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Argentina's Cristina Fernandez, Empty Nestor
This was supposed to be Nestor Kirchner’s time. The former president of Argentina was supposed to be returned to office after backstopping his wife – current President Cristina Fernandez (-Kirchner) – for a four year term. Alas, God had other plans for Nestor, who died of a heart attack in October of 2010. With their original strategy of long-term power through successive hand-offs of the presidency now inoperative, Ms. Fernandez stood for election on her record… and on Mr. Kirchner’s ghost. The people of Argentina liked both their present condition and the memories of the man who is credited with it, re-electing Ms. Fernandez by historic margins. Despite a reputation for narcissism, she did not hog the credit, extolling her late husband as “the great founder of tonight’s victory”.
From this decisive victory of a leftish President, others – in the U.S. and elsewhere – might draw encouragement. Fernandez delivered to her people the one-two punch of “growth with equity”, to quote the Financial Times. Whether out of reasoned expectations or pipe dreams, “progressive” politicians believe that only a powerful government that kicks ass and takes (its enemies’) names can provide this desirable state of affairs. While the Argentina returns provide a serious shot of political adrenaline to the left-leaning parties of the world, they have yet to prove the enduring virtue of activist government. In fact, like many re-elected leaders who have enjoyed the euphoria of a landslide vote of confidence, the seeds of disgrace may already be sprouting.
Nestor Kirchner assumed the presidency of Argentina in 2003, following a decade of economic and political unrest. With Argentina’s prosperity ravaged by hyperinflation, successive prior administrations imposed austerity and privatization measures that, while necessary, were poorly received by the populace. Though foreign investment increased and price rises were tamed, the presidents of the 1990s were tainted with allegations of corruption and favoritism. The successful suppression of inflation also had a stifling effect on exports, thereby increasing indebtedness and further exacerbating public anger over joblessness. Violent rioting was commonplace by the turn of the century, as were provisional governments. This was the atmosphere that gave rise to Mr. Kirchner, a provincial governor and Peronist.
Upon taking office, Mr. Kirchner raised the pay of government workers, sweetened retirement benefits and increased the minimum wage. Moreover, he increased taxes on some businesses he did not like and raised the specter of nationalization for others. He also let judges, law enforcement and his military know who was boss by engineering resignations and prosecuting officers from past dictatorships. Most brazenly, he told all of Argentina’s creditors to go to hell – they were not going to get a cent. Defaulting on debt for three years, Kirchner then convinced Argentina’s lien holders that, if they wanted to see any money, they would renegotiate the debt on terms favorable to Kirchner. While such measures show a lot of brass, however, they do not explain the improved quality of life for his country. They fail to account for the “growth with equity”.
Rather than run for a second consecutive term, Nestor Kirchner stood by his wife, then a senator, as she sought to keep the presidency in the family. Her victory in 2007 assured the continuation of central government heavy-handedness by means of their Justicialist Party (PJ), founded by Juan Peron in 1945. To be fair, the PJ is “centrist” within a political system heavily weighted toward the left. Yet the policies enacted by Kirchner and Fernandez have received plaudits from socialist dictators like Hugo Chavez of Venezuela.
The Seeds of Her Success
In short, Ms. Fernandez has fueled rapid growth (with equity?) in the large population centers by sucking the wealth out of the least populated areas, which happen to be the most economically productive regions. Argentina has benefited immeasurably from its agricultural sector. Demand for soybeans, in particular, by China, Brazil and other protein-hungry nations accounted for 17.3 billion dollars (US) in 2010. The president has done all she could to seize the lion’s share of farmers’ industry. In 2008, she hit farm exports with a sliding scale tax regime, increasing the soybean duties from 27 to 40 percent. Furthermore, she sought to tax farmers on sales rather than profits, this in a time of soaring inflation (yes, the Kirchners brought high inflation back) and climbing input costs. Farmer protests broke out in response to her dictates, so Cristina Fernandez de Kirchner decided to throw the whole issue into the lap of the seldom-employed Congress, denouncing farmers – Argentina’s bread and butter – as idle rich landowners who act only from greed. She, of course, would not be the only world leader to denounce the very people the fruits of whose labor she exploits.
Second Term Woes
Maximizing that exploitation, and benefitting from favorable world markets, have been key to Ms. Fernandez victory. She is able to rob from the hard-working and give to the demanding, which seem to pay off handsomely in Argentine politics…for now.
Inflation is back with a vengeance, scaring off 10 billion from investors who remember Nestor's earlier stiffing. A persistently high crime rate has settled in, among regular criminals and the so-called respectable. Earlier this year, impatient commuters, waiting for their delayed train, decided to burn cars on the track and to loot the ticket booths of their cash. The culture of entitlement always gives rise to the right not to be inconvenienced. For the record, crime has been an issue before the Kirchners came along, but it now tops the economy among issues of civic concern.
Time will tell if President Fernandez has bitten off more than her country can chew. The suspicion is that her best days have gone the way of Nestor.