Though Argentina won its political freedom from Spain long ago, in 1816, not until last year did the country's economy turn the corner toward independence.

"After a decade of economic disaster and political turmoil . . . Argentina's comeback is remarkable," Salomon Brothers trumpeted in a recent report.

Launching a string of radical reforms, Argentina last year opened up its economy to international and domestic market forces, cut annual inflation to 85% in 1991 from a whopping 1,344% the year earlier, curbed government deficit spending, reversed capital outflows, and agreed to set up a free trade zone, Mercosur, with Brazil, Uruguay, and Paraguay.

The reforms came after nearly a decade of uncontrolled government spending that kept the printing presses churning out more currency, which sent inflation soaring.

Analysts and Argentine bankers have predicted that gross domestic product will rise by 6% this year after 4% growth in 1991 and that the Argentine economy will remain stable.

"I'm very positive," said Manuel R. Sacerdote, regional manager for Bank of Boston in Buenos Aires. "What encourages me is that we are moving in a clear direction to reduce the size of the government and allow the private sector to work."

Taming Inflation

The New York-based investment bank Solomon Brothers noted in a recent report that inflation had declined from an average of 49% per month in 1989, when President Carlos Menem took office, to less than 3% per month in the first quarter of 1992 and 0.8% in July.

"Faced with a steadier economic outlook." Solomon added, "Argentines are now beginning to spend dollars hoarded over the past decade, boosting real estate prices and sales of cement, steel, and automobiles. The enthusiasm for Argentina's new economic order has translated into more than a $5 billion inflow of foreign funds into bonds, equities, and direct investment last year. This doubled hard-currency reserves, to $8.3 billion, and sent the Buenos Aires stock exchange skyrocketing nearly 400% in dollar terms.

Argentine bankers estimated that as much as $800 million a month is now flowing into Argentina.

Speculative Bubble Bursts

The boom has not been without its down period.

As stock markets began sagging around the world earlier this year, many investors pulled out of the stock exchange as fast as they had piled in, sending the market down by more than 50% from its high for the year.

Analysts said several clouds hang over Argentina's economic future:

* The country's foreign debt remains high, despite the debt-reduction pact with foreign banks.

* The government still needs to boost revenues from privatizations and improved tax collection.

* The trade surplus fell 50% last year, to $4 billion, increasing the chance that the peso may have to be devalued.

* President Menem's six-year term expires in 1995, and he is barred from seeking a second term. If he and Economy Minister Domingo Cavallo leave, persistence in the current free market policies cannot be guaranteed.

Foreign investors are staying bullish.

Recovering Lost Ground

"The market will probably recover lost ground in the medium term," International Finance Corp., an investment unit of the World Bank, noted in a recent report. "As long as inflation remains flat, the market will most likely post modest gains in the short term."

Despite the remaining concerns, Argentina has come a long way from the economic low points of the mid-1980s.

"Clearly, the pace of reform has been rapid," James Capel noted in a recent report. "The major support for this speed of reform has been a combination of a majority for the Menem government in Congress and the popular support for the president and, more recently, for Finance Minister Cavallo,"

Argentine bankers like Mr. Sacerdote said they see even more concrete proof of confidence in the future. "Young people are not thinking of going abroad any more," he said, "and those that went abroad are starting to come back."

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