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Good Times in the 'Southern Cone'

THE BALTIMORE SUN

Santiago, Chile. -- For Argentina and Chile, these are the best of times. They are especially sweet because they have come after some of the worst of times -- military dictatorship, leftist terrorism, murder, torture, mass "disappearances," economic breakdown, political polarization and, in Argentina's case, humiliation by Britain in the Falklands-Malvinas war.

Against this raw background, current prosperity and political calm under reasonably democratic governments are savored fervently in both countries. Free-market economic policy prevails in the Southern Cone of the hemisphere, and, as in Mexico, it has opened doors to foreign investment, reducing trade barriers and prodding the privatization of inefficient state-owned industries.

Argentina (population: 33 million) and Chile (population: 13.3 million) are the economic tigers of South America, nations eager to use Pacific Rim techniques to hasten their transition from the Third World to the First World, from underdevelopment to flourishing industrialized democracy.

Two concurrent political developments underscore this dramatic transformation.

In Argentina, President Carlos Menem, 63, has won the right to seek a second term in 1995 by forging an agreement with his principal opponents on constitutional reforms that should solidify the democratic center for years to come. In Chile, President Patricio Aylwin, 74, is preparing to hand over his office following a remarkably quiet election Saturday between two candidates who promise little change in his successful economic policies.

It was not always thus.

In Santiago, a bustling city of 5 million people set against the smog-hazed Andes Mountains, Chilean soldiers still parade before the Presidential Palace at 10 a.m. on even-numbered days. Not so long ago they symbolized the imposing power of Gen. Augusto Pinochet, for 16 years the military dictator of Chile after his forces overthrew the Marxist government of Salvador Allende. A visitor can still discern where shells struck the palace walls on Sept. 11, 1973, a date inscribed in Chile's collective memory as clearly as Americans recall the assassination of John F. Kennedy.

But the patches on the walls are fading, and so is General Pinochet. Although he remains commander of the army and although he was able to rattle the government as recently as May 28 by a comic-opera show of force, Chile's long democratic tradition -- now reinforced -- seems secure.

The air force and the navy are not in the Pinochet camp. The election of a successor to President Aylwin is going along without a hitch. If the old general can keep his position until 1997, as mandated by the constitution he imposed in 1980, he too will then fade away -- hoping to be remembered as a savior of the nation.

Despite the awful repressions of the Pinochet era -- the mass jailings without recourse, the denial of civil rights and the undoubted atrocities -- the military regime can claim credit for turning around the economy.

Under the influence of the "Chicago Boys" -- conservative theorists from the University of Chicago -- Chile was the first Latin American country to adopt the free-market reforms now enthusiastically embraced by Argentina, Mexico and Peru. The country has enjoyed exceptional growth for a full decade under the guidance of Finance Minister Alejandro Foxley.

It is the only Latin American country to be given a Triple B investment-grade rating by Standard and Poor. Seven of its companies trade on the New York Stock Exchange. Capital inflow is strong, 40 percent coming from the United States and Canada, and Chile is now itself investing in Argentina and other Latin nations.

But General Pinochet's legacy, to give him his due, is not only economic. His constitution, which decrees a "binomial system" in which each citizen votes for two members of Parliament from his district, has broken up the traditional three-way left-center-and-right split in Chilean politics. This was a pattern that paralyzed the country with each election and put into office presidents with only a one-third mandate -- the last of whom was the ill-fated President Allende.

The binomial system is forcing the creation of two broad coalitions, one on the right and one on the left, that have to seek support from swing votes in the center. As a result, the current election pits Eduardo Frei, the son of a president, against Arturo Allesandri, the grandson and nephew of two other presidents, in a contest notable for its lack of fire or fervor. The issues are muted, the rallies few, and billboards and fliers almost non-existent. It is almost as if the country just wants Mr. Frei to win as expected, and to get on with the task of continuing present policies.

Patricio Aylwin has accomplished something that is inadequately recognized in today's world. He has replaced a totalitarian regime and demonstrated that democratic government can work. Unlike Poles and Russians, Chileans exhibit no nostalgia for the bad old days. Instead, they have demonstrated that authoritarian rule is not essential to progress.

On the other side of the Southern Cone, in Buenos Aires, Argentina is mesmerized by the wizardry of the flamboyant Carlos Menem as he arranges to stay in office until the end of the century.

To accomplish this feat, Mr. Menem used all the leverage and popularity he had accumulated in four years as a "Peronist" president who had blithely discarded all the tenets of Peronism -- its reliance on a corporate state linked with big protected state enterprises and huge unions guaranteed a steady flow of public money.

In the manner of Nixon-to-China, Mr. Menem has privatized many state enterprises, opened the way to outside investment, rescinded intrusive regulations beloved by the bureaucracy and denied the unions their traditional control over the welfare system. Yet he has done this so adroitly that he has won the admiration of progressive leaders in the business community while not losing the proletarian power base of the Peronist party.

Today, with Economics Minister Domingo Cavallo calling the plays, the Argentine peso is tied to the dollar in a courageous display of monetarism. Inflation has been cut from more than 10 percent a day to less than 10 percent a year. Argentina's 8 percent growth rate is among the world's best, and its natural resources, so badly managed over the years, make it a takeoff country if there ever was one.

Mr. Menem has done all this by continuing the democratic restoration that gives his predecessor, Raul Alfonsin, an honored place in Argentine history despite the hyperinflation that forced him from office five months ahead of schedule.

Now Mr. Menem has forced Mr. Alfonsin to accept a deal in which the old single six-year-term presidency will be discarded in favor of a maximum of two four-year terms. This really represents a consolidation of the nation's two big centrist parties and assures the stability that will attract foreign investment.

Chile and Argentina still have landscapes splotched by shantytowns, and vast disparities exist between the rich and the poor. But they are eons better off than basket cases to the north. Both, too, have had to placate the military by finessing any widespread punishment of officers guilty of atrocities. But, over all, human rights and freedom have been released from the cage of military repression.

For the United States, the emergence of the two great Southern Cone countries as free-market democracies is a bonanza in the drive to create a free-trade system from Alaska to Tierra del Fuego. Chile is already in line to join in the North American Free Trade Agreement or, failing that, to sign a separate bilateral free-trade accord with Washington. Argentina will not be far behind despite its leadership in another trade group linking it with Paraguay, Uruguay and Brazil.

It will take a lot of sorting out to mesh the idea of hemispheric economic consolidation with the commercial connections Argentina and Chile are assiduously building within Latin America, as well as with Europe and Asia.

Their economies are not tied to the United States', as is Mexico's. The colossus of the North is not on their doorstep but thousands of miles distant. But both countries eagerly favored NAFTA. Both would have considered its defeat a severe U.S. slap at the rest of the hemisphere. Now the challenge for U.S. foreign policy is to take full advantage of the opportunities that make this the best of times in the Southern Cone.

Joseph R. L. Sterne is editor of the editorial pages of The Baltimore Sun.

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