Argentina:
Can President Kirchner Overcome the Political and
Economic Obstacles to Achieving Sustained Growth?
A Panel Discussion Hosted by
The Center for Latin American Issues and
the Latin American Studies Program on
June 10, 2003
A Synopsis
Néstor Kirchner became the President of Argentina on
May 25, 2003. His administration faces the daunting tasks of
reconstructing the Argentine economy, alleviating high poverty levels, and
re-establishing faith in the political class. In a panel discussion hosted
by the Center for Latin American Issues and the Latin American Studies
Program at the George Washington University, GW
Professor Gonzalo Paz noted that because of the circumstances of his
election (his opponent in the runoff, former President Carlos Ménem,
withdrew from the race), there was a distinct possibility that Kirchner
would be perceived, at least initially, as a weak executive.
Contrary to such expectations, he has been quite bold in his first two
weeks in office. He has made efforts to purge the Supreme Court, the armed
forces and the Federal Police of corrupt officials; he has begun to
reshape foreign policy; and he has strengthened relations with neighboring
countries, said Paz.
James J. Carragher, the Director of the Office of Brazil and Southern
Cone Affairs at the U.S. State Department, also commented on Kirchner’s
strong start, he noted that the confidence and dynamic leadership Kirchner
has demonstrated during his first two weeks in office “reflected the
reality that, had there been a second round of elections, he would have
won decisively.”
Eduardo Amadeo, who recently completed his service as Argentina’s Ambassador to the United States, reflected on the stark differences between the political culture of Argentina today and that of a year ago. The political hopelessness that characterized the months after the 2001 financial crisis has receded. Events during the last couple of months have renewed hope for basic institutions and democracy. In the first round of presidential elections in April, 80% of the population voted, with the lowest blank and null vote in 35 years. He remarked that through the upheaval of the past 18 months, people have distinguished between political institutions and politicians, and this differentiation explains in large part why democratic mechanisms have remained intact. The value of dialogue and consensus has been elevated.
Ambassador Amadeo pointed out other reasons for optimism. The economy
keeps growing: estimates for 2003 anticipate 6% growth, with a positive
adjustment in the pricing system. Consumer and investor confidence is very
high, and investment has increased steadily during the first part of the
year. The job growth has been particularly strong during the past two
months.
In addition, the Kirchner administration will be working with an
international arena that is more favorable than it has been for quite some
time. With the war in Iraq largely concluded, the United States will be
more open to dialogue than confrontation. Ambassador Amadeo views the
signing of the U.S.-Chile free trade agreement and the improved USTR-Brazil
discussions as positive signals for increased attention by the Bush
administration to hemispheric relations. In a broader sense, now that the
war in Iraq has ended, financial markets are much more stable.
Professor Paz noted several “Herculean tasks” that lie ahead, including negotiations with the IMF and external creditors, political institutional reforms, keeping the fiscal deficit reined in, improving public services and revamping the tax system to make it more efficient. Ambassador Amadeo anticipated also several challenges for the Kirchner administration. Fourteen provincial governors will be elected this year, and each one will be perceived as testing public support for Kirchner’s policies. Economic reforms are crucial, particularly fiscal and financial sector reforms. “The balance among social, political and economic forces is fragile,” said Amadeo. However, if the economy continues to improve, Kirchner’s public support should grow and, Amadeo predicts, that the President should be in a stronger position by the end of the year.
The
negotiation of Argentina’s debt with the IMF is a critical issue. Amadeo
emphasized that default is not a viable option; the question is how to
generate the resources to make debt payments viable.
A serious obstacle to
creating a predictable, stable society with economic growth is the power
of interest groups, such as businessmen and teachers, who often rally
against government policy and make financial demands that the government
cannot meet without further straining already severely-limited resources.
Paz pointed out that the political interest groups are the most important
to be considered in this light: there is a window of opportunity for
political reform. Argentina must strive for more effective
representation while creating mechanisms that promote better governance.
Achieving these goals will be complicated by the high poverty rates – over 50% of Argentines now live below the poverty line. This group includes not just the “historic poor” but also many in the middle class who have recently become poor because of the sharp decline in real wages since 1998. Kirchner will have to face all of these challenges with limited fiscal resources.
Carragher emphasized the
U.S. desire to maintain a strong, cooperative,
dynamic partnership with Argentina. President Bush called Kirchner to
congratulate him on his inauguration; Secretary of State Colin Powell was
in Argentina the day of the CLAI/LASP forum to meet with the new
President. There
are some areas of disagreement between the nations, including relations
with Cuba and the war in Iraq, but the common interests of the nations
ensure that the partnership will remain strong in many important respects.
For example, the nations have cooperated extensively in counter-terrorism
efforts and in combating money-laundering in the tri-border region.
President Bush has extended an invitation to President Kirchner to visit
the U.S.
For recent news on President Kirchner’s first two weeks in office, click on the links below:
http://www.washingtonpost.com/wp-dyn/articles/A51345-2003May28.html
http://www.washingtonpost.com/wp-dyn/articles/A20135-2003Jun5.html
http://www.nytimes.com/2003/06/11/international/americas/11ARGE.html
http://www.nytimes.com/2003/06/06/international/americas/06ARGE.html