Menem jolted by third place in capital's poll

PHIL DAVISON

Latin America Correspondent

President Carlos Menem of Argentina has suffered his worst political setback since he was re-elected in May. The centre-left opposition Frepaso alliance won the influential Senate seat for the capital, Buenos Aires, at the weekend.

The overwhelming victory by Frepaso's candidate, Graciela Fernandez Meijide, with more than 50 per cent of the vote to only 21 per cent for Mr Menem's Peronist candidate, was seen as reflecting disquiet over rampant unemployment and reports of official corruption. The Peronist candidate, Antonio Erman Gonzalez, a former economics and defence minister under Mr Menem, was left a humiliating third behind Jorge Vanossi of the Radicals, who won 22.5 per cent.

"This will teach those who said there was no way to get at Menem," said Ms Meijide, a leading human rights campaigner. "The people are fed up."

The vote of discontent in the capital followed a series of provincial riots this summer, notably in Cordoba and San Juan provinces, some by the unemployed but mostly by public sector workers who had not been paid in months.

When he was re-elected in May, Mr Menem pledged to "pulverise unemployment the way we pulverised inflation". But the jobless figure has spiralled to a record 18.6 per cent.

On the recent feast day of St Cayetano, patron saint of work, more than a million people filed through the St Cayetano church outside Buenos Aires to beseech the saint for jobs. Some had camped out for a week to get a place in line.

The jobless rate threatens Mr Menem's economic successes of the past five years, bringing the economy to its most sensitive point since it floundered in the wake of last December's Mexican financial crisis.

Uncertainty over the future of the Economy Minister, Domingo Cavallo, architect of much of the recent successes, has also caused jitters among domestic and foreign investors who fear economic instability were he to go. Mr Cavallo caused a political storm in August when he said mafiosi were entrenched in the upper reaches of government and state bodies. Rumours that hardline Peronists would force his dismissal sent the stock market downward and threatened foreign investment until Mr Menem issued a hearty endorsement of his minister.