The votes may not have been cast but the outcome looks inevitable: Cristina Fernández de Kirchner will be re-elected in Argentina’s presidential elections on October 23.
It’s a conclusion that even the opposition seem to believe is inescapable. “There is nobody who thinks that this government is not going to win,” says Julio Burdman, a Buenos Aires political analyst. “Even the opposition candidates think so.”
Her main challenger, Ricardo Alfonsín, son of the late president Raúl Alfonsín, has repeatedly admitted this – even on the campaign trail – making for an odd election season in Argentina.
The results of the country’s first general primary elections, held on August 14, gave her an impressive lead over the rest of the field. Figures from the National Electoral Council show Fernández de Kirchner won 50.2% of the votes, Alfonsín 12.2%, Eduardo Duhalde 12.1%, Hermes Binner 10.1%, and Elisa Carrió with 3.2%.
Obtaining at least 40% with at least a 10-point margin of victory over the runner-up would allow Fernández de Kirchner to avoid a run-off.
And it does not appear that any curveballs could deflect the Argentine leader’s victory in the coming weeks. Burdman, who is also director of political science and international relations at the University of Belgrano, tells Emerging Markets: “Nobody sees a possible scenario or event that could change the expected outcome.”
Even a financial crisis, for example, caused by a deteriorating outlook for the eurozone, he says, “only reinforces the government’s strength and position”. Indeed, Burdman says that, were another crisis to unfold, “there is nobody in the opposition now that would be able to politically capitalize on it.”
This is a remarkable turn of events for Argentina’s president, who hovered in the 30s in polls for much of her first term and who had – just two years ago – even lost the congressional elections in the key province of Buenos Aires.
But Argentines appear satisfied with the economy and her overall administration, and in particular the country’s sustained recovery from its crisis in 2001.
TURNAROUND
Indeed, for all the government’s well-documented shortcomings, this is a very different country compared to what it was 10 years ago.
From a macroeconomic standpoint, the country appears well-positioned. Marina Dal Poggetto, an Argentine economist and director of Estudio Bein & Asociados, forecasts a growth rate of 7% for 2011 and in an optimistic scenario 4.5% in 2012. Central bank reserves are down, but she still expects them to finish the year at a robust $47 billion.
Sebastian Briozzo, director of the sovereign ratings group at Standard and Poor’s, expects 2011 to produce 6.5% growth and also estimates 4.5% for 2012.
Debt also continues to fall. Briozzo puts it at 40% of GDP but says that when taking out what is held by the social security administration, ANSES, the figure falls to about 25%. Either way it is well below the US and many European countries’ debt-to-GDP ratios.
However, pressure is on to control spending and for once to rein in inflation, because the trade and fiscal surpluses that Argentina has depended on for many years are dwindling. Dal Poggetto pegs the trade surplus at 0.1% of GDP in 2011, a fall from 0.9% of GDP in 2010.
If spending is not tightened, and in particular the government cannot control annual salary increases, Dal Poggetto says a devaluation could occur. If that happened, she pegs 2012 growth at just 1.2% with a peso’s nominal exchange rate at Ps5.55/$ by the end of 2012.
There are also other less quantitative changes compared to a decade ago. There are no longer daily protests outside the economy ministry, banks are not just open but plentiful, and ATMs even dispense cash. Extreme poverty has fallen, and factories have re-opened; many are now owned by workers.
CHALLENGES TO COME
But challenges remain. For one, the country continues to be shut out of international debt markets. Briozzo says liability management operations remain a relevant risk for Argentina given the government’s restricted access to international capital markets.
As to whether the incoming administration will change its stance from open indifference to foreign investors, the signs are not overly optimistic.
In August, the country’s economy minister – now Fernández de Kirchner’s vice-presidential candidate – Amado Boudou, said that “only for sports or infrastructure projects, works that would go on for 50 years, could we issue debt, but in no way [would it be raised] for paying other debt or for normal operating costs.”
One of the first things Fernández de Kirchner did after her August win was to send a bill to Congress that would restrict foreign ownership of land. This has been a long-standing issue, but the prospect of increased liquidity in the US and Europe looking for alternate markets to invest has prompted concern from the government.
As to whether Argentina can continue to avoid the international markets, many have doubts. Alberto Bernal, head of research and strategy with Bulltick Capital, says, “Argentina’s strategy of using reserves to pay back debt is a finite one. I expect Argentina to acknowledge that fact by issuing debt in 2012 to finance a portion of the shortfall.” He thinks part of that issuance would occur outside of Argentina.
At the same time, he says that barring economic crises, “Argentina could, in theory, survive about three years, remaining current on the debt, without having to go to the markets for financing.”