Argentina politics: What next?

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FROM THE ECONOMIST INTELLIGENCE UNIT

Two days after the death of Néstor Kirchner, it is deeply uncertain who will fill the void left by the departure of the most important figure in Argentinian politics in the past decade. Key questions centre on the management of economic policy, who will emerge as the political operative behind the Kirchner powerhouse and who will stand in his place in the next presidential election. What will be the shape of “kirchnerismo” without him?

Mr Kirchner was president from 2003 to 2007, was the husband of the current president, Cristina Fernández de Kirchner and was widely tipped to be the ruling party’s candidate in the October 2011 presidential election. Having centralised power in the presidency during his term of office (using decree powers that had been bestowed on the executive during the 2001-02 crisis and have remained in place until now), he then became an extremely powerful figure in Ms Fernández’s presidency.

The former president maintained tight control of a small and loyal group of advisers and was believed to be the one making key policy decisions, particularly with regards to the economy. Through a raft of public works programmes and discretionary funds transfers to the provinces, he also kept key politicians in Argentina’s dominant Partido Justicialista (Peronist party), of which he was president, on his side.

Game changer

Mr Kirchner’s death has left the 2011 presidential race wide open. The Economist Intelligence Unit had assumed that Mr Kirchner would run but fail to regain office in 2011, but the race was expected to be close. Given his powers of incumbency and using his position as president of the Peronist party, Mr Kirchner was the man to beat in the party primary to be held in mid-2011. All eyes have now turned to Ms Fernández, and to whether she will run again next year on a wave of public sympathy.

However, it is too soon to predict what she will decide. Although at least one cabinet member, the Secretary of Foreign Affairs Héctor Timerman, said in an interview that she would be the candidate for her party, this is still uncertain. Given Mr Kirchner’s personal and political importance in the ruling couple’s political project it is unclear that she will have the desire to continue on her own.

Moreover, it is uncertain whether, without a political operator of Mr Kirchner’s stature, Ms Fernández will retain the support of key members of the Frente para la Victoria (FV, the pro-Kirchner faction of the Peronist party). So far key cabinet members and Hugo Moyano, the head of the powerful labour federation, Confederación General de Trabajadores, have expressed unqualified support for the president. But if they eventually transfer their allegiances to other Peronist factions she will find herself isolated if she does indeed decide to run. Bearing this in mind, she might not be up for the fight. On the other hand, the pressures on her from much of the public and among key Peronist supporters to run will also be strong.

If Ms Fernández does not run, Daniel Scioli, the governor of Buenos Aires province and vice-president under Mr Kirchner, is the most likely FV candidate and is already being viewed as a possible compromise contender who would unify the pro-Kirchner wing of the Peronists with the centre-right of the party. Despite his closeness to Mr Kirchner, Mr Scioli is seen by the financial markets (and perhaps by parts of the electorate put off by the Kirchners’ confrontational style and unorthodox micro-management of the economy) as more pro-business than the ruling couple. He does not, moreover, suffer the strong negative poll ratings that would have been a major obstacle to Mr Kirchner’s candidacy and would still harm Ms Fernández’s chances.

Meanwhile, without Mr Kirchner to rally against, there is a strong likelihood that the opposition parties will fragment even further. Just before Mr Kirchner’s death it had seemed possible that the opposition would present just one centre-right Peronist candidate (such as the popular governor of Santa Fe, Carlos Reutemann) and one centre-left candidate: the latter could have been Julio Cobos, the current vice-president, who broke with the Kirchners in 2008 but retains his post, or Raul Alfonsin, son of former president Ricardo Alfonsin. These candidates would have run against Mr Kirchner in the first-round presidential election. The Economist Intelligence Unit had premised its forecast of an eventual loss for Mr Kirchner on the basis of a combined anti-Kirchner vote in a second round, which would have prevented a victory for the former president.

Now, as all the possible candidates reassess their prospects in the absence of Mr Kirchner, it seems likely that an atomisation of the opposition will take place rather than unification. This could ultimately pave the way for the FV, whether under Ms Fernández or Mr Scioli, to emerge victorious.

Change of style or policy?

Of more immediate concern (and equally difficult to predict) is how Ms Fernández will choose to govern in the year running up to the presidential poll. Mr Kirchner was broadly perceived to have been responsible for economic decisions in the government, and there is increasing speculation that there may now be some scope for changes in personnel and policy in this area. Controversial figures considered to be closer to Mr Kirchner than Ms Fernández, such as Guillermo Moreno (the commerce secretary frequently blamed for deterioration of inflation statistics in recent years), could exit, and the efforts of the economy minister, Amado Boudou, to rehabilitate Argentina in the eyes of investors (Mr Boudou championed Argentina’s recent foreign debt restructuring) might progress.

The financial markets appear to be betting on some shift in policy. Shares in the media group Clarín have skyrocketed on the possibility that Ms Fernández will now rein in the government’s battle with Argentina’s dominant private media group. Shares in energy and power companies have likewise shot up on speculation that there will be greater efforts to adjust the energy price controls that have crippled investment in the sector and led to worsening power shortages.

For the moment, however, there are no concrete indications that policy will shift at all, and it is equally conceivable that Ms Fernández will dig in her heels and be as combative with her adversaries as ever. Yet even a slight moderation of policy could win back the middle classes and give the FV a greater chance for victory, particularly if the more market-friendly Mr Scioli were to run. It remains extremely uncertain, however, what an FV government without the Kirchners would look like.