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payments to foreign creditors. Per capita GDP had fallen 15 percent
in the previous 10 years. Following 19 months of unsuccessful wage
and price freezes and the resignation of the first economics minister,
the government launched a bold stabilization project called the Plan
Austral (Southern Plan).
Alfonsín's Southern Plan of 1985 met with immediate success. The
government retired the worthless old peso and created a new monetary
unit called the
austral.
Simultaneously, policy makers froze wages and
consumer prices with the cooperation of organized labor and business
groups. To trim government expenses, President Alfonsín decreed a
wage freeze for all public employees, and there was a reduction in
armed forces personnel and paychecks. The Plan Austral also renewed
a commitment to promote settlement in the Patagonia by proposing to
move the national capital from Buenos Aires to the town of Viedma on
the banks of the Río Negro. The move was intended to entice
porteños
to leave the comforts of Buenos Aires in order to develop the untapped
resources of the south. In addition, the government vowed to strengthen
tax collection procedures to eliminate the time-honored strategies of
tax evaders. Government deficits in the short term declined, and infla-
tion came down from 360 percent to 24 percent. In 1986, the GDP
shot up by 10 percent. Then reality set in once again, and government
economists could not maintain sufficient self-deception.
By 1988, Alfonsin's policy makers admitted failure. The economic
(and political) situation had deteriorated to the point that bureaucratic
appointments multiplied rather than declined. In the 1980s, public
employment rose from 484,000 to nearly 600,000, a figure representing
one in every five employees in the country. The state companies contin-
ued to lose millions of dollars each day, and private industry declined
as well. Government deficits grew, and the politicians lacked the will to
rigorously apply the nation's tax laws for fear of a political backlash. In
1989, only 30,000 of 30 million Argentines paid any income taxes at all.
Workers' wages suffered from the resurgence of inflation (see table on
page 263), which they did not accept passively. Angry workers reacted
by launching 13 general strikes during Alfonsin's administration. In addi-
tion, the Peronists won the congressional elections and a majority of the
governorships and thereafter obstructed many reforms of the Radical
Party. With the resurgence of inflation, rebellion on the part of the
Carapintada, and the recovery of the Peronist Party, President Alfonsín's
administration appeared headed for failure.
The Peronists ran an adroit campaign in 1989. Their presidential
candidate, Menem, had been governor of his home province of La
