Jul 31, 2008

World - The Mess in Argentina

WHEN Cristina Fernández de Kirchner selected a turncoat member of the opposition Radical party as her running-mate in her successful campaign for Argentina’s presidency last year, the choice looked like a canny ploy to win votes beyond her Peronist party’s working-class base. Ms Fernández’s assumption that her vice-president, Julio Cobos, would show more loyalty to her than he did to the Radicals now appears to have been an act of hubris. As vice-president, Mr Cobos had the tie-breaking vote in the Senate on a crucial tax bill backed by Ms Fernández. On July 17th he voted against his own government, dealing a debilitating blow to her eight-month-old presidency.
Ms Fernández has spent the past four months in a fierce battle with Argentina’s farmers. They launched a campaign of strikes and roadblocks after the government raised taxes on soyabean exports to nearly 50%. The public backed the farmers and the president’s approval ratings tumbled. But Ms Fernández and her combative husband, Néstor Kirchner, who preceded her as president and now runs the Peronist party, refused to reach a compromise and lower the taxes.

The two sides were locked in stalemate until the Supreme Court—a majority of whose judges were appointed by Mr Kirchner—said that it would rule on whether the taxes, which were implemented by diktat rather than by legislation, were constitutional. To avoid a judicial rebuke and to defuse the protests against her, which have taken the form of the noisy banging of pots across the country, Ms Fernández asked Congress to ratify the levies last month.
This was a miscalculation. Ms Fernández underestimated the pressures on her party’s legislators from the rural provinces, where voters were staunchly opposed to the taxes. Despite holding comfortable majorities in both houses, her block in Congress had to establish a costly scheme of payments for small farmers to win a close vote in the lower house. The bill then passed to the Senate, where a stampede of defections from Ms Fernández’s supporters produced a 36-36 draw.
The decision thus fell to Mr Cobos, whose relationship with the president had become frosty. Ms Fernández had barely spoken to him in a month. The beleaguered vice-president all but apologised to her as he cast the vote that handed her the defeat. “The Argentine president will understand me,” he said, “"because I think that a law that doesn’t provide a solution to the conflict won’t achieve anything…I ask forgiveness if I am wrong.” Forgiveness has not been forthcoming: on July 21st, Ms Fernández had six officials loyal to Mr Cobos sacked.
Ms Fernández’s defeat marks a turning-point both for her government and for her country’s fragile system of checks and balances. Mr Kirchner brooked no challenges to his authority as president, treating dissent as indistinguishable from treason. Argentina’s Congress has rarely been strong enough to put meaningful limits on the executive. Traditionally, influential provincial governors have instead served as the primary counterweight to the presidency. But Mr Kirchner cowed them too during his four years in office, thanks to high approval ratings and an ample budget surplus, which gave him an unusual amount of freedom to direct spending to supportive regional officials.
Until the defeat, Ms Fernández had mimicked his hectoring style, repeatedly accusing the farmers of seeking to topple her government. Mr Cobos’s vote should undermine this way of governing. Unlike her husband, Ms Fernández is now unpopular (her approval rating is just 20%) and her government is short of money (soaring public spending has depleted the treasury). She faces a legislature that has ceased to be a rubber stamp and provinces that will no longer tolerate the central government in Buenos Aires appropriating their wealth.

How to silence the saucepans
Something of the new landscape has been revealed in the week since the vote. On July 18th Ms Fernández issued a resolution reducing the export taxes to their previous level. She has reverted to Peronist type, announcing that Aerolíneas Argentinas, a crumbling airline, would be nationalised after nearly 20 years as a private company. A week later her cabinet chief, Alberto Fernández (no relation), resigned. Mr Fernández was her closest aide, de facto press spokesman, and chief negotiator in the failed talks with the farmers.
Ms Fernández has three-and-a-half years left of her term, and so it is too early to write her political obituary. The opposition remains weak and divided. Yet Mr Kirchner has bequeathed her a formidable list of problems: a pliant, little-respected cabinet; a doctored price index which reflects less than half of the true rate of inflation (which is around 25%); a mixture of subsidies and price controls in energy and transport that have discouraged investment and strained public finances; and a sprinkling of corruption scandals.
Add this defeat and Ms Fernández is now faced with a choice: either break with the policies of her husband less than a year after he handed over the presidency to her, or live the next four years of her first term as the longest-serving lame duck in Argentina’s recent history. Ms Fernández campaigned as a moderate consensus seeker. She will need to start governing like one if she hopes to salvage her presidency.

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