President by Default

Argentina's new president, Néstor Kirchner, would like to revive the country's moribund economy. (Photo: AFP)

Former Argentine President Carlos Menem is not the sort of man who calmly accepts political defeat. He is an inveterate fighter, and so it came as a shock for Argentines when, on May 14, Menem announced that he was dropping out of a May 18 presidential runoff election and leaving his opponent, reformist Peronist Néstor Kirchner, as the winner by default.

Menem, a lawyer known for his political shrewdness, waited until the very last minute to present his official retirement from the race. After flatly denying his intention to quit, and in the face of overt quarrels among his closest supporters, he then flew to his home province, La Rioja, amid varied rumors concerning his intentions.

All the indications were that Menem was heading for a stunning defeat. Polls had given him 25 percent of the vote as against 75 percent for Kirchner, the governor of the oil-producing province of Santa Cruz. Clearly, suffering an overwhelming defeat would have put a large dent in Menem’s shrinking political resources—on the other hand, stepping down saved him from a humiliating defeat and denied Kirchner a clear political mandate, giving Menem a basis for future attacks against him.

“Menem’s decision, although complying with the Constitution and the electoral code, conspires against the pages history has reserved for the ex-president,” wrote Walter Curia in the May 15 issue of the independent Clarín, “and appears only to do honor to the unfortunate tradition in Argentina of disrespect for institutions.”

The runoff election was a follow-up to the first-round election on April 27, in which Menem polled 24 percent to Kirchner’s 22 percent. The two men, both Peronists, had split the votes of Peronist supporters. In accordance with a constitutional amendment introduced in the 1990s, a further ballot is needed to decide a winner if no candidate gets 45 percent of the vote or a 10-percent margin of victory.

Most of the country’s mass media and its non-Menemist politicians strongly criticized the ex-president for further weakening its fragile institutions, many of which are still struggling to recover from the effects of a prolonged social, economic, and political crisis that began a year ago.

“I am filled with indignation and shame,” said Ricardo López Murphy, the conservative candidate who placed third in the first round. Socialist candidate Alfredo Bravo commented, “Menem’s decision is typical of a person that has always put his interests above those of the nation,” while fourth-place candidate Elisa Carrió limited herself to saying: “Words lose their meaning in the face of the brutality of these political events.”

The April 27 election was called to bring the country to normality following the shattering events of 2002. The year had ended with the collapse of the peso-dollar parity established in the 1990s to deal with Argentina’s soaring rate of inflation, the government’s inability to meet foreign debt payments, and the resignation of President Fernando de la Rúa, the conservative head of a non-Peronist coalition government.

As the economic crisis deepened, angry middle-class savers had taken to the streets, banging pots and pans to protest a freeze on the withdrawal of savings and investments from Argentine banks. They were joined by unemployed piqueteros, who added to the protests by demanding jobs. Mass lootings and the violent death of numerous protesters at the hands of police led to De la Rúa’s resignation on Dec. 10.

A rapid succession of five presidents attempted to patch up the situation, until Congress finally named Eduardo Duhualde to fill out the term to December 2003. In attempting to deal with the situation, the caretaker government declared an end to the dollar parity system and “pesified” the economy, with a sharp devaluation that lowered the price of Argentine exports but created untold headaches for those with debts in U.S. dollars. Ironically in light of recent events, the election was brought forward to April in order to find a government with clear popular support. 

One important impact of Kirchner’s victory will be a resumption of the effort to work out mechanisms for dealing regionally with Latin America’s problems.

Even before Menem decided to step out of the race, Kirchner had begun to act as the future president. He traveled to Brazil and Chile for talks with Presidents Luiz Inacio Lula da Silva and Ricardo Lagos, and made clear his desire to pump new vigor into the Mercosur (the nascent Latin American economic body that seeks to break down trade barriers among member countries and work toward common monetary policies). “The Mercosur must be reaffirmed,” Kirchner told the center-left Página 12. “Our actions must be extended to the rest of South America and then we will determine necessities and schedules.”

During his campaign, Kirchner also suggested that he would support a Keynesian economic policy, one that might include state intervention to promote growth in industry and the labor market. Menem, on the other hand, supported free market economics and the U.S.-backed Free Trade of the Americas agreement, an initiative that seeks to bring the economies of the Western hemisphere under a single free-trade umbrella.

Analysts are predicting that Kirchner will back away from the neoconservative economic policies Menem introduced during his presidency in the 1990s—the privatization of the country’s state industries and the curtailing of import barriers—and will instead introduce measures designed to develop local industry and reduce the country’s dependence on multinationals. Roberto Lavagne, currently the country’s economic minister, is to remain in his post.

“First he will explain that in order to lower unemployment (near 20 percent according to surveys), he will launch an ambitious plan of public works demanding an investment of 4 billion pesos and which is under Economic Minister Roberto Lavagne’s consideration,” commented the conservative La Nación on May 15. Where that money will come from, in a country facing payment of US$3 billion in foreign debt obligations between now and September, is not clear. But Lavagne has given a few hints. According to Página 12 (May 15), one possibility would be a reform of the country’s privatized retirement system, one that would siphon off some of the US$160 million the system generates each month into building projects. Another possibility would be to seek a return of the estimated US$35 billion that Argentines have hidden in their homes, according to a report by the Argentine Central Bank in the same issue of the paper.

Whatever policies are used to deal with the situation, the April 29 issue of the liberal Laprimera asserted that “the future for the next president is far from bright: The rate of unemployment, poverty and indebtedness, just to name a few, will continue being dramatic.” An agreement with the International Monetary Fund runs out in August, and in September Argentina will need to make debt payments of some US$3 billion. As Laprimera pointed out, “That will oblige the new administration to negotiate almost against around the clock and with an even more complicated fiscal situation…a scenario that is not very favorable for a country that needs to recuperate its foreign credit and that has a total foreign debt of US$80 billion.”

For the moment, the country is breathing more easily and licking the wounds inflicted by the election drama. But it’s too early to relax. A taxi driver put it bluntly: “This country is dominated by two mafias: Duhualde’s, which has strength inside the country, and Menem’s, whose power is abroad. Mark my words: [Menem] will be back in power within a year or two.”

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