The expected ascension of Senator Cristina Fernandez de Kirchner
to the Argentine presidency in the October 28 elections-succeeding
her husband, Nestor Kirchner-is unlikely to improve relations
between Argentina and the United States. Although her campaign
pronouncements convey an image of moderation in foreign policy
matters, Cristina Fernandez would most likely continue the leftward
drift of Argentina and its cozy relationship with Venezuelan
dictator-President Hugo Chávez. Chávez has sent
billions of dollars of Venezuela's oil wealth to bail out
Argentina's debts; Argentina's credit rating has yet to recover
from the major default the government declared in 2002.
Barring an unexpected shift in Fernandez's thinking or tactics,
there is little hope for the economic liberalization so desperately
needed in the Argentine economy. Once the showcase of Latin
America, the economy has fallen further and further behind as a
result of bad policies. The Bush Administration, with few good
options for direct engagement, will need to rely on building strong
relations with Argentina's neighbors and other Latin American
countries that are still resistant to Chavista populist appeal. As
an important step, Congress should approve pending free trade
agreements with Peru, Colombia, and Panama.
Sailing to an Easy Win?
The buzz in South America is that Senator Fernandez will succeed
her husband, Peronist and leftist Nestor Kirchner. According to the
Buenos Aires newspaper La Nacion, nearly 40 percent of
Argentines support Fernandez and her running mate, Julio Cobos, who
is Governor of Mendoza province. Her closest competitor, leftist
Elisa Carrio of the Civic Coalition, is in second place with 10
percent. Former Minister of Economy Roberto Lavagna has garnered
the support of only 8 percent of likely voters for his party, the
Una Nacio Avanzada (UNA). Former Minister of Defense (and later,
Economy) Ricardo Lopez Murphy, a University of Chicago-trained
economist and the leader of the free-market-supporting Recrear
party, clinched 16 percent of the vote in the 2003 presidential
election. This year, he created a new center-right
coalition called Republican Proposal (PRO), but his second run for
the presidency has attracted only 2 percent of support to date. The
22 percent of respondents who did not say which candidate would get
their support on October 28 may diminish the predicted Fernandez
runaway but are not likely to change the expected outcome.
Peronist Machine Dominates Electoral
The general election in Argentina is a direct vote election with
compulsory participation from Argentines between the ages of 18 and
70. If Fernandez receives a first-round vote of more than 45
percent (or 40 percent with the runner-up at least 10 percentage
points behind her), then there will be no run-off, and Fernandez
The constitutional "reform" of 1994 concocted by the
long-dominant Peronist Party under then-President Carlos Menem
created a scheme whereby the ruling party is assured of about 35
percent of the votes and therefore is on the brink of winning from
the start. Tactics like these have allowed the
Peronists to maintain a virtual stranglehold on political power
since the days of the late dictator Juan Peron in the 1950s.
Ricardo Lopez Murphy recently noted that, in the past 50 years,
none of the handful of non-Peronists who have managed to become
President has been permitted to complete a term of office.
Senator Fernandez stresses her record of leadership as a
legislator, but critics wonder how her parliamentary style will
translate under the pressures of the presidency. Her insistence on
being called "Cristina" represents a desire to seem like one of the
masses and is a weak attempt to counter her designer wardrobe. The
campaign portrays her as a pluralist and an internationalist; but
when it comes to policy, Fernandez's strategy has largely been to
avoid taking clear stances and to postpone clarifications,
presumably until after the elections. However, a Fernandez election
would bring no radical departures from the policies of her husband,
say sources, and would maintain an interventionist attitude toward
Nestor Will Remain Powerful
President Nestor Kirchner came to power in 2003 with only 22
percent of the vote after his opponent backed out of the run-off. In the
years since, however, he has become the most powerful president
since Juan Peron. Kirchner inherited a massive international
debt, a dismal credit rating, and his predecessor's disdain for the
International Monetary Fund (IMF). He was helped, however, by
rising commodity prices that allowed him to avoid making the
politically painful reforms needed for Argentina's long-term
prosperity. President Kirchner also gained popularity early in his
term by reforming the Supreme Court, increasing wages for lowest
earners, and firing off anti-IMF rhetoric, but that popularity was
beginning to wane by 2005. Kirchner policies then seemed to morph
into the Peronist party's business-as-usual agenda of economic
tightening, including the imposition of price controls.
Recently, however, he has seen his popularity rise again, thanks in
large part to his partnership with Hugo Chávez.
The Chavista Factor
Relations with the IMF, the Paris Club, and international
commercial banks have been tenuous since Argentina defaulted on
part of its external debt in 2002-at over USD$125 billion, it
remains the largest default in history. Many individuals in Europe
and elsewhere who had purchased Argentine government bonds lost
their life savings. In response, Kirchner turned to Cuba and
oil-rich Venezuela for help, forming a strategic alliance through
which Argentina could easily access credit and cheaper oil. In
January 2006, Argentina paid off its entire $9.5 billion debt to
the IMF in one fell swoop. Many observers say that Hugo
Chávez had a hand in the transaction. Kirchner has been
seeking permission to restructure the $6.3 billion debt it owes to
the Paris Club, representing loans from foreign governments,
without going through the IMF. As of March 2007, Kirchner
was steadfastly holding to his refusal to have the restructuring
conditioned by the IMF, but murmurs from inside the Argentine
government suggest a willingness to reestablish negotiations when
Dominique Strauss-Kahn succeeds Spaniard Rodrigo de Rato as
Managing Director of the IMF in November 2007.
Barring a substantial increase in international support,
Argentina's reliance on Chávez is unlikely to diminish.
Successful talks with the Paris Club and the IMF, however, could
gain Fernandez some ability to distance herself from Chávez.
There are clues that Fernandez is open to maintaining ties with
Chávez, but at a speech in Caracas she displayed a
willingness to openly disagree with him. In what may have been a
knock on the Venezuelan leader, Fernandez said, "Each and every one
of us who has the responsibility of being part of an elected
institution in Latin America should not only raise our voices but
act in a concrete way against any sign or glimpse of
anti-Semitism." Buenos Aires has the largest population
of Jews of any city in South America.
What the United States Should Do
U.S. policymakers should do the following:
- The Bush Administration should continue efforts to improve U.S.
relations with countries that surround Venezuela and Argentina,
while making it clear that the United States is willing to work
constructively with those two countries if they renounce their
anti-U.S. rhetoric and behavior.
- The Bush Administration should begin negotiations for new free
trade agreements with Brazil, Uruguay, and Paraguay and should
continue to pressure leaders in Bolivia and Ecuador to back away
from the destructive policies of Hugo Chávez.
- Congress should quickly approve the three pending trade
promotion agreements with Panama, Peru, and Colombia.
If she becomes president of Argentina, as expected, Senator
Fernandez is unlikely to mend relations with the United States.
Given the biased electoral process, the likely influence of her
husband in a Fernandez administration, and the lack of policy
specifics in her campaign, Cristina Fernandez will likely continue
Argentina's dependence on socialist Venezuela rather than embrace
free market reforms.
The Bush Administration should build strong relations with other
Latin American countries, first and foremost by urging Congress to
approve pending trade promotion agreements with Peru, Colombia, and
James M. Roberts
is Research Fellow for Economic Freedom and Growth in the Center
for International Trade and Economics at The Heritage Foundation.
Research Assistant Caroline Walsh contributed to this
Ricardo Lopez Murphy, Speech Before Fifth International Economics
Convention, University of the Applied Sciences, Lima, Peru, October
13, 2007 (from author's notes).