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The latest
chapter in the tortured history of Argentine politics will come to a
close with presidential elections scheduled for April 27. These
elections will determine the successor to President Eduardo Duhalde,
appointed to the position in early 2002 upon the resignation of
Fernando de la Rua in December 2001. Whoever assumes the Presidency
will face a daunting series of challenges – restoring faith in
governing institutions, reining in government spending and resolving
vexing economic problems – before it clearly can be said that the
country is back on the road to long term stability and prosperity. A
short review of the players, the process and the potential impact on
the U.S. is in order given the stakes for American interests.
Argentina, with a
population of 38 million, is Latin America’s third largest economy and
has one of the highest per capita incomes in the region. Argentina is
also an important recipient of foreign investment from the U.S.,
having garnered nearly $3 billion per year on average during the late
1990’s. The country has been a staunch ally of the U.S. on many
regional and international issues and is poised for an important role
in the negotiations over the Free Trade Agreement of the Americas.
The U.S. is the
country’s second largest export market after Brazil. Both values
and mutual interests tie Argentina to the United States. A generation
ago, Argentines rejected a military dictatorship in favor of
democracy. For the past 15 years Argentina has invested significant
political capital in its relationship with the U.S., standing beside
us at the U.N. on critical international issues like nonproliferation
and human rights. It voluntarily renounced its Condor missile program
and joined the Nuclear Non-Proliferation Treaty and is the only
Western Hemisphere country to have
achieved Major Non-NATO Ally status (1998). Its support for the U.S. was
evidenced during the first Gulf War in 1991, when Argentina provided a ship to
coalition efforts. Throughout this period Argentina made equally
important strides in
revamping its economy, opening it to trade and adopting a broad range
of based policies.
In recent years,
the country’s economic woes have led many Argentines to question the
wisdom of their commitment to the neo-liberal economic model.
Likewise, just a year ago, many in the U.S. wrote off Argentina as an
economic basket case. The country was in the midst of a four-year
tailspin that began in 1999, leading to the cancellation of the peso
peg to the dollar, a near 50% decline in foreign reserves from 2001 to
2002 and poverty rates above 57% at the end of 2002. Public protests
and riots led to the resignation of President de la Rua and the
country ultimately was forced to default on foreign debt payments as
the peso continued to sink. Worse still, this extended economic
decline may have undermined Argentines’ confidence that the economy
finally had reached a stage of sustainable, stable growth.
Fortunately, the
adoption and implementation of a tough fiscal policy under the
guidance of Economy Minister Roberto Lavagna, fortified by an interim
IMF arrangement, helped put the economy back on track. Exports are up,
tourism receipts are high and confidence and liquidity are returning
to the banking system. Although the economy is expected to grow up to
3% in 2003, Argentina is not out of the woods yet. The new government
there will face certain tension between the populist allure of free
spending social policies vs. prudent fiscal and social management
needed to reinvigorate the economy, sustain growth and also alleviate
the poverty into which over half of the country’s population has
slipped since the economic crisis began. This tension was evident in
the strained, yearlong negotiations with the IMF over a temporary
(eight-month) Stand-By Credit Arrangement for some U.S. $3 billion
signed early in 2003.
The political
scene is set for a tough scrum among five principal candidates. Three
hail from the Peronist Party (Partido Justicialista), which was unable
to hold a party primary because of concern that the former president
would win it hands down. They include Carlos Menem, Nestor Kirchner,
President Duhalde’s hand-picked successor, and Adolfo Rodriguez Sáa,
the one-week president who served between de la Rua and Duhalde in
late 2001. Non-Peronist candidates are economist and ex-Minister of
Economy and Infrastructure Ricardo Lopez Murphy, and Elisa Carrió, a
Deputy in the Federal Congress, holding down the left.
Under Argentine
electoral rules, a candidate wins in the first round either by
securing more than 45% of the valid votes cast or by securing more
than 40% of the valid votes cast with at least a 10% margin over the
second place candidate. Absent these results, the top two candidates
proceed to a run-off election within 30 days. With so many candidates,
and voter apathy running high, the political jockeying now requires a
significant focus on the "what-if" planning for possible pairings in a
likely run-off election on May 18.
In numerous
recent polls Kirchner and Menem have traded the lead with some 20%
each, followed closely by Rodriguez Sáa at over 16%, and Lopez Murphy
and Carrio, polling over 10% each. These numbers have remained
relatively stable, and it is highly likely that there will be a
run-off between two of the Peronists. In effect, President Duhalde,
who fought hard against Menem supporters to eliminate the Peronist
Party primary, may now face the same net result in the second round:
Kirchner vs. Menem.
The Candidates
Nestor Kirchner
(53) has been pushed to the top of the Peronist pack by Duhalde’s
unflagging efforts. The President has worked hard to assure that
Kirchner follows him into the Pink House or Casa Rosada, the seat of
Argentine government. Kirchner is three-term Governor of the oil-rich,
sparsely-populated southern Province of Santa Cruz. An attorney known
more for his administrative skills than for his political prowess,
Kirchner has done a creditable job of managing Santa Cruz (and its oil
and gas revenues) without giving rise to the corruption allegations so
common in Argentine politics.
In recent weeks,
he has spoken out strongly against the war in Iraq, comparing the U.S.
effort there to that of the U.K. in the Falkland (Malvinas) Islands in
the early 80’s. He has also indicated that Argentina’s foreign debt
burden is not sustainable. Kirchner’s early-April commitment to keep
the popular Economy Minister, Roberto Lavagna, in the government may
help improve his popularity and provide economic policy continuity if
he is elected.
Carlos Saul Menem,
two-term president from 1989-1999, continues to poll near 20%,
neck-and-neck with Kirchner. Despite intense opposition from
Argentines critical of the corruption and mismanagement they associate
with his earlier tenure, Menem continues to draw substantial support
and is the consummate political survivor. That said, he could
well prevail in a run-off election.
Menem is running
a smart campaign that incorporates frequent promises to the poor that
he will attack rampant poverty, while also assuring businessmen that
he will run a business friendly regime. Unlike the other candidates,
he has made a firm pledge to repay all external debt. But Menem has
also supported the war in Iraq, which over 90% of the Argentines
opposed, and he must confront the barrage of attacks from all other
candidates. Menem, as the most known entity in the crowd, may bring a
lot of baggage, but there is no doubt about his continuing support for
the U.S., and he may see his third term as a way to complete
unfinished reform efforts in a mutually supportive relationship with
the U.S.
Adolfo Rodriguez
Sáa (56) is five-term Governor of San Luis Province in central
Argentina. In many respects, his populism is reminiscent of a younger
Menem, in the vein of the charismatic leadership, or caudillismo,
which has often characterized traditional Argentine politics.
Rodriguez Sáa also has the dubious distinction of having declared a
moratorium on debt payments during his brief term as President. In
this campaign, he has claimed, among other things, that he would
reduce the size of the State bureaucracy and that he would renegotiate
external debt payments. The hands-on approach that has served him well
in a small province may be more problematic in the presidency of the
nation, as evidenced by his whirlwind former experience in that
office.
Ricardo Lopez
Murphy (52) of the Federal Recreation Movement is running as a
center-right candidate with a neoliberal economic plan. An economist
with a master’s degree from the University of Chicago, he has been
critical of government economic strategy and the current policy of "pesification"
(i.e. converting deposits made under the Convertibility Law of
one-to-one to "new" pesos at an exchange rate of three to one dollar),
while calling for "recreating" the state by improving services,
removing bureaucracy and reforming laws and regulations. He and Menem
are the only two candidates that have not sought to distance
themselves from the U.S. His numbers in the polls have continued to
rise, and he may be able to slip into the final run-off vote.
Elisa Carrió (46)
is running from the left under the banner of the Argentina for a
Republic of Equals Party (ARI), and places the end of government
corruption as her top priority. A federal lawmaker, Carrió emulates
Brazil’s "Lula" model, seeking to draw support from workers and the
poor, with campaign promises to bring the oil industry under state
control, review all privatization of government services, put an end
to IMF meddling and promote womens’ rights.
Implications
Argentines, who
are long-accustomed to economic and political trauma, yearn for
political, economic and institutional stability, and will look for
these elements in all candidates’ campaigns in the weeks ahead. They
have often demonstrated high ambivalence regarding relations with the
United States and most likely give relatively little weight to the
candidates’ foreign policy approaches.
If Menem loses, a
new chapter will begin for Argentina, as he has been a fixture in
national politics since 1989.
Though Menem
casts a long shadow on the Argentine political landscape, at age 73 he
is unlikely to have a political future if he loses this race. But the
next president must be possessed of the strong leadership skills that
characterized his two terms in order to manage the pressing internal
economic needs under the burden of a $140 billion foreign debt. The
task will be further complicated if the winner is not elected by a
significant margin, indicating a lack of a clear mandate from the
people, or if there is any delay in the final selection due to a
recount in a close race.
Whoever wins,
there will be no time for a honeymoon. The new president will be
tested immediately by Argentina’s daunting economic problems. If the
elections go to a second round, the winner would assume office less
than 10 days later. The temporary IMF package granted earlier this
year expires in August and must be renegotiated; a recent Supreme
Court decision which overturned the "pesification" of deposits by the
Province of San Luis, if extended nationwide, will strain fiscal
accounts, while increasingly evident poverty threatens social unrest.
Argentina will also need to make pension and bank reforms, improve tax
collection, rationalize tariffs in privatized public services and
reduce the size of federal and state bureaucracies. Finally,
congressional elections in the fall will further complicate all
decisions.
Interestingly, it
is not only the economy that has suffered over the past four years.
The Radical party, the traditional rival to the Peronist Party, is
effectively absent from this election (although Lopez Murphy and
Carrio have their origins there), leading to the political domination
by the Peronist candidates. A viable, national alternative to the
Peronist party is an important political control mechanism that is now
lacking. Likewise, the politically challenging, and to date
unsuccessful, task of limiting provincial financial excess must be
tackled.
Given the
continued focus of the U.S. on critical foreign policy issues outside
of the region, the new leader can also expect limited U.S. attention
absent renewed crisis in the region. For the U.S. part, the stakes in
assuring continued Latin American commitment to U.S. values and
interests – ranging from the war against drugs and terrorism to the
growth of markets for U.S. exports and the stability of the
international financial system – counsels sustained attention to a
country that could serve as either a counterweight or an accelerator
to a renewed wave of anti-American populism in the region. The next
year will be a critical juncture for the country as it struggles to
take the next step toward a sustainable, long-term recovery.
Principal Author:
R. Kirk Sherr is
a Senior Fellow at The Forum for International Policy.
Mr. Sherr was a
Foreign Service Officer at the Department of State from 1985-1995.
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