Democracy was finally restored with the elections of October 1983, which were won by the radical, Raúl Alfonsín - the first time that the Peronist party had been defeated at the polls. Alfonsín, a lawyer much respected for his record on human rights, inherited a highly volatile and precarious political panorama. He faced two great challenges: the first, to attempt to build some sort of national concord after the bitter divisions of the 1970s; and the second, to restore a shattered economy, where inflation was running at over 400 percent and the foreign debt was over $40,000 million. In the midst of this, Alfonsín solved the politically sensitive border dispute with Chile over the three islands in the Beagle Channel - Picton, Nueva and Lennox - which had threatened to bring the two posturing military dictatorships to the brink of full-scale war in 1978. Papal arbitration had awarded the islands to Chile, but Alfonsín ensured, in 1984, that the mechanism for approving this was by public referendum.

The issue of prosecuting those responsible for crimes against humanity during the dictatorship proved an intractable one that Alfonsín, despite his skills of diplomatic compromise, had no chance of resolving to everyone's satisfaction. Alfonsín set up a National Commission on Disappeared People (CONADEP), under the presidency of the respected writer, Ernesto Sábato, to investigate the alleged atrocities. Their report, Nunca Más - or "Never Again" - documented 9000 cases of torture and disappearance, although it is generally accepted that the figure for the number of deaths during the Dirty War was actually closer to 30,000. In no uncertain terms, it recommended that those responsible be brought to trial. Those convicted in the first wave of trials after the report's initial findings included the reviled Videla, Viola, Galtieri, and Admiral Emilio Massera, one of the most despised figures of the junta. All were sentenced to life imprisonment.

Military sensibilities were offended by the proposed trials: defeat in the South Atlantic War had discredited them but, rather like a wounded dog, they could still pose considerable danger to the fragile, emergent democracy. While Alfonsín was willing to provoke a few growls, he felt he couldn't risk full confrontation. In 1986, he caved into militery pressure and passed "End Point" legislation ( Punto Final ), which put a final date for the submission of writs for human-rights crimes. However, in a window of two months, the courts were flooded with such writs, and, for the first time, the courts indicted officers who were still in active service. Several short-lived uprisings forced Alfonsín to pull back from pursuing widespread prosecutions. In 1987, the Law of Due Obedience ( Obediencia Debida ) was passed, granting an amnesty to all but the leaders for atrocities committed during the dictatorship. At a stroke, this reduced the number of people facing charges from 370 to less than 50. This incensed the victims relatives, who saw notorious torturers such as "The Angel of Death", Alfredo Astiz - the man who attained international notoriety through the brutal murder of the French nuns - escape prosecution.

As for the economy, Alfonsín managed to secure some respite from international creditors by restructuring the national debt and, in 1985, introducing a platform of stringent austerity measures, which were received with bitterness by many sectors of the population who had seen the restoration of democracy as a panacea for all their ills. These measures, named the Plan Austral in reference to the new currency that was to be introduced, were essential, however, with inflation running at well over a thousand percent annually. The government continued to be crippled by hyperinflation , however, even after the introduction of a second raft of belt-tightening measures, the Australito , in 1987. The inflationary crisis turned to meltdown in 1989, when the World Bank suspended all loans: many shops remained closed, preferring to keep their stock rather than selling it for a currency whose value disappeared before their eyes. In supermarkets, purchasers would have to listen to the tannoy to hear the latest prices, which would often change in the time it took to take an item from the shelf to the checkout. Elections were called in 1989, but, with severe civil unrest breaking out across the country, Alfonsín called a state of siege and stood down early, handing control to his elected successor, Carlos Saúl Menem . This was the first time since 1928 that power had transferred, after a free election, from one civilian government to another.