South America has been a special part of my life for four decades. I have lived many years in Brasil and Peru. I am married to an incredible lady from Argentina. I want to share South America with you.
At a gathering of hardline supporters of Argentina’s president, Luis D’Elía’s voice cracks with emotion as he celebrates Cristina Fernández’s refusal to pay the group of creditors branded the “vulture funds”.
“Much worse than the vultures abroad are the vultures within,” the social activist tells the crowd, referring to domestic opponents who have criticised Ms Fernandez’s decision not to pay the “holdout” creditors, which pushed Argentina into default for the eighth time in its history.
After the default, support for Ms Fernández swelled on the perception that she was standing up for Argentina’s interests against an enemy that, in Mr D’Elía’s eyes, threatens to undermine the country’s stability and represents the worst of “savage” capitalism.
But amid fears that the default will aggravate a deepening recession, with job losses and shop closures increasingly dominating headlines, the big question is how long the government can survive without cutting a deal with the holdouts, and so put an end to the default.
“If the government sees that there is no urgency [to reach a deal] because the economy is under control and there is no unrest on the streets, it could continue to postpone a deal for some time,” says Alejandro Catterberg, a director at Poliarquía, a local polling company, who points out that current problems pale in comparison to previous episodes in Argentina’s crisis-riddled economic history.
For now, the government’s confidence has been boosted by a series of positive opinion polls. According to one from Poliarquía this week, only 49 per cent of Argentines believe that the government should obey a New York judge’s order to pay the holdouts, a group of hedge funds who refused to accept restructured debt after the country’s 2001 default. That compares with 65 per cent at the time of the US Supreme Court’s rejection of Argentina’s appeal in June.
Nevertheless, the same poll showed that more than two-thirds of Argentines believe that a failure to reach a deal with the holdouts will bring economic gloom.
Analysts agree that should the market optimism begin to disappear – bond prices have remained high as investors bet that presidential elections in October 2015 will deliver a more market-friendly administration – the government will be forced to find a solution in order to avert a balance of payments crisis, with central bank reserves plumbing record lows.
Amid growing pessimism for the prospects of a deal between the holdouts and the private sector – many now expect the government to wait until the end of the year when a key clause in its bond contracts expires.
Although officials had argued that the so-called Rufo clause prevented the government from negotiating with the holdouts, since this would trigger a torrent of lawsuits from the rest of its bondholders, others argue that a deal would still be politically unacceptable.
But whether or not Ms Fernández could maintain support should the economy hit the buffers is in doubt. Her appeals to nationalist sentiment are already foundering, as the government unsuccessfully attempts to blame Barack Obama, the US president, for Argentina’s problems by failing to keep unruly judges under control.
“As the days go by, people are returning to their everyday concerns: crime, inflation, job security,” says Ricardo Rouvier, a political scientist in Buenos Aires.
Sergio Massa, Argentine opposition leader, has described such problems as the real “vultures within”.
“The president wants to complete her mandate in the best way possible so that she can rescue the idea of the so-called ‘victorious decade’,” Mr Rouvier says, referring to how Ms Fernández describes the period since 2003, when her predecessor and late husband Néstor Kirchner became president.
The slogan is based on the idea that the couple resurrected Argentina from the 2001-02 economic crisis and set the country on the path to lasting prosperity, even though Ms Fernandez is struggling to fight off “stagflation” as her presidency reaches an end in December 2015.
Indeed, the government has engineered a string of abrupt U-turns in the past, implementing policies that it had sworn never to consider – notably January’s devaluation and the deal to compensate Repsol, the Spanish oil company, after expropriating its assets in Argentina in 2012.
“In the end, the Kirchners are pragmatists. If they have to negotiate, they will negotiate,” says Mr Catterberg. “This is not about ideology, or who is good and who is bad. The government just needs a political victory.”