ideas, has persistently impeded the formation of a powerful center party.

The Peronists default

The Peronist movement is showing some signs of fragmentation after the poor showing in the July elections. The decision to put up an avowed conservative, Dr. Vicente Solano Lima, as the Frente’s presidential candidate aroused the opposition of the political, “soft-line” wing of the movement, and its spokesman, the neurosurgeon Dr. Raúl Matera, was expelled from the party’s coordinating council. When military pressures forced Solano Lima to withdraw his candidacy forty-eight hours before the election, Frondizi and the Peronists ordered their followers to cast blank ballots. In previous elections the Peronists had consistently been able to muster from 25 to 30 percent of the total vote. However, in the July balloting, the blank votes amounted to a mere 17 percent.

It would be unwise to invest too much significance in the low total. Many Peronists voted for Illía or Alende as a reaction against the third major candidate, retired army general Pedro Eugenio Aramburu, who as provisional president after the fall of Perón led an unsuccessful campaign to root out all vestiges of the former dictator’s movement. Also, it is evident that large numbers of Peronists were tired of remaining outside the electoral process.

Of greater importance is the general recognition that the Peronists’ failure to put up candidates for the National Congress and provincial offices was a tactical blunder, for it leaves the movement without any legitimate means of pressuring the government from within. Postelection recriminations reflect the divergence between the moderates and the extremists in the party. But despite these divisions, Peronism continues to exist as a major force in Argentina. The Peronists still constitute the largest single political party in the country. The phenomenon of its lingering vitality has its roots in the social revolution Juan Perón effected in his nine years of dictatorial rule. He was the first political leader to bestow upon the masses a sense of dignity. Both urban and rural workers were made to feel that at long last they were participating in the governmental process. By means of clever demagoguery and extravagant fiscal policies, Perón and his wife, Evita, built up a fanatical following among the lower classes.

Some observers feel that had Perón been allowed to remain in office a few years longer, the inevitable bankruptcy toward which the country was moving might have discredited him in the eyes of his supporters. As it was‚ the intensive campaign to bring to light all the excesses of his regime failed to detach the hard core of his followers.

Frondizi’s austerity program, which put a lid on wages but permitted prices to soar, further alienated the working class. When he allowed the Peronists to run their own candidates in the congressional and provincial elections of March, 1962, they scored a sweeping victory‚ which was promptly annulled by the intervention of the military. Another factor contributing to the longevity of Peronism has been the ex-dictator’s ability to block the rise of any leader who might rival his hold over the masses. In any future reorganization it will be impossible to divorce the movement from the man whose name it bears. Though policy decisions may be made locally, Perón as a symbol will remain.

Intervention by the military

A reluctance to vest full responsibility for civilian affairs in the hands of the Frondizi government led the military to intervene constantly in affairs of state. But direct action was not taken until the Peronists won the March, 1962, elections, and Frondizi had alienated virtually every political group in the country.

Although they have not fought a war since 1878, the armed forces consume about 30 percent of the national budget, as opposed to 3 percent allocated to social welfare. One j of their functions is to protect the country against internal enemies. The fulfillment of this duty has served as a rationalization for not only direct intervention in civilian affairs but also personal feuds between groups of officers.

Spurred on by a deep guilt complex stemming from their support of the Perón regime up until the very end, the armed forces overthrew Frondizi and installed the puppet government of President José María Guido to prevent blatant military dictatorship. Congress was dissolved several months later, and Guido ruled by “decree laws” which were imposed upon him by the military. The state of siege, which had continued in effect from the days of Perón, enabled the executive power to jail people indefinitely at the disposition of the government.

Instability soon verged upon chaos as power struggles broke out within the armed forces. In September, 1962, the “Blues,” a group of moderate army officers led by General Juan Carlos Onganía, wrenched control of the government from the “Reds.” or vehemently anti-Peronist generals, and proclaimed their intention to hold elections which would “assure to all sectors participation in the national life.” Dissatisfaction with the electoral plans precipitated an uprising in April, 1963, by the Reds and a group of naval officers. Though the revolt was crushed, the Blues took a stronger anti-Peronist stand, which caused some observers to remark that they had turned “Deep Purple.”

The UCRP electoral platform called for a reduction in appropriations to the armed forces and civilian control over the military. Opposition from all shades of military opinion‚ including the moderates, will provide formidable obstacles to the execution of these plans.

Economic downturn

The political turmoil which followed Frondizi’s removal worsened already unstable economic conditions. Frondizi had been pursuing a policy of vigorous industrial development‚ which demanded an increase in imports. At the same time, he failed to expand the agricultural and livestock sectors of the economy, which account for 94 percent of the nation’s exports. Whether as a result of poor planning or hostility to the oligarchic wealthy who control farm and livestock production, this policy led to a disastrous deficit in balance of payments and a staggering national debt. The full employment and industrial growth of 1961 soon gave way to a recession.

In 1962, Argentina’s gross national product in real terms showed a decline of 4.5 percent in comparison with that of 1961. The peso, which had been selling at 83 to the dollar in April, 1962, dropped as low as 153. The 1962 trade deficit amounted to $173,400,000. An overstaffed federal bureaucracy (1.8 million government employees) and uneconomical state-run enterprises, such as the railroads, resulted in a case deficit of about $300 million in the 1961-1962 fiscal year. The country fell further in arrears on both its official overseas and its private debts.

In the early months of 1963, the downward trend continued. One of the few bright spots was the renewal of the 1963 standby agreement with the IMF. This led to similar standby support from the U.S. Treasury, AID (Agency for International Development) approval of $20 million in new balance-of-payments assistance, and an Export-Import Bank agreement to expand refinancing of Argentine debts. In addition, the so-called “Paris Club” creditors, which include most of the Western European countries, reconfirmed their earlier agreement to postpone $150 million in debt repayments due in 1963 and 1964.

A further development of some significance has been the exodus of manpower from the country. In May, 1962, the number of visa applications for emigration to the United States began to increase from a level of about 500 per month, and in the first quarter of 1963 they reached a high of 2100 per month. Most of the applicants have university degrees or some technical skills. An unusually large number of doctors are included in the group. Also, the number of Italian nationals who have sought repatriation to Italy has doubled over the past year. Most of these people are construction workers hard hit by unemployment and rising prices.

Business confidence returns

Satisfaction with both the military’s fulfillment of its promise to hold elections and Dr. I Illía’s victory has served to boost business confidence, which had all but vanished in past months. The peso rallied and steadied at 135 to the dollar. Heavy trading marked an upswing on the Bolsa, or Stock Exchange. Buoyed by an increase in exports over the first six months of the year, optimists were predicting a trade balance of as much as $400 million in 1963. Hope was also expressed that a revival of the nation’s economy might attract some of the $2 billion in Argentineheld private capital abroad.

Rapidly expanding world markets for beef provide a golden opportunity for increasing exports even further. An improved technology, plus a more sensible governmental approach to the livestock sector of the economy, is considered the most effective means of stimulating production.

A vigorous campaign to eradicate foot-and-mouth disease, which costs Argentina an estimated $200 million a year in lost production alone, has been making steady progress. The plan of attack has been to reduce the incidence of the disease by means of vaccination. Then, when the rate is effectively reduced, the disease will be completely eliminated by killing infected herds. The process is expected to take from eight to ten more years. In 1930, fresh, frozen, and chilled meat imports from Argentina were banned from entering the United States, which is a country completely free of foot-and-mouth disease.

Foreign investment in oil

One of the very few consistent performers in the Argentine economy has been the petroleum industry. Considerable controversy has developed over the policy of allowing foreign producers to exploit the rich petroleum reserves which potentially cover 46 percent of the country’s surface area.

The gap between domestic oil consumption and production, which required the importation of petroleum and was costing the country $251 million, impelled Frondizi to initiate his Reactivation Plan of 1958. The state petroleum agency, YPF, was directed to extend its exploration and development activities, new exploration and development contracts were negotiated with private companies, and drilling contracts to supplement the working of YPF rigs were granted to private drilling companies. A number of U.S. companies signed contracts under the plan. The production of crude petroleum is now nearing a level of self-sufficiency.

Nevertheless, the cry has been raised in various quarters, including the UCRP campaign platform, that the petroleum contracts with foreign companies should be annulled. The argument is that under the terms of the contracts, which require the private companies to sell all the oil they produce to YPF, payment by YPF must be made in dollars. Because of the drop in the value of the peso, opponents of the contracts contend that it would be cheaper to import. The private oil companies point to mismanagement in YPF, which is thoroughly enmeshed in financial difficulties and is far behind in its payments. Also, they criticize the drilling contracts, which provide for fixed fees and for as many as 1000 wells. In the United States, during oil booms contracts seldom call for more than twenty wells to be drilled and provide for renegotiation as drilling costs diminish.

Shortly after the elections, Dr. Illía indicated that he would seek to renegotiate the contracts rather than annul them. His low-pressure personality will serve to advantage in the conciliatory negotiations vital to the economic and political recuperation of the country.

It has been said that Argentina is such a wealthy country that it can prosper under ordinary bad management. Events of the past twenty years have demonstrated that it cannot thrive under excessively bad management. A stretch of good government is long overdue.