With presidential elections scheduled in Argentina later this year, few major changes are likely in the political or economic arenas.
President Cristina Fernández de Kirchner has yet to say that she will stand for re-election. Her late husband and predecessor, Nestor Kirchner, was to have swapped positions with her until his sudden death last year. But now she is widely expected to seek a second term – there are no other viable candidates within her ruling party and the polls show her likely to win, primarily due to the strength of economic growth.
Argentine electoral law requires a candidate to take 40% of the vote with a difference of at least 10 percentage points to win outright in the first round. So there is the distinct possibility of one of the Kirchners running Argentina for 12 consecutive years without ever winning a majority of votes.
The ruling party has made an impressive comeback from just two years ago when it suffered a humiliating defeat in the mid-term legislative elections. Then, Nestor Kirchner was defeated by businessman Francisco de Narváez in the contest in the province of Buenos Aires.
Analysts say there are two major reasons for the Kirchners’ resurgence.
First, following the 2009 elections – which deprived Fernández de Kirchner of an outright majority in Congress for the first time – the opposition has shown itself incapable of forming a cohesive group or governing.
Second, the death of Kirchner galvanized many of his previously silent supporters. The turnout for the funeral was enormous and surprised many. In particular, a new block of potential young voters and activists emerged. One group called La Cámpora was formed some years ago by Kirchner’s son Máximo but now has taken on the responsibility of continuing his legacy.
ECONOMIC ADVANTAGE
One advantage Fernández de Kirchner will have in any electoral contest is that Argentina’s macroeconomic conditions are “extremely favourable”, says Miguel Kiguel, a director of consultancy EconViews. He says the high prices of soya and other commodities, the high liquidity in the world given the low interest rate climate, and the strength of Brazil’s economy – one of Argentina’s most important trading partners – means that “Argentina basically has growth guaranteed.”
Other economists also expect a solid year in Argentina. Dante Sica, head of Abeceb, a Buenos Aires consultancy, tells Emerging Markets that he forecasts GDP growth of 5.5–6.0% this year.
Argentina’s financial sector also appears to be stable. Even Argentina’s biggest problem, inflation, “does not represent a credit risk as it does not affect Argentina’s willingness or capacity to pay”, Kiguel says.
Economically, however, the government would be careful to avoid complacency. In addition to inflation, Argentina remains highly uncompetitive. Eight years after the Kirchner era began, import restrictions and price controls are still commonplace and on occasion have increased. The economy is too dependent on consumption rather than investment.
Nevertheless, Argentina is in good enough shape that the government can likely continue its antipathy towards international investors.
Fernández de Kirchner previously said she was waiting for interest rates to enter single digits before the country would issue new bonds. But that has already happened. Kiguel says that, “Argentina could have issued money at 7.5–8% interest, but it did not. So we really do not know what it is waiting for.”
Inflation has traditionally been problematic for the Argentine economy but does not appear to be a major political issue. The opposition has campaigned on the issue for several years now without gaining much benefit.
This is for a couple of reasons. First, Fernández de Kirchner started a subsidy programme to the poor, Asignación por Hijo, which has proven popular. Second, virtually nobody pays attention to Indec’s inflation figures. The trade unions, for example, use their own numbers when negotiating their yearly wage increases.
Keeping these sectors content will be one of the main challenges to Fernández de Kirchner. The ruling party lost a lot of support among the poor in the 2009 elections, particularly in the gritty conurbano of Buenos Aires province.
Another challenge will be to manage Argentina’s powerful trade unions, which remain able to cripple governments. Nestor Kirchner, who was skilful in managing them, will be missed. Indeed, Hugo Moyano, the head of the powerful union CGT, told Agustín Rossi, the head of the Kirchner block of legislators in the House of Deputies, that if Nestor were around, a recent arrest of an important union leader on murder charges would never have happened. The arrest set off days of protests and strikes in Argentina in February.
CANDIDATES
Among the opposition candidates, radical party legislator Ricardo Alfonsín, son of the late former president Raul Alfonsín (whose government was, incidentally, brought down in large part by CGT strikes) is a leading contender to oppose Fernández de Kirchner. He is likely to pair up with Santa Fe governor Hermes Binner.
Buenos Aires mayor Mauricio Macri is another candidate. He was once the most feared opposition leader by Nestor Kirchner. But Macri has been an ineffective and uninspiring mayor.