History, Menemís Presidency
Carlos Saul Menem, Domingo Cavallo, Menem, emergency economic powers, MERCOSUR
Inflation remained unchecked, however, and in May 1989 the Peronist candidate, Carlos Saul Menem, was elected president. With Argentinaís economy deteriorating rapidly, Menem imposed an austerity program. During the early 1990s his government curbed inflation, balanced the budget, sold off state enterprises to private investors, and rescheduled the nationís debts to commercial banks. In 1992 full diplomatic relations with Britain were restored, helping to heal the wounds of the Falklands War. In January 1994 the country signed the Treaty of Tlatelolco, making Argentina a nuclear weapons-free state. Also in 1994, leaders from Argentina, Brazil, Paraguay, and Uruguay signed the Asuncion Treaty, which confirmed those countriesí intention to create the Southern Cone Common Market by the end of 1994.
In 1994 Argentina adopted a new constitution. The most notable change shortened the presidential term from six to four years and allowed the president to seek a second consecutive term. In 1994 Argentina, Brazil, Paraguay, and Uruguay signed a treaty that created the Southern Cone Common Market (also known by its Spanish acronym, MERCOSUR). The agreement took effect on January 1, 1995, allowing 90 percent of trade between member countries to proceed duty free. This agreement, combined with the privatization of state industries, helped Argentina to continue its economic recovery.
Menem won a second presidential term in May 1995. When it became clear later in the year that Argentina would have difficulty meeting fiscal targets for 1996 set by the International Monetary Fund, Menem called on the Argentine Congress to declare a state of economic emergency. In an effort to allow the president to raise funds quickly in the event of a budget crisis, Menem was granted emergency economic powers in March 1996 that gave him the power to raise tax rates and impose new taxes without congressional approval.
That same month more than 10,000 prisoners rioted across Argentina, taking dozens of hostages and instigating one of the worst prison rebellions in the countryís history. The rioting began at a maximum security prison in Buenos Aires, quickly spread to other prisons, and lasted for more than a week. Inmates, an estimated 70 percent of whom were awaiting trial, called for an end to overcrowding and unsanitary conditions, and for faster processing in the courts.
In July Menem dismissed Domingo Cavallo, the finance minister who guided Argentinaís economic policy in the early 1990s. Cavalloís policy of deregulation and privatization brought lower inflation and economic stability to Argentina, but many government employees lost their jobs when government-owned businesses were privatized. Despite Cavalloís dismissal, the government continued to follow his fiscal plan. Rising unemployment led labor organizers to call a general strike in September 1996 and in May 1997 violent protests against the governmentís economic policies took place in cities and towns across the nation.
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