New President Presses His Quest for Stable Argentina : South America: Carlos Saul Menem is fighting to keep his ambitious reform plan on its feet. But the early hopes for a quick solution have vanished.

BUENOS AIRES —  For a man who was not even supposed to take office for another few weeks, President Carlos Saul Menem sometimes has the look of a haggard victim of Argentina’s “me-first” political and economic wars.

The trade union movement that helped put him in office is squabbling; big business is howling over lost subsidies and higher taxes; the black-market dollar has shot up, and rumors of impending Cabinet changes are denied daily--all of this little more than four months into Menem’s six-year term.

Reminding would-be challengers of his days as an amateur boxer, Menem has been ducking and weaving to keep his ambitious economic reform program on its feet in the face of a barrage of pressures. The odds-makers still are with him, but the euphoric hopes of a quick knockout and a long, happy reign as champion have vanished.

Menem, a Peronist, was elected in May as successor to Raul Alfonsin of the Radical Civic Union. He was to have assumed office Dec. 10, but Alfonsin, faced with nightmarish hyper-inflation that led to violence in the streets, quit in July, five months early, and Menem was hurriedly sworn in.

His abrupt decision to break with his own party’s legacy of state domination of the economy--and his sweeping initiatives to implement the changes--won wide favor at home and abroad. Inflation, which peaked at 196% monthly in July, has slowed to an expected 5% or so for October. Privatizations of state companies, slashed subsidies for business, more flexible hire-and-fire rules and a host of other changes are in the works.

“The people almost forgot for a while that we still had terrible problems. There was a collective forgetfulness,” said Mario Vicens, a former government economic official and now a consultant to private companies. “There was an element of hyper-optimism.”

This month, however, all the traditional Argentine sectorial pressures and heightened expectations appeared to descend on Menem at once, fed by the doubts of a nation accustomed to seeing hopeful beginnings crumble into broken promises.

The dollar, a bellwether for the state of the economy, suddenly began rising sharply against the national currency, the austral. After hovering for months near the fixed official exchange rate of 655 australs, the black-market dollar shot up to 800, then 900 and finally over 1,000 australs last week. Early this week, it steadied below the 1,000 mark, but the austral’s wild ride has prompted fears of a return to the inflationary spiral.

Amid razor-edge tension and mutual accusations, Menem managed to restore some confidence by assuring the nation that neither policies nor personnel would change. He sought to remind the public, and the speculators, that the indexes did not justify the rise in the dollar since the reforms are taking hold, inflation is way down, the deficit has plunged and productivity is improving.

Late last week, with the austral’s value plummeting, nerves were frayed and the 59-year-old Menem abandoned his habit of chatting with reporters several times a day.

But he took time to tell Gente magazine: “I think that Argentines are very sensitized. We have seen many years of frustrations, of failures. This has created a spiritual state that we are going to change with preaching, with example, and with firm and coherent steps as time passes.”

When the dollar began rising, the government at first tried to intervene with its central bank reserves, freshly rebuilt from near zero to about $2 billion. But after selling off about $600 million, without slowing the dollar’s rise, that policy was abandoned to avoid Alfonsin’s error of burning up all the reserves in a no-win fight against currency traders.

A nationwide strike by bus drivers, the backbone of Argentina’s transportation system, fueled fears that the unions might begin a series of walkouts to press for higher wages and jeopardize the price-stabilization program.

That has not materialized, and the bus strike was suspended without major concessions. But the jitters further encouraged a traditional flight into dollars by major companies determined to protect the value of their portfolios, which in turn prompted other savers and speculators to cash in their australs.

Central Bank President Javier Gonzalez Fraga said that the government’s attack on various interests--the cutbacks in subsidies, promotion schemes and tax breaks for big business--has angered powerful groups. Lowering inflation to 5% from 200% a month was easy, he said, compared to the challenge of lowering it from 5% to 1% a month without treading on more toes.

“If anyone thought that the transformation of the economy was going to be easy or happy, then that person was ignorant of the gravity of the crisis that the country is going through,” he said. “After three months in office, the honeymoon was already over.”

Gonzalez Fraga, who had been at odds with the government economic team on some points, re s igned late last week, adding yet another element of uncertainty to Argentina’s quest for stability.