Argentina

The president of Argentina, president Cristina Fernández de Kirchner, will be happy to see the back of 2013. Her administration has ended a turbulent year facing grave economic, political and social challenges.

The country’s economy stares into the abyss as its rate of inflation hovers at an astonishing 26%. Latin America’s third largest economy faces its most serious economic challenge since the infamous collapse of 2001 (which saw the country default on government bonds worth some $95 billion USD). Kirchner blames the current crisis on Argentines spending money abroad (thus removing currency from the domestic economy). The administration has reacted by increasing its (already whopping) tax on credit card purchases in foreign currency from 20% to 35%. Central bank reserves have hit a seven year low as the regional economy slows and the government struggles to service foreign debt.

The country also faces deepening social challenges. In December, police officers stood by and watched as looting and lawlessness broke out across the country (resulting in at least 14 deaths). Police officers walked out over the issue of low pay, and only returned to their posts after widespread criminality had engulfed the country and made headlines around the world.

Problems continued over the festive period as an unprecended heat wave finally stretched the country’s aging electrical grid to breaking point. The inevitable blackouts resulted in public sector employees being told to stay home in an effort to save electricity. The extreme temperatures (the worst to hit Buenos Aires in 40 years) resulted in several fatalities and saw scores of angry residents spill onto the streets in protest. The government blamed private utility companies who have failed to invest in upgrading the electrical grid. But it is equally clear that the under pressure administration has failed to accept their responsibility for the outages. The energy crisis stems from the freezing of utility prices in 2002 (during a time of extreme economic hardship in Argentina). The policy had been intended as a temporary measure, and was aimed at assisting a struggling population in their most desperate hour of need. The policy had not been intended as a long term strategy. Nevertheless, subsequent Kirchner administrations decided to indefinitely retain the measure as a means of shoring up their own short term popularity. As the economy recovered and grew exponentially over the course of a decade (a pattern seen across most of Latin America), demand for electricity equally increased. But low prices and increasing demand only resulted in utility companies finding themselves simply unable to invest in upgrading the creaking infrastructure. This crisis has been a long time coming and should not have come as a surprise to anybody.

Meanwhile, Kirchner’s political future looks about as bright as the electrical grid. Whilst October’s midterm elections saw her left wing coalition retain a small majority in the country’s congress. The elections also saw a significant decrease in its congressional support (from 54% in 2011 to 33% in 2013). The president has two years of her term remaining, but her chances of retaining power beyond 2015 are all but over (some commentators had speculated that Kirchner had hoped to lift the existing term limits to allow for another term). The president and her predecessor (her husband, the late Néstor Kirchner) have governed by confrontation politics for a decade. They have pursued a populist approach based on short term gratification and long term shortsightedness. The two Kirchner’s revelled in taking credit for a booming economy (which like others in Latin America regularly grew by 8-9% per annum for the best part of a decade). All the while blaming the country’s problems on everybody from multinationals, the IMF, bondholders and foreign governments. Taking responsibility has not been a trait often seen by a Kirchner administration.

For decades, one has been able to judge an Argentinean government’s domestic pressures by the ferocity of government outrage over the Falkland Islands, Kirchner is no different. The long standing dispute reached fever pitch in 2013. The year saw the Islanders overwhelmingly vote (by some 99.8%) to remain part of the United Kingdom. Yet Kirchner predictably continues to escalate the issue by stoking nationalist fervor. She most recently threatened oil company’s operating from the islands with fines, confiscations and jail sentences of up to 15 years for their executives. Furore over the issue is a tried and tested attempt to distract Argentines from more serious domestic challenges. No Argentine leader has shouted louder or angrier than Kirchner since Galtieri in 1982.

With the good times well and truly over, the magic formula of populism looks to have lost much of its allure to many Argentines. The year has also presented Kirchner with more personal challenges. She underwent skull surgery as a result of a nasty fall in August, and just to exasperate matters, she has ended the year embroiled in a corruption scandal. The Argentine newspaper La Nación has accused the president of funneling taxpayers’ money into luxury hotel resorts owned by businessman and personal friend, Lazaro Baez.

To sum up, the year could not have been much worse for the Argentine leader. Expect the troubled times to continue well into 2014. Whilst Kirchner herself need not worry about re-election in two years time, the left wing coalition she leads faces an uphill struggle if they hope to retain power in 2015.

BY: Robert Kiteley