Subject: General and provincial elections in most parts of Argentina have begun to clarify the political scene. The agreement with the IMF has done likewise as far as the economy is concerned. However, aside from the president’s strong popular support, many doubts remain as to the future of Argentina, particularly with respect to the role of the Justicialist Party.
Summary: The last few weeks have seen elections to appoint governors and legislators in most Argentine provinces. The results can be seen from various angles: most of the local caciques were voted back in; Justicialism confirmed its position as the dominant political party; and the new president, Néstor Kirchner, was able to reinforce his grip on power by getting his candidates elected in the city of Buenos Aires and other less populated areas. However, Kirchner is not the leader of the Justicialist Party, meaning that he had to come to a series of cross-party compromises which upset the old guard. At the moment there is a tense but, so far, discreet power struggle which could end up in either open conflict or intra-party consensus. Kirchner’s ‘honeymoon’ popularity and the upturn in the economic cycle both work in his favour; the provincial barons, however, led by ex-president Eduardo Duhalde, hold significant reserves of power in both local and national government. Time will tell.
Analysis: The elections held in most Argentine provinces over the last few weeks produced results open to various interpretations. It is undeniable that only twenty months after the social revolt that unseated Fernando De la Rúa on a wave of popular animosity against all politicians, the victors of these elections were the ‘same who were there before’. Only in Tierra del Fuego, a province created by constitutional reform in 1994, with few political roots, was the standing governor unable to renew his mandate nor impose –as occurred elsewhere– a hand-picked successor with a slightly renovated image. It is equally unarguable that the Justicialists have proved to be, once again, the dominant political party, although not the overwhelming force they once were. When on 10 December local and national legislators assume –or resume– their mandates, the movement created by Juan Domingo Perón will control three quarters of the provinces and have a majority in both houses of Congress. What is less clear is President Kirchner’s situation following the elections. Although he moved up spectacularly in the popularity polls, his political resources are insufficient. He is no longer the weak leader who obtained the presidency when other more heavy-weight candidates backed out, but he still lacks the clout to make him a national leader. A pall hangs over the political scene in Argentina. Although the voter turnout was not as depressing as the outburst of anti-political feeling in the 2001 general elections, the level of abstention was still high, at 30%, and spoiled or blank ballot papers accounted for another 7% of votes.
A double-headed Justicialist Party
In days gone by, when the Justicialist Party was in power, it went without saying that the presidency of the nation and the leadership of the party should be held by one and the same person. Not so today. The president is not, for now at any rate, the leader of the party and the party is a patchwork of provincial barons, chief among them being ex-president Eduardo Duhalde who, despite having no political post himself, has renewed his political standing in the powerful province of Buenos Aires by virtue of the victory of his hand-picked candidates. For the presidency and the party leadership not to reside in the same person is practically unheard of in the Justicialist Party. The only time something similar occurred was in 1973, when Héctor Cámpora headed the government while Perón was in full control of the party. The experiment lasted only 40 days and ended in a palace coup followed by fresh elections which swept Perón to the presidency on a wave of populism. However, despite his 70s air, Kirchner is no Cámpora, mainly because there is no Perón in the Justicialist Party. Cámpora’s fleeting reign as head of the executive branch of power was as Perón’s delegate; Kirchner, though he got the job as Eduardo Duhalde’s last resort to prevent Carlos Menem from doing so, used the splintering of both his own party and Argentine politics in general to initiate from his first day in office a race against time to build his own power base. In his efforts in this direction he has not remained within the confines of his own party, but made cross-party deals wherever it suited his purposes. He put forward his own candidates to challenge the official representatives of the Justicialist Party and supported with both his physical presence and public spending those official candidates who pledged him loyalty. Finally, in resignation and with all due caution, he made friendly gestures to those official candidates he could not unseat.
This strategy bore its fruits, at the expense of sowing considerable disarray among the Justicialist Party leadership. The benefits are clear: Kirchner won the city of Buenos Aires, the second largest political constituency in the country, by supporting a centre-left candidate, Aníbal Ibarra, who would have been defeated without the presidential leg-up. He also won the small province of Misiones, in a straight fight with the official Justicialist Party candidate. He, of course, won in his home province of Santa Cruz. Formally at least, the Justicialist Party governors have closed ranks behind him; the progressive parties have joined his bandwagon, more or less enthusiastically as the case may be. But it is another story within the Justicialist Party apparatus, which disapproves of the president’s cross-party alliances and his less-than-veiled contempt for the party hierarchy. Indeed, the party proved incapable of beating the Radicals for one governorship, that of Río Negro, because of Kirchner’s support for a third runner who ended up splitting the vote. Such practices are not soon forgotten by the Justicialist Party and if criticism at the moment is behind closed doors, it is only because of the new president’s popularity.
In the wake of the elections, the main question mark hanging over Argentine politics is where the tension in the dominant party or, to put it more exactly, between the dominant party and the president will lead. To date, Kirchner’s best card has been to exercise power energetically, promising radical reform. He has pledged to eliminate corruption and the obscure trafficking that goes on in the corridors of power, end political favouritism and restore to order the huge and hugely inefficient social security system. He has begun, with the support of Congress, to renovate the generally disrespected Supreme Court. He is talking tough with the privatised utilities and has used the same straight-to-the-jaw approach with the IMF. And he has at last managed to persuade Congess to repeal the laws passed by the Alfonsín government that prevent charges being brought against the military officers accused of crimes against humanity under the military dictatorship. This, combined with an economic recovery that had already begun when Eduardo Duhalde was still in office, but which is now more visible, constitutes his buttress against the malcontents. No local baron will risk raising a dissident voice against a popular president.
That political manoeuvring remains silent and is conducted with a Florentine subtlety for which the Justicialist Party is not normally noted does not mean that the struggles are over. Far from it. The strategy being followed by Duhalde and other influential local leaders is to offer Kirchner the chairmanship of the party and support for the government irrespective of party politics. The argument is as old as it is explicit: the Justicialist Party cannot be seen to be double- or multi-headed. In exchange, the sole condition is that Kirchner ceases to engage in cross-party deals that undermine Justicialist Party hegemony and throw together party leaders who have declared their unswerving loyalty to him with centre-left groups and independents, such as Foreign Minister Rafael Bielsa, whose light is merely a reflection of Kirchner’s. So far Kirchner is not prepared to play ball and has said as much through spokesmen. The counter-argument he uses is impeccably republican: the president is president of all Argentines and cannot at the same time be the leader of a faction. The real reason is rather different. The last thing Kirchner wants is to become embroiled in infighting within the Justicialist Party, however generous its leaders now appear. He does not want to be the elected king of a round table of feudal lords, a primus inter pares. What he wants is to exercise power as president and, from that vantage point, draw a political map of his own choosing.
It is a strange encounter. Duhalde wants to be seen as the guarantor of the unity of the Justicialist Party and offer this on a plate to Kirchner as a tool of government. Kirchner is hesitant at accepting a tool not of his own making. On May 25, the day of his speech on accepting office, in which he made no mention of his predecessor, Kirchner showed the head of his advisors, Alberto Fernández, the staff of office with the remark, ‘It’s all we have’. Since then he has been partly successful in converting symbolic power into real power, but not as much as he would have liked. If he really wants to reject Duhalde’s offer, he will have to move forward faster, displaying an aggressive strategy in which it is made clear that party unity is not a priority for him. If this occurs, Duhalde is unlikely to seek a confrontation, given that he already represents the status quo of a powerful, albeit fragmented, Justicialist Party. If conflict arises, it will be of Kirchner’s seeking. But such an outcome is unlikely unless the president felt that it was within his grasp to guarantee government by means of a new political coalition. If not, rather than confrontation the most likely outcome is a consensus among the Peronists.
The opposition awaits
It has been observed on numerous occasions that in the case of the Justicialist Party, government and opposition are both represented within the same party. At times like the present this could not be more true. The parties who theoretically should be in opposition are in a state of paralysis, awaiting decisions in which they might, however remotely, have some say. The political groups that stood for change in the presidential elections, people such as Elisa Carrió on the centre-left or Ricardo López Murphy on the centre-right, have been swept away, to the point at which the democratic centre-right has been left with practically no representatives in Congress. This may simply be the result of the political errors of inexperienced new leaders. It could also be interpreted as proof that in politics old habits die hard. At least as surprising as the retreat of the innovative parties (and the other side of the coin) is the survival of the Radical Civic Union as the second-largest national party, holding on to nearly 50 seats in the Lower House. The strong grass roots of Argentina’s oldest party provides its leaders –whoever they may be in the future– with an unexpected opportunity. What will this mean for developments within the Justicialist Party? It is hard to say for sure, but the probability is that in present circumstances the radicals prefer a political panorama closer to that they became accustomed to in the past half century than the one that loomed at the time of the Fernando De La Rúa catastrophe. If so, Duhalde can rest assured of having the party of Raúl Alfonsín as an ally.
The economy sets its own course
While the political chessboard is being reordered, the country’s economy seems to show a high level of self-adjustment that makes it immune to the uncertainties we have just described. In terms of growth, activity looks set to increase by an annual 6% in 2003 and, bar accidents, in 2004 as well. Kirchner is the first president since democracy was restored in 1983 to take office on an economic upswing. An exceptional combination of factors explain this good performance, which no analyst foresaw: there is still plenty of capacity idle since the deep depression of 1998-2002; dollars abound as a result of a trade surplus of over 10% of GDP; and the budget is in surplus on primary items of almost 2.5% of GDP, thereby relieving the government of the highly unwelcome task of having to cool the economy down. A stable exchange rate and the recent hard-fought agreement with the IMF have boosted business confidence, with the resulting increase in investment and private spending.
The agreement with the IMF left winners and losers in the concert of nations. The winner was US President George Bush, who not only encouraged the international organisation to take a more lenient attitude to Argentina, he also expressed understanding for the massive reductions of principal recently argued by the Kirchner administration in the first negotiations following the default at the end of December 2001. Together with his advisers, Bush has moved round from his early view that market forces were the best way to deal with sovereign debt (in a word, bankruptcy) to being the first pro-default president in the history of the United States. As if in an inverted mirror image, the losers in the agreement on the restructuring of the Argentine debt are the European nations with interests in the country (Spain, France and Italy). On the one hand, the text of the agreement with the IMF makes no formal mention of raising the charges of privatised utilities that provide public services or of compensation for banks for the loans lost in the crisis; on the other hand, there are far more holders of practically worthless Argentine bonds in Europe than there are in the US.
Whatever the state of international politics, jobs are being created in Argentina, something that is calming grave social misgivings and fuelling demand. There is no doubt that unemployment and rank poverty will remain at very high levels, but a virtuous circle has evolved at least for the short term. However, it is now time to look a bit further than the immediate horizon. The Argentine economy now seems to have a major opportunity ahead. The combination of a high real exchange rate with inflation controlled by monetary and fiscal policies rather than by artificial exchange-rate fixing against the dollar is something that has not happened for decades, probably not since the 1930s. And for such a combination of a high real exchange rate, price stability and a more or less open economy, one would have to go even further back, to the early years of the twentieth century. That was the time when Argentina grew far above the world average. However, there are two significant differences between now and then. Then the country had markets prepared to buy its products without placing tariff barriers in their path. Nor was there debt default or widespread breach of contract; the financial markets, though hardly robust, worked more or less normally. Capital investment in those days was high; at present it hardly covers depreciation.
Even if we take the view that today’s low investment rate is to be explained by the presence of idle capacity, the country should prepare for the time when it requires much higher inflows to maintain growth. That will mean a tough stance on access to markets and measures to ensure that memories of what happened in 2001 and 2002 are quickly forgotten. Something along these lines appears to be happening. Negotiations with private lenders have begun, probably at just the right time. If they had been started earlier, progress would have been difficult; today Argentina has a primary budget surplus which improves its credibility. If they had been delayed too long, the results would not have been achieved in time to meet investment requirements. 2004 should be the year for financial normalisation and the renegotiation of contracts with the privatised utilities. The Kirchner administration has before it some difficult juggling to do. Only if it handles all the pieces nimbly will it be able to prevent returning inflows for investment turning into another round of capital flight.
Conclusions: Following the elections of the last few weeks, we are left with some certainties and some unknown quantities. It is clear for the moment that the Justicialist Party remains the dominant political player, albeit a divided one. A silent battle is going on in its midst. President Kirchner is trying to shore up his cross-party alliances to give him the power he needs to face down the territorial barons of his party. Former president Eduardo Duhalde wants to be the guarantor of a united party and has offered Kirchner the party leadership and political support in return for an end to the alliances with other parties. In the current scene, the remaining political parties are mere spectators waiting to see whether the struggle leads to conflict or a consensus within the Peronist movement. Meanwhile the national economy is moving on its own parallel track. Reactivation is well underway but now seems the time when uncertainties should be clarified in the interest of protecting much-needed future investment.
Torcuato Di Tella University, Argentina