By Antonio Guerrero
Kirchner: May have to rein in her populist agenda
When Cristina Kirchner won Argentina’s 2007 presidential election, she was taking over the office held since 2003 by her husband, Nestor Kirchner. Observers speculated the couple could alternate power for years to come. However, the country’s June elections may have upset the couple’s dream. The ruling Peronist party lost control of both congressional houses, raising the possibility that the Kirchners may have to pull back from their populist agenda in order to cling to the presidency. That prospect unleashed a market rally.
With the administration facing limited financing sources, coupled with increased capital flight, there are mounting concerns over its ability to service the nation’s debt.
Venezuelan president Hugo Chávez has almost single-handedly kept the Argentine economy afloat by purchasing several billion dollars worth of sovereign paper, as the Argentine government remains excluded from international capital markets as a result of its $100 billion debt default in 2001. However, lower oil prices have constricted Chávez’s supply of petrodollars. Fitch Ratings says Argentina may face repayment problems as early as first-half 2010. The economy, which grew 6.8% last year, is expected to contract by 3% this year.
The administration will have to seek consensus with opposition forces in congress, ending rubber-stamp approval for its policies. Market participants were cheered by the possibility that the government may now seek an IMF accord, clear its defaulted Paris Club debt and reach an agreement with $20 billion in holdouts from the 2001 default’s workout. However, with the new congress not seated until December, the Kirchners still have several months to consider their options.
In a particularly harsh political blow, Nestor Kirchner lost a bid for a congressional seat for the province of Buenos
Aires in the June elections. The winner in this case was not an opponent. Instead, Francisco de Narváez is a dissident from within the Kirchners’ own Peronist party. The winds of change are sweeping through the Pampas.