Six months back, things looked rather grim for much of Latin America. International finance battered the capital markets of Brazil because opinion polls indicated that the Brazilian people were likely to elect the leftist, former trade union leader, Lula da Silva, as their President. The United States government actively conspired with large capitalists in Venezuela to overthrow the leader Hugo Chavez, who was elected with a huge majority and the support of Venezuela's poor. Argentina's nightmare went on unabated-the economy continued to contract in a downward spiral as the International Monetary Fund (IMF) tried to force the hapless government into further deflationary measures, poverty increased massively and unemployment rose to historic levels.

But now, things look so much better. Not only did Brazil survive the attempted capital flight of late last year, but Lula was elected, with a massive share of the vote. Chavez of Venezuela managed to survive the crippling oil strike that had been instigated by the US, and has re-established control over the economy and the government.

Until recently, it looked as if Argentina's woes would, however, continue. The economic turmoil that hit the country at the end of 2001 has left almost 60 per cent of the population living below the poverty line. Real wages have fallen about 40 per cent since the crisis.

The election itself was another sign of the turmoil the country's institutions have been thrown into because of the economic crisis. The run-off would have been fought between the centre-left candidate, Nestor Kirchner (who was supported by the outgoing President) and the flamboyant and disgraced former President, Carlos Menem.

That Carlos Menem could even contemplate contesting the Presidential elections in Argentina again is almost unbelievable. He is one of the most hated men in that country, not only for his association with public corruption and sleaze, but because he presided over and directed the previous round of liberalization and crisis in the economy, and the subsequent stabilization package, which many believe were what created the conditions for the more recent crisis. When Menem was President in the early/mid 1990s, his government privatized most of the important assets and practically all the major public utilities and services. Indeed, one complaint during the present crisis, was that, as a result, there is nothing left to privatize or sell off any more!

Fortunately, it became evident very soon that the people of Argentina could not stomach having this man as their ruler once again. Opinion polls consistently showed that he would lose heavily. Typically of Menem, he chose to withdraw from the contest, rather than, as one disappointed voter put it, 'giving us the chance to defeat him comprehensively and throw him out'.

The new President, Nestor Kirchner, has already indicated that he will emphasize a more active role for the government in bringing the economy out of its crisis. He has also made it clear that the government would not pay its external debt at the cost of increasing hunger and poverty within Argentina.

In his inaugural speech, Kirchner said, 'We have to start
planning and carrying out public works in Argentina to refute with facts the neo-liberal argument that public spending is unproductive.' The immediate plan is to revive public infrastructure projects, such as a programme to build 50,000 new houses for the poor. The new government correctly believes that such publicly funded infrastructure projects will create jobs and production which, in turn, will boost the domestic market.

Other plans of the new government include a reduction of value added tax, currently 21 per cent, on some basic goods to improve the purchasing power of the poorest Argentines.

On the external debt front, Kirchner said his government would 'stick to firm principles' when negotiating a repayment plan with the holders of defaulted Argentine sovereign bonds. It would look to reduce the face value of the defaulted debt, lower interest rates and lengthen maturities. However, Kirchner recognized that reaching an agreement with private creditors was a 'central issue', and the government intended to meet its financial obligations.

One of the more interesting statements made by Kirchner relates to Mercosur, the trading group consisting of Brazil, Argentina, Paraguay and Uruguay. Mercosur is complete anathema to the United States, which has consistently opposed it and tried to demolish it. Economists at the IMF and the World Bank have spent years trying to show that Mercosur has damaged the member economies. All this is because the US wants to establish its control over all preferential trade agreements in the region, and simply cannot bear the idea of some countries setting up on their own.

Some economists from Latin America have suggested that the only reason Mercosur's figures are not impressive is because two of the large member countries-Argentina and Brazil-have suffered crisis and adjustment. They argue that in fact Mercosur ensured that trade within the region did not fall any further, and allowed import substitution in the region to generate employment.

Kirchner clearly supports this position. In his speech, he reiterated his commitment to import substitution and export policies, and said foreign policy would aim to revive the Mercosur trade bloc as an engine for growth and deeper regional integration. He is quoted as saying, 'our country should be open to the world, but open in a realistic way, ready to compete within a framework of policies based on regional preference.'

All this augurs well for Argentina, and also for the economy of the region. All we have to hope for now is that the chances for concerted revival led by left-oriented leaders in Latin America will not be destroyed by the US government and IMF interference.