Pages

Tuesday, April 1, 2014

President Cristina Fernandez Faces The Political Fight Of Her life




March 31, 2014 6:04 pm

Argentina’s Fernández faces mother of political fights

Cristina Fernández confided in a recent televised address that as well as being Argentina’s president she liked to think of herself as “the mother” of the nation.
Although the 61-year-old indulged a handful of supporters by posing for pictures afterwards, many Argentines were incensed by the speech, in which Ms Fernández denied there would be a big jump in utility bills even though some are set to rise by as much as five times after hefty subsidy cuts were announced hours earlier.

More

ON THIS TOPIC

IN AMERICAS POLITICS & POLICY

Despite her maternal instincts, Ms Fernández’s popularity has dived since her 2011 re-election and could drop further as the leftist leader scrambles to avoid impending economic troubles by implementing the sorts of orthodox market reforms her government had long resisted.
The government’s series of U-turns on economic policy – which have also included a devaluation, therevamping of the consumer price index and the settling of long-running investor disputes – have led some to ask whether there has been a change of heart at the top of Argentina’s government.
Last Thursday, the cash-strapped government announced it was cutting subsidies on natural gas and water by a fifth, thus unwinding one of the cornerstones of government policy during what Ms Fernández calls the “victorious decade” since her husband Néstor Kirchner took power after Argentina’s 2001-02 economic crisis.
On the same day, the government revised its growth estimate for 2013 from 4.9 per cent down to 3 per cent, in line with private sector estimates, just in time for a deadline set by the International Monetary Fund for Argentina to improve its long-questioned statistics. In doing so, the administration saved itself a $3.5bn payout to holders of GDP warrants, which would only have been triggered if growth had exceeded 3.2 per cent.
The attempt to pursue more orthodox economic policies has helped Argentina’s bonds to rally strongly.
However, José Octavio Bordón, Argentina’s ambassador in the US during the administration of Mr Kirchner, said there has been “no ideological change” in government. “This is just an objective response to the fact that the government has run out of money,” he said.
Mr Bordón agreed the subsidies had been necessary to stimulate consumption when the Argentine economy collapsed after the 2002 default, but said these were kept in place for too long as it bounced back.
High commodity prices drove average annual growth of 7.2 per cent from 2003 to 2011. Yet the subsidies are now being removed just as another recession looms.
Carlos Germano, a political analyst, said: “There is no clear policy strategy. They [the government] are just going around putting out fires, fixing problems as they arise without thinking too much about the long-term consequences”. He expects further subsidy cuts.
“The president’s popularity is going to take a real beating. This is seriously weakening her leadership,” he added.
Foreign policy, which is driven by a desperate need to attract investment since Argentina has been locked out of the international capital markets since the 2001 default, has also been haphazard.
On a trip to Europe last month, Ms Fernández sought support from François Hollande, French president, in negotiations with the Paris Club of creditor nations that Argentina owes some $10bn.
But she also raised hackles among western leaders when she received a telephone call from Vladimir Putin, Russia’s president, to thank her for her position on the crisis in Crimea. Ms Fernández had criticised the “double standards” of UK and US leaders, who supported last year’s referendum in the Falklands Islands, in which 99.8 per cent of inhabitants voted to remain a British territory, while rejecting the recent referendum in Crimea.
Nevertheless, Argentina’s fitful efforts to mend poor relations with the international community bore fruit recently, when France, Brazil and Mexico declared their support for Argentina to the US Supreme Court in a dispute with so-called “holdout” creditors, who rejected restructured debt after the 2001 default and are pushing to be paid in full.
Ms Fernández’s success in tackling the problems assailing her government, which include having one of the highest inflation rates in the world to alarmingly low levels of foreign exchange reserves, will determine her political future.
Mr Bordón, himself a former presidential candidate, said Ms Fernández’s goal was to leave power with the best image possible when her term concludes at the end of 2015. The president’s approval rating is languishing at about 30 per cent.
He suggested she may be aiming to mirror the performance of Michelle Bachelet, president of Chile, who recently returned to power after a four-year hiatus.
“Those who think that the president is thinking of leaving [politics] are mistaken,” said Mr Bordón.
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.