Latin Democracy in Progress--or in Peril? Debt-related economic hardships make civilians, and some militaries, restless. CHOOSING NEW LEADERS

CAN fragile Latin American democracies survive the political fallout from strong doses of economic austerity? Although it won't be on the ballot, that question will be crucial when voters in four Latin American countries pick new presidents this month, beginning today.

In a region where democracy was rare 10 years ago, upcoming elections in Argentina, Bolivia, Paraguay, Panama, and throughout the continent in the coming year (see map) should be cause for celebration. But analysts are pessimistic about Latin America's prospects.

Burdened by huge foreign debts, which total $415 billion for the region, governments are bearing down on the poor. Democracy, writes American scholar Douglas Payne, is becoming ``identified more with hardship than with freedom'' in popular opinion.

A sharp reminder of this occurred in February, when Venezuela's poor erupted in riots after the new government of President Carlos Andr'es P'erez doubled gasoline prices. The price hikes are part of an economic austerity program required by the International Monetary Fund as a condition for new loans.

In Argentina, union leaders warn that violence will explode in their country if the prices of food and household items continue to climb. Until this year, the government dodged the full force of the country's $58 billion foreign debt with fancy financial footwork, but inflation began to take hold in March. Price rises in April alone are expected to reach 40 percent.

``The patience of the workers has a limit,'' says labor leader Saul Ubaldini, who heads the General Federation of Labor.

The federation is built on the authoritarian populism practiced by Gen. Juan Domingo Peron when he was president of Argentina after World War II and again in the early 1970s. His erratic economic policies precipitated military coups both times.

Argentina typifies the main danger that dogs democracy in Latin America: When the economy sours, the military gets restless.

President Ra'ul Alfons'in, who took over from the military in December 1983, raised hopes that he could lift Argentina out of economic stagnation and move the country away from military governments. But as he prepares to leave office, economic indicators are similar to those in the days before the 1976 coup.

Army factions are moving back into politics, and Peronist presidential candidate Carlos Menem has found it advisable to pay a campaign visit to the Army's chief of staff, Gen. Francisco Gassino. Candidate Eduardo Angeloz, of the ruling Radical Party, is trying to counter the populist appeal of the Peronists by asking President Alfons'in for a general wage increase, but Mr. Menem is favored to win in the balloting on May 14.

In Bolivia, where voters go to the polls on May 7, all three of the leading candidates subscribe to the broad principles of the current government's successful economic austerity program. The program has combined financial discipline with free-market policies to slash inflation from an astronomical 23,000 percent four years ago to 20 percent now.

But economic success has come at high social cost: The state tin company has cut its workforce from 30,000 to 7,000, and the Roman Catholic Church estimates that more than 20 percent of the country's workers are unemployed. The results are apparent major cities, where thousands of children live in the streets.

Public desperation has increased the popular appeal of presidential contender Gen. Hugo Banzer S'uarez, a former military dictator who seized power in 1971 and held on for seven years. General Banzer's regime was repressive. He jailed hundreds of political opponents, including the man who is now the leading leftist candidate for president, Jaime Paz Zamora.

But the Banzer years were also relatively prosperous since the prices for Bolivia's mineral and oil exports remained high and the government borrowed heavily. Memories of the ``good old days'' have helped the diminutive former dictator clean up his image.

``They are trying to make Banzer appear like a little democratic uncle,'' says Mr. Paz Zamora. ``But he was a tough and cold dictator.''

Banzer now narrowly leads Paz Zamora and government candidate Gonzalo Sanchez de Lozada in the polls, but none is expected to a win a majority of votes. That would throw the final decision to Congress. If the president is picked by Congress, legislators have until Aug. 5 to make up their minds. Three months of political uncertainty would put a strain on democracy in a country where the military has seized power 180 times since independence was gained in 1825.

As in Bolivia, neighboring Paraguay (related story Page 3) has a military man running for president. Gen. Andr'es Rodr'iguez wants to be elected after seizing power in February from Gen. Alfredo Stroessner.

Gen. Rodr'iguez seems sure to win today in Paraguay. The opposition is splintered after 34 years of his predecessor's dictatorship and unable to take advantage of the brief three-month period to prepare for elections.

Rodr'iguez has promised to hand over the government to an elected successor in 1993, even if the winner is a member of the opposition. If that happens, it would be the first time in Paraguay's 178 years as a nation that a ruling party gave up power through the ballot box.

But Paraguayan democracy walks on shaky economic ground. The country has a foreign debt of $2 billion and almost no money in the Central Bank. Reserves were only $100 million when Rodr'iguez seized power.

For many years the economy has been kept afloat by officially condoned smuggling, including drug trafficking by military officers. Rodr'iguez himself has been ``the subject of numerous allegations of illegal activity, including drug trafficking,'' according to the United States State Department's 1989 report on drugs.

If separating the military from the drug trade will be a daunting task for Paraguay's fledgling democracy, it seems a nearly impossible one for Panama, which holds elections May 7.

The country's de facto dictator, Gen. Manuel Antonio Noriega, was indicted by a US federal grand jury in February 1988 for aiding drug smugglers.

Now his hand-picked candidate, Carlos Duque, is likely to win as president. The opposition says a Duque victory will only come through fraud. But some analysts say the opposition is so divided that General Noriega's man can win without cheating.

Like the other three Latin American nations holding national elections this month, Panama is caught in economic crisis. Its gross national product dropped 23 percent last year.

But Panama's case is unique because its economic problems have been brought on by US-imposed sanctions intended to topple Noriega. Opposition leaders have asked Washington to lift the sanctions. They say the sanctions are more harmful to Noriega's businessmen opponents than to the general, whom they allege earns an independent income from smuggling drugs and other contraband goods.

The charge that the economic crisis benefits Panama's strong man puts a new twist on a common theme that runs through the four elections next month - austerity is no friend of Latin American democracy.

Continent in Transition Presidential elections in Latin America 1989 Paraguay May 1 Bolivia May 7 Panama May 7 Argentina May 14 Brazil Nov. 15 Uruguay Nov. 26 Honduras Nov. 26 Chile Dec. 14

1990 Costa Rica February Nicaragua February Colombia May Peru April

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