Argentina: A Flagship Privatization and Its Demise

Abstract

With 12 million inhabitants on the shores of the Rio de la Plata, a huge and cheap source of freshwater, the bustling metropolis of Buenos Aires was a great prize to win for the world’s water companies. Argentina had just come out of a dark period, one of instability followed by a military dictatorship that had cost the lives of thousands of people and that ended after the disastrous war over the Falkland Islands, called the Malvinas by the Argentines. The country returned to democratic rule, but the economy did not recover. The new President, Raul Alfonsín, from the Radical Party, took over in 1983, after democratic elections. The new government inherited a high foreign debt, and inflation spiraled out of control, amid labor disputes and frequent strikes. At the height of the crisis, close to the end of the 6-year presidential period, almost half the population lived in poverty. During the elections, the opposition candidate from the Peronist party, Carlos Menem, stylized himself as an advocate of the poor in the tradition of the party’s founders, former President Juan Perón and his wife Eva. The two, later subjects of the hit Broadway musical and subsequent film adaptation, “Evita”, the latter starring Madonna as Eva Perón, had ruled Argentina in the 1950s and are revered as icons by their followers. Building on the enduring myth of the Peróns, Carlos Menem promised to stabilize the economy and to fight poverty. When the government lost the 1989 elections, the situation was so bad that the incumbent President Raúl Alfonsín asked to hand over power to the new President Menem 6 months earlier than foreseen.