Tough economic test for Menem after poll victory

Carlos Menem will lead Argentina for four more years after an unexpectedly clear-cut victory in Sunday's presidential elections. But a looming economic crisis threatens to give him a rough ride.

With almost 95 per cent of votes counted, the 64-year-old candidate of the Justicialist (Peronist) Party had 49.5 per cent of the presidential vote, two points better than his 1989 victory. His nearest rival, 49-year- old Jose Octavio Bordon, who broke away from the Peronists last year to lead the new Frepaso (Front for a Country of Solidarity) coalition, scored 29.6 per cent, dumping the Peronists' traditional rivals, the Radical Civic Union (UCR) into a distant third place with a historic low of 17 per cent.

The Peronists also swept most of the 14 provincial governorships at stake and increased their parliamentary majority by several seats. Their only significant loss was in the city of Buenos Aires, where Mr Bordon defeated Mr Menem, but that result had been expected.

As fireworks exploded shortly before midnight on Sunday and thousands of supporters sang, danced and shouted "Matador", Mr Menem's nickname, the victor appeared on the balcony of the Pink House, the presidential residence on the capital's Plaza de Mayo.

"With your permission, I would like to dedicate this triumph to my son, who I know is watching and celebrating with us now," Mr Menem said. Carlitos (Carlos Junior) Menem, a 26-year-old racing driver, was killed in a helicopter crash two months ago.

Mr Menem's only daughter, Zulemita, who has become a substitute First Lady since his estrangement from his wife, Zulema, left the balcony in tears.

Significantly, most of those in the square were from the surrounding Buenos Aires province and a huge placard carrying the name of the provincial governor, Eduardo Duhalde, dwarfed those for Mr Menem himself. Holding 8 million of the nation's 22 million voters, Buenos Aires province - a separate electoral entity from the capital city - was the key to Mr Menem's victory.

Since ballot slips twinned the presidential and gubernatorial votes, the popular Mr Duhalde was credited with bringing in much of Mr Menem's unexpectedly high tally. Political analysts believe Mr Menem may express his gratitude by naming Mr Duhalde as presidential candidate for 1999.

Before that, however, the President will have to deal with a looming recession, which many economists believe has been swept under the carpet during the election campaign. In his victory speech, Mr Menem promised to "pulverise" unemployment, currently at a historic high of 12 per cent.

In a front-page leading article, yesterday's issue of the English-language Buenos Aires Herald first congratulated Mr Menem on his victory, then added: "That was yesterday. The recession starts today."

Maintaining his policy of dollar-peso parity may prove to be difficult. Many economists here say parity has created a mirage of economic stability and predict a Mexico-style crisis unless the peso is devalued. Doing so, however, could prove politically disastrous for Mr Menem, who campaigned on a pledge to keep the peso equal to the dollar.

Taking advantage of parity, many Argentines took out dollar-denominated credits, mortgages or loans. "People will jump out windows if he devalues. But he may soon have to," said one foreign banker here.