No doubt about it: the first hundred days in office of Argentina's new president, Néstor Kirchner, have concluded on a note of sweet success. As a former governor of one of the country's least populous provinces, Kirchner began with a small base of support for national politics. He won the presidency with a mere 20 percent of the popular vote (thanks to the decision of former president Carlos Menem to withdraw rather than face a runoff which would have given Kirchner a firm mandate) and was virtually unknown to most Argentines until several months ago. Nevertheless, he has suddenly become wildly popular--in some polls registering nearly 80 percent approval ratings. This figure sets a record for all Argentine presidencies for which polling exists; by way of comparison, at the same point in his term begun in 1999 former president Fernando de la Rúa had a mere 47 percent rating. As if to underscore the current president's standing, in the first electoral contests held since his inauguration on September 14, pro-Kirchner candidates won large majorities in by-elections in the all-important province of Buenos Aires and in the race for mayor in the federal capital (the city of Buenos Aires).

Kirchner's surge of popularity is due largely to an assertive, even confrontational personality, and a sure sense of symbolism. During his first three months, the president has essentially told the Argentines that he is out to repeal not merely the go-go nineties--associated with deregulation, privatization, and "automatic alignment" with the United States in foreign policy--but the eighties as well. His first measures include virtually decapitating the high command of the armed forces and replacing the chief of staff with a low-ranking brigadier of his own choosing, repealing an amnesty for crimes committed by the military during the so-called "dirty war" against urban guerrillas in the late 1970s, and purging the supreme court of Menem appointees. In the run-up to his inauguration, there was much talk of reestablishing some distance with the United States and drawing closer to Argentina's Latin American neighbors, particularly Brazil. On a post-inaugural trip to Spain and France, Kirchner stunned his hosts by reading them stern lessons. On that occasion he (and even more, his foreign minister, Rafael Bielsa) accused foreign investors of harvesting excessive profits in his country, dusting off rhetoric that had not been heard from any Argentine official in more than twenty-five years. (For whatever it may be worth, on a subsequent visit to Washington and New York his remarks were moderate and well considered.)

Argentina's pollsters and analysts--who are among the finest in Latin America--cannot quite decide what to make of what they call the "K Phenomenon." One writes off the current euphoria as typical of the grace period granted any Argentine chief executive, or even, for that matter, any of Latin America's newly elected democratic presidents. Others believe that the president's poll numbers reflect hopes and expectations that had best be realized quickly if those numbers are to be sustained. Still others warn that his confrontational style, so popular today, may win him enemies in the future if things do not turn out well.

It's the Economy, Stupid

Although Kirchner has been reluctant so far to unveil a comprehensive development plan to put his country back to work, he has benefited indirectly but materially by his predecessor's devaluation of the Argentine peso (formerly at par with the dollar, now trading at about three to one). Cheaper exports have meant more business--the Argentine trade balance for July registered a surplus of $1.5 billion (4.75 percent higher than the same month a year before), and the accumulated trade surplus for the year exceeds $10 billion. Lower labor costs alone have led to the creation of more than 17,000 jobs in July and more than 51,000 in the last twelve months. Even so, official unemployment figures still hover at around 20 percent--virtually unprecedented in modern Argentine history.

The one economic achievement for which President Kirchner can indisputably take credit is a hard-edged negotiating posture with the International Monetary Fund. In an agreement announced early last month, Argentina succeeded in limiting the Fund's demand for a fiscal surplus to 3 percent for the rest of this year (after paying debt services), and the government dug in its heels against requests to increase utility charges or privatize state banks. It also refused to draw on its considerable ($13 billion) foreign reserves to pay down the nearly $3 billion in maturities that were due in September and freed itself of having to pay on $21 billion in maturities due to the international financial institutions over the next three years.

How Argentina virtually twisted the fund to its pleasure will provide much material for economic historians of the future. Clearly the country's negotiating posture was greatly enhanced by its willingness to go to default--after all, Kirchner's economic team seems to have reasoned, after what the country has been through these past two years, things could hardly be worse.[1] And, of course, it could be excused for assuming that the IMF would do anything to avoid a default. It should be noted, however, that this Outlook has received information that the fund was perfectly willing to let the Argentines default; the real pressure, according to this source, came from the Bush Treasury Department.

Whatever the case, the IMF agreement is more significant for what it leaves out than for its immediate benefits. While Kirchner was able to avoid default on his own terms, the outcome does not provide the shock of confidence the private sector was waiting for. Nor, as one
commentator in Argentina's flagship daily notes, has the political discourse of the government "helped to draw back into the productive cycle thousands of dollars still hiding in mattresses or safe deposit boxes." The rules of the game for the financial sector have yet to be established. It is not clear, the commentator adds, what the government will use its new revenues for (assuming they materialize)--social aid, public investment, or the payment of obligations. "The government has won time," he concludes, "what remains to be seen is what use it will make of it."[2]

The unexpectedly favorable IMF agreement may have also strengthened those within the Kirchner administration who want to continue playing hardball with the international financial community. As this Outlook goes to press, Economy Minister Ricardo Lavagna was announcing at a meeting of the World Trade Organization in Dubai that the country intended to offer bondholders roughly a quarter of what they are due--actually less, if inflation is taken into account. It is impossible to imagine how such a decision can help reopen the spigot of new investment so desperately needed to reactivate the Argentine economy.

Party Realignment

For many years now, Argentina's political scene has been dominated by two major forces--the Justicialist (Peronist) Party and the Radical Civic Union (more commonly known as the Radical Party). Both have been characterized by a high degree of discipline and organization, as well as heavy doses of personalism. Each resembles the other programmatically--combining nationalism and populism and occupying roughly the same space on the ideological spectrum, which is to say the broad center (but extending as far to its left and right as possible). As a result, third parties have historically found it difficult to gain much traction in Argentina.

Since the onset of the economic crisis of 1999-2000, however, three fresh political phenomena have emerged. The first is the virtual disappearance of the Radical Party, certainly as a major contender for power. The second is the proliferation of independent forces. The third is the emergence of leftist politics in a country where the Left has not been a significant factor for more than fifty years.

The Radicals are Argentina's oldest party and the most venerable democratic force in Latin America. However, since the emergence of General Juan Perón in 1946, the Radicals have rarely been able to win national elections, and even then usually only because the Peronists were proscribed from participating or abstained. The two presidencies they won in their own right, those of Raúl Alfonsín in 1983 and of Fernando de la Rúa in 1999, were truncated by economic crisis forcing both men to resign their mandates early. Today the Radicals hold a minority of seats in both houses of Congress and control a handful of governorships, but no serious observer of Argentine politics believes that they can become nationally competitive again in the foreseeable future. Instead, Argentina seems to be veering toward unquestioned one-party dominance with the only real political competition taking place within the Peronist camp. Characteristic of this change was the inability of the Peronists to produce a jointly agreed upon candidate for the presidency this last election; instead, in an unprecedented arrangement, both Kirchner and former president Carlos Menem were both on the ballot. The Peronists are coming to resemble the old Mexican PRI, a "hegemonic" party that used to contain all of the possible political tendencies under one tent, but with the important difference that--unlike Mexico--in the last election, the Peronists' primary and the general election occurred at the same time, on the same ballot paper.

In the past the only third parties to win representation in the Argentine congress were the so-called provincial parties, mainly from the country's arid north and northwest. This is still largely the case, but the last presidential race introduced some surprising variations. Ricardo López Murphy, an economist, former cabinet officer, and long-time Radical, won nearly 14 percent of the vote as the candidate of a party of his own creation, RECREAR. Although on economic matters López Murphy is right of center, his personal integrity proved to be his strongest suit. To the surprise of many, he was endorsed by a number of the country's leading intellectuals, most of whom previously identified with the Left. Another third-party candidate who did well (though less so than might have been anticipated a year before) was Elisa Carrió, founder of a movement known as Argentines for a Republic of Equals (ARI). A former beauty queen, single mother, and devout Catholic, Señora Carrió gained considerable popularity in the late nineties by her constant denunciations of corruption and favoritism, though it appears that by the time elections rolled around voters had tired of her one-issue politics. Still, for many voters--particularly middle class residents of Argentina's major cities--the issue of corruption has become more important than any other.

Finally, one cannot but be struck by the emergence of a strong leftist tendency, particularly in the capital. The reelection of Aníbal Ibarra, an independent leftist, as mayor of Buenos Aires on September 14--against formidable competition from businessman Mauricio Macri, owner of a popular football team--underscores the fact that the city is no longer a bulwark of the Radical Party, as it was for generations. (Even Macri, who forced Ibarra into a second round, is not a Radical but an independent who in the past, at least, has had links to the Peronists.) Buenos Aires is one of the few Latin American capitals to have a serious left-wing daily (Página 12), and one of the few capable of staging large demonstrations (almost on the scale of Western Europe) protesting U.S. actions in Afghanistan and Iraq. Cuban dictator Fidel Castro, in town for Kirchner's inauguration, was greeted by ecstatic crowds and given a standing ovation in the Argentine congress; later he spoke to 20,000 people on the steps of the Buenos Aires Law School, which followed a characteristically rambling, two-hour discourse on the evils of globalization and the United States, which was received with rapt and respectful attention. Conversely, President Bush is about as popular in Buenos Aires as he is in Berlin.

To be sure, Argentina is not likely to have a left-wing government any time soon, if for no other reason than that the Left there is divided into too many different groupings. Yet by taking to the streets in large numbers, the Left may have pulled Kirchner somewhat farther in that direction than he might otherwise have gone, at least rhetorically and in terms of foreign policy.[3] And there is always the possibility that Ibarra will find a way of using the mayorship as a springboard to the presidency in 2007. He forced the Peronists into endorsing him rather than fielding a candidate of their own in this last race; who knows what circumstances might permit him to do four years hence?

Blaming the Government

Argentina is a nostalgic country and why not? Its past is well worth remembering. In 1914, it was one of the five or six wealthiest countries in the world, and its living standard exceeded that of Western Europe until the late 1950s or early 1960s. For the past fifty years, it has been living on the recollection of what it was and the hope of recovering past glories. Meanwhile, during that time its per capita income has not grown at all.

Various factors account for this, but probably the most important is the all too common belief by Argentines that their lack of prosperity is the sole fault of the government of the day. For decades this has been the repeated refrain of Peronists and anti-Peronists, civilians and military men, businessmen and labor, intellectuals and civil servants, left and right. Every government, elected or de facto, has come to power announcing its intention of making a clean sweep and a new beginning. Somehow, though, the same problems keep returning. Some of them undoubtedly have to do with Argentina's difficult placement within the international system. Those problems include agricultural protectionism in Europe and the United States, reckless lending policies by private and multilateral banks (who buy into Argentina's view of itself as potential El Dorado), and an unfavorable geographical location. But more of the perennial problems have to do with how the country is run rather than by whom, particularly with respect to the rule of law and the rules of the game, which have changed too often and bent too readily to suit the convenience of the government of the day and its friends. To the extent that President Kirchner carries out his stated intention to correct these evils, he will continue to go from strength to strength. One hopes that he will, but one hopes to begin with that he understands the costs to him and his country if he fails.

Notes

1. The New York Times (May 25) quoted President Kirchner as saying, "Argentina has shown that it can live without an agreement with the IMF. The economy has limited chances of paying its foreign debt."

2. Néstor O. Scibona, "Ahora viene lo más difícil," La Nación (Buenos Aires), September 11, 2003.

3. Some experts believe that the decision of Argentina to vote against condemning Cuba for its recent crackdown on human rights violations at a UN conference in Geneva in April was worth at least 300,000 votes to Kirchner, votes that would otherwise have been thrown away on minor leftist candidates.

Mark Falcoff is a resident scholar at AEI.