Argentina - Politics, government, and taxation

Argentina declared independence from Spain in 1816. The nation then underwent a political struggle between groups that favored a strong central government and those that favored a less rigid federal system. In 1853, the 2 factions established a new constitution and a government of national unity, thereby establishing Argentina as a constitutional democracy. The remainder of the 1800s were marked by increasing industrialization and a large amount of foreign investment, especially from Great Britain, in areas such as railways and port facilities.

Conservatives dominated Argentine politics until 1916 when the Radical Civic Union (URC) gained control of the government. The Radicals worked to expand political participation through fair elections and helped strengthen the political power of the middle class. However, in 1930 the military overthrew the legally-elected president. A succession of military governments tried to cope with the economic problems of the 1930s, but continued labor and social unrest led Juan Domingo Peron to power in the 1940s. Peron dramatically expanded union membership and the power of the working class. In 1947, women were given the right to vote. Peron and his wife Eva, popularly known as Evita, enjoyed great support among the working class and the poor. However, the Peron regime was marked by political corruption and repression. Peron also undermined the Argentine economy by nationalizing industry and trying to manage the economy through state-controlled economic policies and adherence to a series of 5-year plans. The military overthrew Peron in 1955, and through the 1950s and 1960s, Argentina had a succession of civilian and military governments, none of which could establish long-lasting political stability.

Meanwhile, the nation suffered from economic decline and a rise in both terrorism and formal rebellion by anti-government forces. This instability led voters to return Peron to power in 1973, with his third wife, Maria Estela, as his vice-president. However, both liberal and conservative extremist groups continued campaigns against the government, and the economy continued to decline. Peron died in office in 1974 and his wife, who succeeded him, was overthrown by the military in 1976. From 1976 to 1983, the military ruled Argentina and conducted a brutal campaign to eliminate opposition forces. At least 10,000 people were abducted and killed during this period that is known as the "Dirty War." Argentina also lost a war with Great Britain over possession of the Falkland Islands (called the Malvinas Islands by the Argentines). Popular pressure led to elections in 1983 and the restoration of democracy.

Argentina is once again a constitutional democracy. The 1983 elections installed Raul Alfonsin as president for a 6-year term. Alfonsin worked to establish civilian control over the military and fix the nation's economic problems. However, by 1989 inflation had soared to 4,923 percent and the country's economy was in shambles. Alfonsin was defeated in the elections in 1989 and replaced by Carlos Saul Menem. The inauguration of Menem marked the first peaceful transfer of power in Argentina in more than 60 years. Menem adopted a variety of reform programs which included privatization efforts and a pro-United States foreign policy. Menem also initiated monetary reforms which fixed the Argentine peso to the U.S. dollar.

In 1994, there were major revisions to the Argentine constitution. In the past, the president had been chosen by an electoral college, similar to that of the United States, for a 6-year term. Under the new constitution, the president is directly elected by the people for a 4-year term and can serve only 2 terms in office, but can be reelected after leaving office for at least 1 term. The president serves as the chief of state, the commander-in-chief of the military, and the head of the government. The Argentine president has more power than his American counterpart, including a line item veto (the ability to reject a single item from a legislative bill, rather than the whole bill). Argentina's legislative branch is a bicameral (2-chamber) body known as the National Congress. The upper chamber is the Senate, which has 72 members who are elected for 6-year terms. There are 3 senators for each of the nation's 23 provinces and the Federal District. The lower chamber is the Chamber of Deputies, which has 257 members who are elected for 4-year terms. Half of the deputies are elected on a proportional basis (each political party receives a percentage of the seats in the Congress based on their election totals, so that a party receiving 40 percent of the votes would receive 40 percent of the seats). The 1994 constitution improved the accountability of judges by establishing a Judicial Council which oversees judicial conduct. All judges are appointed by the president, subject to approval by the Senate. The nation's 23 provinces have significant power, not unlike the states in the United States, and each has a constitution that mirrors that of the national government.

There are 2 main political parties in Argentina. The Justicialist Party (JP) or Peronist Party is the party of Juan Peron. The JP is now a centrist party, but its main base of support continues to be with the working class and labor unions. Under Carlos Menem, the JP has embraced free-market, economic liberalization as the cornerstone of their economic program. The second major party in Argentina is the Union Civica Radical (Radical Civil Union or UCR), which evolved from the old Radical Party that was founded in 1890. The UCR's main base is among the middle class, and the party is now the more conservative of the 2 main political factions in Argentina. Under Raul Alfonsin, the UCR attempted wide-ranging economic reforms, but was unable to implement them in the face of popular opposition. Leftist members of the JP split with the party in the 1990s and formed the Front for a Country in Solidarity (FREPASO). In 1997, the UCR and FREPASO joined together in a coalition that is known as the Alliance for Work, Justice and Education, or simply as the Alliance. In 1999, the leader of FREPASO, Fernando de la Rua, was elected president. Despite the leftist leanings of FREPASO, its coalition with the UCR has brought the Alliance to the center politically. President de la Rua continued the economic reforms of Menem. There are also a number of minor and regional parties.

Under de la Rua, the government's policies were based on continuing liberalization of the domestic economy through privatizations and a reduced role for the state in the economy. The government is also working to reduce trade barriers and thereby increase foreign trade through integration in organizations such as MERCOSUR and direct trade agreements with other countries such as the United States. In its ongoing effort to increase trade, Argentina has worked to end a number of minor disputes with other countries, including border disputes with Brazil and Chile. Argentina has also restored relations with Great Britain, which were broken in the wake of the Falkland Islands war. The key component of economic policy that has united all of the main political parties is the continued fixed exchange rate between the peso and the dollar. This has served to practically eliminate inflation and to make Argentina attractive to foreign investors and to international organizations that provide economic assistance.

An ongoing problem for the government is the continuing budget deficit. By 1999, the deficit had climbed to 2.5 percent of GDP or almost US$9 billion. In an effort to reduce the deficit, President de la Rua implemented an economic program that expanded the privatization of government-owned businesses and included both spending cuts and tax increases. Among the most significant privatization programs over the last decade have been the selling-off of the nation's state-owned telephone company and reforms in the banking and insurance sector. The government has also expanded the availability of private pension plans, which has reduced the strain on the nation's social security system. Corporations in Argentina pay a standard 30 percent tax on profits each year. Individuals pay a graduated income tax that ranges from 11 to 30 percent, depending on income. There is also a 0.5 percent annual wealth tax on individuals who have a net worth of more than US$100,000.

Approximately 919,000 Argentines work for the government. In 2000, the government's budget was US$28 billion, but its revenues were only US$24 billion leading to a US$4 billion deficit. Repeated deficits have led to a large external debt of US$149 billion. In another effort to increase revenues, the government has been engaged in a long-running effort to improve tax collection and simultaneously decrease corruption in the public sector .

After decades in which it enjoyed a high degree of political power and prestige, the Argentine military has shrunk dramatically. The nation's military is now an all-volunteer force. In 1999, Argentina spent only 1.3 percent of GDP or US$4.3 billion on defense (compared with as much as 5 percent in the 1980s). Argentina has developed close military relations with a number of countries, including the United States, Israel, Spain, Germany, France, and Italy. In 1998, Argentina was designated a major ally by the North Atlantic Treaty Organization (NATO). Argentina has recently participated in a number of international humanitarian military operations such as the intervention in Haiti and NATO missions in the former Yugoslavia.