Briefing on Argentina

- June 4th 2007

Argentina’s president, Néstor Kirchner, celebrates four years in office on May 25th, amid an ongoing economic recovery and approval ratings (more than 60%) unrivalled by any Argentinian head of state at this stage of his presidency. Yet, just five months before new elections, he has still not announced whether he will run for re-election. Instead, speculation continues as to whether the president or his wife will represent the governing Partido Justicialista (PJ) at polling day.

Either Mr Kirchner or Cristina Fernández de Kirchner, a senator representing Buenos Aires province, would be well positioned to win. They are far more popular than the candidates of the fractured opposition, even Roberto Lavagna, who as Mr Kirchner’s first economy minister (until being sacked in 2005) is credited with having pulled Argentina out of its 2001-02 economic and financial crisis. But so far the Kirchners have kept the country guessing as to who will actually ran.


On May 24th, however, on the eve of both his anniversary and a national holiday, Mr Kirchner seemed to be publicly boosting his wife, extolling her virtues as a statesman and suggesting she had all the experience necessary to become the candidate of her party. This is being interpreted as a strong sign that Mr Kirchner will bow out in favour of his partner. He made his comments in the capital of the province of Mendoza, where he was preparing to celebrate the May 25th holiday in grand style with the governor, Julio Cobos. This is fuelling speculation that Mr Cobos (among the governors from the opposition Partido Radical who are allied with the government) might be a possible running mate on a multiparty “consensus” ticket.


Eight more years?


Critics of a Cristina candidacy fear that this arrangement is calculated to enable the Kirchners to alternate in power for many more years: Néstor would be able to run for office again in 2011, potentially perpetuating the couple in power through 2015. Some opposition figures would prefer to see Mr Kirchner run again this year, as a second term for him would probably be more difficult than his first, and his appeal, and that of his party, might consequently dissipate.


There is little doubt that either of the Kirchners could win the election handily. Economic growth is strong, at more than 8% for the fifth consecutive year, and the opposition is feeble and in disarray.


However, the political scene is not without its problems. There are signs of growing social discontent in some areas, evidenced by recent strikes (including one by teachers in Mr Kirchner’s home province) and rioting this month because of a badly functioning commuter railroad line in the Buenos Aires area. A corruption scandal also recently exploded, involving illegal kickbacks from 12 companies participating in a government-funded project to extend a natural-gas pipeline in the country. Moreover, the government has had limited success is taming inflation—despite an array of interventionist measures—and this remains its number-one economic challenge.


Fresh face, same policies


A Cristina candidacy might take the heat off the administration in all of these areas. Deemed to be more moderate than her husband, she might also be able to build bridges with disaffected members of the middle class, and to mend relations with foreign creditors and investors still angry about the government’s heavy-handed policies towards “hold-out” foreign creditors (who refused to participate in a draconian restructuring deal) and foreign-owned utilities (suffering because of years of frozen tariffs). Relations with the US, which have been cool under Mr Kirchner, might also improve.


These, however, would be changes more of style than of substance. While Mrs Kirchner would provide a fresh face, there would be little difference between the two in terms of policy or determination to concentrate power. Either would continue to espouse an interventionist role for the state in the economy, in contrast with the free-market policies of the 1990s.


Further, political challenges to the Kirchners probably would be limited in the next presidential term, at least initially, whoever wins the election. Either would enjoy a comfortable majority in Congress, since voting for congressional candidates will be distributed in line with whom they support for the presidency. Mr Kirchner has also successfully cultivated the backing of 17 of 24 governors of provincial districts and he (or she) is likely to enjoy a similar level of support after the October 28th elections. This would serve to bolster governability until the mid-term congressional elections of October 2009.


A sharper-than-expected slowdown in the economy or an inflationary spiral would hit the Kirchner’s popularity, weakening their position, but the opposition’s ability to capitalise will be constrained by its disunity. At the same time, another Kirchner term will heighten concerns about transparency and the independence of institutions, given Mr Kirchner’s tendency to concentrate power in the presidency. This isn’t likely to change, either.