October 30, 2007
Can Argentina's Cristina Fernandez de Kirchner avoid another economic bust?
CRISTINA FERNANDEZ de Kirchner was elected president of Argentina on Sunday in a relatively free and fair vote. That's not to be taken for granted; not only has Argentina suffered from chronic political turmoil in the past, but several other Latin American governments, led by Hugo Chavez’s Venezuela, are working to dismantle the liberal democracies established throughout the region in the 1980s. Ms. Fernandez de Kirchner was nominated by her husband, the outgoing president Nestor Kirchner, who poured state resources into her campaign. Yet she could have won without the extra help: The Kirchners are riding a wave of popularity born of rapidly rising incomes for Argentines during the past four years.
Certainly, Argentina has changed significantly since the last time a woman became president in succession to her husband. Isabel Perón, who took office in 1974, presided over economic catastrophe and a virtual civil war before being deposed in a military coup. Democracy has now endured nearly a quarter century, the military is confined to its barracks, and violent revolutionary movements are a distant memory. But Argentina -- and Ms. Fernandez de Kirchner's Peronist party -- still have not learned the lessons of the country's history. That could make the coming years more turbulent.
For the last century, Argentina has lived by a cycle of economic boom and bust, driven by prices for its agricultural exports, by the fondness of its governments for populist policies and by its resistance to playing by the usual rules of global financial markets. The boom under Mr. Kirchner, which followed the devastating bust of 2001, follows the usual pattern: It has been fueled by high prices for Argentine beef, wheat and soybeans, and by Mr. Kirchner's stiffing of international creditors, vast government spending, and controls on energy and food prices. The predictable result has been disinvestment in the energy sector that already has caused brownouts and mounting inflation that is probably double the official estimate of 9 percent annually.
The Kirchners managed to get through the election season by manipulating the inflation figures and bullying supermarkets into keeping prices down. Now Ms. Fernandez de Kirchner, who conducted her campaign without participating in a debate or even holding a news conference, must make a crucial decision. She can use her mandate to deliver the tough medicine the economy needs -- including energy price and interest rate increases, a revaluation of the currency and a reconciliation with the International Monetary Fund, which holds the key to renewed foreign investment. Or she can pursue her husband's populist course until it produces another crash. Ms. Fernandez de Kirchner is a seasoned politician with more interest in the outside world than her predecessor. But it will be a pleasant surprise if she avoids repeating history.