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After a train ploughed into Once station in Buenos Aires at high speed last weekend injuring 99 people – the third serious accident on that line in two years – pundits were quick to draw parallels between the deplorable state of Argentina’s railways and the country at large.
President Cristina Fernández’s re-election ambitions could come to a sudden end in midterm legislative polls on Sunday, which her party is widely expected to lose. Many also fear that a disaster may be in store if Argentina does not resolve a host of economic problems.
With only two years left in power for the 60-year-old leader, who a spokesman says is “very well” after an October 8 operation but will not return to public life until after the vote, some are predicting that Ms Fernández will be replaced by a more market-friendly leader after presidential elections in 2015.
“The battle for succession has already begun,” says Luis Tonelli, director of political sciences at the University of Buenos Aires.
He said the poor result for Ms Fernández’s candidates in primary elections in August made it clear that she would be unable to gain the two-thirds majority that she needs on Sunday to amend the constitution and seek a third term as president. The day after that election she suffered a head injury that later required surgery.
Much attention will centre on the key race in the province of Buenos Aires, the largest electoral district with 37 per cent of the population, where local pollster Poliarquia expects Sergio Massa to beat the ruling party candidate by about 8 percentage points.
A convincing victory would leave Mr Massa, the dissident mayor of Tigre who was formerly Ms Fernández’s cabinet chief, in a strong position to compete for the presidency in 2015, capitalising on discontent with the government while credibly claiming to support its more popular policies on social justice.
Ms Fernández’s candidates are also expected to do badly in the country’s largest cities, where the remainder of voters are concentrated. Pollsters say the ruling party could win less than a third of the national vote and lose its majority in congress.
The convalescent president’s approval ratings edged up from about 35 per cent before her operation to 40 per cent now, according to pollster Graciela Römer. But that is still much lower than the 54 per cent of votes with which she was re-elected to the presidency in 2011. And this tide of sympathy appears not to have rubbed off on her party’s candidates, who are struggling against widespread public dissatisfaction with insecurity, endemic corruption, spiralling prices, and collapsing public services.
“The midterm elections constitute a possible inflection point in the political cycle, although there are two more years before presidential elections lay the stage for a shift in the course of broader economic policy,” says Vladimir Werning, an economist at JPMorgan.
He says that a build-up of “imbalances” in the economy – such as stubbornly high inflation, an increasingly overvalued currency and rapidly disappearing foreign exchange reserves at a rate of about $800m a month – has raised market expectations that the next government will confront the need to make economic adjustments. “It’s simply not possible to sustain the level of reserve drainage beyond another two years at the current rate,” said Mr Werner, pointing out that reserves have now dropped below $35bn.
When the value of the so-called “blue” dollar on the black market broke through the 10-peso barrier this week, compared with the official rate of 5.9 pesos, the head of the stock exchange, Alejandro Vanoli, likened the illegal blue dollar to cocaine. “Good point. Prohibition makes them more attractive and expensive,” quipped economist Felipe Murolo on Twitter.
The big question now is how Ms Fernández will react when she returns to public life, effectively as a lame duck president. But that will not be until at least November 8, as she has to observe doctors’ orders to rest completely for at least 30 days, the presidential spokesman said on Wednesday.
“These elections are paradoxical: there is much less uncertainty about what the results will be than how the president will react on her return,” says Ms Römer, the pollster.
Although some fear Ms Fernández may radicalise, Ms Römer argues that she is more likely to moderate her much-touted “model” in her twilight years, driven by urgent economic problems and pressure from Peronist leaders who want to ensure a smooth political transition.
Indeed, there are already signs of moderation with the government’s decision to settle arbitration claims for $677m at the World Bank investment disputes tribunal, ICSID, which it had been putting off for years in spite of pressures from the US. That deal is expected to release $3bn of World Bank loans, mostly to repay old credits. Also, it promises that a new inflation index is in the offing after continued pressure from the International Monetary Fund to revamp its long-questioned statistics.
Still, Eduardo Levy Yeyati, who runs the Buenos Aires-based economic consultancy Elypsis, doubts how far the government can, or will, go. “There will mostly be damage limitation measures that will not resolve underlying distortions, but will nevertheless allow the government to make it more or less intact to 2015 without any great shocks,” he says.
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