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By Jeremy Main

(FORTUNE Magazine) – -- The economic chaos engulfing Argentina underscores changes sweeping through South America that in some ways are as profound as those of Eastern Europe. On the plus side, South America is moving toward more democracy and free enterprise. For the first time, all the major countries either have installed or are soon likely to install democratically elected Presidents. Even more surprising, these new and future Presidents all profess faith in free-market economies. On the minus side, it is unlikely they will attack the fundamental problems of corrupt bureaucracies, inefficient state enterprises, and swollen budgets with the same toughness that Mexico's President Carlos Salinas, 41, has shown FORTUNE, January 15). Here's a rundown:

-- Chile is the closest to a success story in South America. Under the authoritarian rule of General Augusto Pinochet, 74, who ousted Marxist President Salvador Allende in 1973, the country has regained economic and political sanity. The poor haven't yet benefited, but exports are strong, the GNP is growing briskly, and foreign debts are being reduced. Now comes democracy. Newly elected President Patricio Aylwin, 71, takes over in March. Aylwin doesn't want to go back to the old Allende populism. And his prospective economics minister, Alejandro Foxley, who once served in Allende's cabinet, now argues that Chile must follow the balanced-budget, free-market doctrine he once attacked.

-- Argentina's new President, Carlos Menem, 59, has failed utterly to keep his promise to privatize government enterprises. Since his July inauguration, Menem has had three economy ministers, three central bank presidents, and four stabilization plans. Interest rates recently hit 600% per month and the austral lost value so fast there was talk of making the U.S. dollar the official currency.

-- In Brazil, the first popularly elected President in 29 years -- Fernando Collor, 40, rich, handsome, and business-oriented -- could easily face Menem- like problems when he comes to office March 15. His ineffectual predecessor, Jose Sarney, 69, is leaving him with an annual rate of inflation of over 1,700%. Collor has held several meetings with tough-minded economists, most recently in a private session in Rome, and perhaps is preparing the kind of dramatic crackdown that got Mexico's Salinas off to a good start. Collor won't have long to show results before congressional elections in October. His effectiveness will be of special interest to U.S. companies such as Dow, Du Pont, Ford, GM, Hewlett-Packard, and IBM. They have poured nearly $12 billion into Brazil's hothouse economy.

-- Peru still has a populist President, Alan Garcia, 40. But novelist Mario Vargas Llosa, 63, a believer in free markets, looks like a winner in April's elections. His economists are leading him to the kind of austerity and discipline that helped bring stability, if not yet prosperity, to neighboring Bolivia. But for Peru, which is on the brink of civil war, austerity might be intolerable. South America has gone further than Eastern Europe in achieving democracy, but its economic problems are even more forbidding. This new crop of Presidents must bring budgets and currencies under control and create new market systems that work for everybody, not just for the charming blue bloods who have kept all the good things to themselves since colonial days. If they fail, they could give democracy a bad name. Neither the masses of poor nor the grumbling generals will allow them much time.