A year ago, Argentine President Raul Alfonsin administered shock treatment to his nation's inflation-ravaged economy -- imposing stiff wage and price controls to slow inflation from an annual rate of more than 1,000 percent to 50 percent today.
Now Alfonsin appears ready to tackle the country's other major economic blight -- the decades-long stagnation that has sent Argentina on a long decline from one of the world's richest nations to a middle-income country with a massive foreign debt burden.
But the steps Alfonsin and his economic advisers say they want to take will require a major break with his nation's tradition of state-centered economic policies and a struggle with the interest groups that benefit from those policies.
The core of Alfonsin's reform plan is the sale to private interests of many state enterprises, the gradual removal of protectionist barriers that allow Argentine industry to remain high-cost and inefficient, and the deregulation of much of the rest of the economy.
A more competitive and efficient economy, and one in which inflation is under control, should attract the investments Argentina needs to grow, officials say.
Alfonsin, for example, is trying to lure back oil companies that were kicked out of the country two decades ago, and last week he took off for Japan to try to attract Japanese investors to Argentina.
There are skeptics, including respected economist Enrique Szewach, who question Alfonsin's commitment to changing Argentina from an inward-looking economy to a competitive one.
Alfonsin has been talking about reforms for several years, said economist Jorge Dominguez, who is seeking a congressional nomination from the opposition Justicialist (Peronist) Party. "The government says a lot of things; it does very little."
Indeed, most of the moves so far appear to be symbolic. The country is not planning to put up for sale most of its biggest and costliest public companies -- communications, utilities, the railroads and petroleum. The biggest single expense item in this year's budget, for example, is the subsidy to the railroad industry.
"It is not possible politically to sell them today," according to Roberto Lavagna, secretary of industry and foreign trade.
It also is unclear how much freedom the government is willing to allow potential buyers of other state enterprises such as its steel and petrochemical operations. Many economists say purchasers will have to be allowed to get rid of excess employes, to buy low-cost foreign supplies and to have foreign partners.
Unless the government is willing to give buyers a free hand to make the companies profitable, the offer to sell them can be considered less than convincing, according to one U.S. executive based here.
Even so, there may not be the money in Argentina to buy the government companies. In addition, economists wonder whether Argentine business -- so accustomed to protection, government subsidies and tax breaks -- is up to working in a competitive environment.
"In inflation, there are no entrepreneurs. It is impossible to measure efficiency when prices are rising 100 percent or more per year. But we can see how badly the state has performed for 50 years. We have to give them Argentine businessmen a chance," according to economist Szewach, who heads the respected research institute FIEL.
Economy Minister Juan V. Sourrouille said the government is strongly committed to rebuilding industry to make it competitive. He said the country's agricultural sector -- mainly grains and cattle -- is already internationally competitive.
Sourrouille dismisses those who question the administration's sincerity. "It is not just a whim of government," he said. He noted that one small enterprise already has been sold and the steel and petrochemical companies have been put up for sale.
In addition, the government also has proposed to remove import restrictions on components used by manufacturers who sell their products for export.
"It is a small thing," said a businessman. "But it is an indication the government is serious about opening up the economy and encouraging competition and exports."
Sourrouille said the government wants to ensure that the legal underpinning of the sale of the publicly owned enterprises is so firm that some future government does not undo it. In part that explains why the process is taking so long, he said. In a recent interview, he said the Alfonsin administration would soon send Congress a law that would provide the legal authority for the sale of most public companies.
A high-ranking business executive agreed with Sourrouille, noting that Alfonsin has had many difficult problems on his agenda since his elected government succeeded a military junta in December 1983.
"He had to deal with inflation before he could deal with growth. Now that he has inflation down to a reasonable level, at least for Latin America, he can worry about growth," the businessman said.
Carlos Bulgheroni -- director of the privately owned manufacturing conglomerate, The Bridas Group -- doesn't question Alfonsin's commitment. But he said there are powerful forces arrayed against the president, including many of the old guard in Alfonsin's Radical Party.
Change is coming slowly, Bulgheroni said. "But we need to produce change more quickly than politics will permit." Another top Argentine executive said, "The old guard in the Radical Party is being replaced by younger members who think more like Alfonsin. But it is a slow process. And Alfonsin must constantly balance the interventionist-nationalist politicians with the modernizers."
The policy changes advocated by the Alfonsin administration read almost like a wish list from U.S. Treasury Secretary James A. Baker III. Baker argues that many policies in debtor nations like Argentina sabotage the economic growth and job creation that the countries seek.
Baker wants stepped-up lending to go to the countries that are willing to change their economic policies. The loans, from both commercial banks and official institutions like the World Bank, are supposed to make it easier for the reformist debtor nations to pay their interest bills and still have enough funds left over for investment.
With $52 billion in foreign debt and anticipated interest payments of more than $4.6 billion this year, Argentina is a leading candidate for the so-called Baker initiative that was unveiled in South Korea last October.
But Alfonsin must negotiate a political and economic mine field to "modernize" an economy that has consciously featured the state as either the center or arbiter of most economic activity and has developed its own set of special interests in the current method of doing business.
Alfonsin slowly but surely is conquering the ideologues in his own party, according to Bulgheroni of The Bridas Group. "I find it instructive that the same man former energy secretary Conrado Storani who 20 years ago canceled contracts with foreign oil companies was the one in charge of luring them back."
He said Storani, now minister of public health and a strident nationalist, may not have liked inviting foreign oil companies to explore for oil. But that he did it shows Alfonsin gets his way.
Unfortunately for Alfonsin, with oil prices plummetting oil company interests in exploration is waning.
Even if Alfonsin brings his own government around, he also must deal with a number of powerful interest groups, including labor unions and businesses that are used to manipulating the state for their own ends and will resist changes, according to Charles Rowe, a top official with the Bank of Boston here.
Over the last half-century, Rowe said, the government has created a number of private fiefdoms for individual businesses -- giving tax breaks, interest subsidies, or other benefits that make it virtually impossible for other companies to enter a particular industry.
Other government regulations stifle entrepreneurial activity. For example, the law requires that pharmacies be owned by the pharmacists. "That prevents a sharp businessman from hiring a couple of druggists and starting a chain, or a supermarket from adding a drug counter," Rowe said.
The Argentine economy is full of rules that benefit one or another group and that have to be struck down to create a competitive environment, according to economist Szewach. The public sector has grown steadily since former president Juan Peron nationalized the railroads 40 years ago.
Resistance to selling those companies comes not only from the numbers of Argentines that firmly believe the state should intervene in the economy, but from hundreds of thousands, perhaps millions of state workers who have a less ideological concern: their jobs.
Although declining real incomes have been a problem in Argentina since the 1930s, unemployment has not been. In fact, many companies were bought by the state to avoid the unemployment that would have been created if the faltering firms went bankrupt.
Several months ago the government announced its intention to sell the state's steel company, Somisa. A small minority of Somisa is already owned by private interests. Almost immediately after the announcement, workers, joined by the local Catholic bishop, began to agitate against the sale.
The state sector -- both the enterprises and the ministries -- is constantly subject to strikes as organized labor attempts to force concessions from the government.
So far, the Alfonsin administration has stood its ground. Rather than crumble before what it considers an illegal strike by pilots of the state-owned Aerolineas Argentinas, for example, the company fired the striking pilots and is looking for replacements.
Most Argentines support the kinds of changes the government says it wants, according to economist Szewach. They have seen 50 years of bad economic performance and realize that change is needed, he said.
A former top government official agreed. "The unions can make it very unpleasant. They can muster 100,000 demonstrators in the Plaza de Mayo in front of the government house on 24-hours' notice.
"But most Argentines are not union members and most want change. If the government can resist union intimidation, it can get the job done, because most people support it," he said.
Alfonsin's plans could founder, however, on something as unexotic as the lack of local resources to buy the state enterprises the government wants to put up for sale.
Finding a buyer for Somisa, which has been for sale for several months, will be difficult, according to Jorge Llados, a director of the company. "I don't see a local buyer because of the amount of money involved," Llados said. The value of the company on its books is $800 million, he said. To replace the facilities would cost $5 billion.
Economy Minister Sourrouille agreed that few Argentine investors have the cash to buy many of the state enterprises. He said it would be wishful thinking to expect Argentines, who have billions of dollars invested abroad, to bring those funds home until there is strong evidence of economic growth.
Sourrouille said the administration is trying to develop a method that would allow qualified purchasers to buy state enterprises with a minimum cash down payment. One former government official suggested that Baker plan loans -- probably from the World Bank -- might be used to facilitate sales of state-owned enterprises.
"The enterprises should get themselves in shape, eliminate excess workers, write off old facilties. Baker plan loans could be used to pay off the workers and retrain them," the former official said. In limited instances, an economist suggested, the Baker plan money might be used to assist purchases of state enterprises.
Curiously, the Baker plan itself, offered as a way to make it easier for countries to undertake economic reform, is an impediment to that reform here.
"The opposition says we are giving into Yankee imperialism," lamented Argentine Treasury Secretary Mario Brodersohn. "We were interested in taking these steps long before Baker gave his speech in Seoul."
It was the country's long period of economic stagnation that sparked the administration's desire for change, he said.
Argentina, Latin America's third-biggest debtor country, has had virtually no economic growth for 35 years and what little it has achieved it accomplished with funds borrowed from abroad.
"Now, we must have growth while at the same time using 30 percent to 40 percent of our domestic savings to pay interest on the foreign debt," Brodersohn said.
But Brodersohn, Argentina's chief negotiator with both commercial banks and the International Monetary Fund, said Argentina's debt is a major irritant but not the fundamental problem.
"We had stagnation before we had debt. Even if we got a free ride on the debt, we would have to change if we expected to grow."