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

http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A39281-2003May25&notFound=true

 

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