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Perspectives 12:00 AM
Monday, August 11, 2008
Argentina: Exit Kirchners?
ON LIFE SUPPORT? Argentine President Cristina Fernandez de Kirchner tours San Juan province Friday.  Her days are numbered, the author argues. (Photo: Argentine President's Office)
      
  Poll
When will the Kirchners be ousted from power in Argentina?
 They will last until 2011
 Next year
 Before the end of the year
Results / Other Polls
It is no longer a question of "if," it is now a question of "when" the Kirchners will be ousted.

BY WALTER T. MOLANO

Argentine bond prices plunged more than 6 percent on Friday, as the market gave up hope that President Cristina Kirchner would amend her ways. Argentina suffered its worst week since the default of 2002. The Argentine EMBI+ jumped to 727, the widest spread in the region.

Although there were initial hopes that the president would strike a more conciliatory tune after she lost the conflict with the agro sector, her actions showed the contrary. Former President Nestor Kirchner’s henchmen, Planning Minister Julio de Vido and Interior Commerce Secretary Guillermo Moreno, were never replaced.

An attempt by the newly appointed Chief of Staff, Sergio Massa, to restore confidence in the INDEC and Administration were quickly sidelined. Given the intransigence of the Kirchners, it is only a matter of time until they are ousted. Unfortunately, abrupt changes of power in Argentina tend to be chaotic. This is the reason why the markets are bracing for a default, even though the country’s macroeconomic indicators are sound. 

ARGENTINE-VENEZUELA BONDS

In addition to the Kirchners’ recalcitrance, investors were buffeted by a slew of negative news. The first was the government’s desperate issuance of more than $1 billion to the Venezuelan government at the usurious rate of 15 percent. The Chavez Administration immediately resold the bonds to local Venezuelan banks and investors who dumped the paper on the international market as a way to circumvent the capital controls.

The deluge of Argentina bonds was one of the factors that triggered the selloff. Given the desperate act, it was not surprising that Moody’s immediately announced that it would soon cut Argentina’s outlook due to concerns about the government’s willingness to service its financial obligations.

At the same time, the meltdown in the commodity markets led many investors to turn their backs on commodity producers, such as Argentina. Soybean prices plunged more than 13 percent last week, erasing 5 percent on Friday—the day of the Argentine debacle. This left very few reasons for anyone to place a bid on Argentine paper, which explained why asset prices dropped so precipitously on Friday.

POLITICAL CLOUT

President Cristina Kirchner was on a well-received tour the day of meltdown in San Juan and Mendoza, two provinces which were not affected by the agro turmoil, but there was still a sense that the clock was running out.

It is no longer an issue of popularity. It is an issue of political and economic clout. The repeal of the tariff initiative was a powerful blow to the government’s purse. With soybean prices on the decline, the outlook is even worse. Although tax revenues soared 40.3 percent y/y in July, approximately 81 percent of the primary surplus was generated by soybean tariffs. Now the surplus is shrinking.

The Kirchners increased spending during the crisis in order to buy friends and influence, but a reduction in government revenues will soon leave them stranded. The government froze provincial transfers last week, as well as some public spending programs. It is only a matter of time until the labor unions turns their backs on the presidential duo. The loss of economic clout translates to less political power. The Peronists are split in two, with more than half of the party under the command of former President Duhalde. This is the reason why people are doubting that the Kirchners will make it to the end of the year.

WHEN, NOT IF

It is no longer a question of “if,” it is now a question of “when” the Kirchners will be ousted. They lost all sense of reality, inventing conspiracy theories instead of bridging their differences with the opposition.

The Kirchners’ dream of remaining in office for another 12 years is a distant memory. The main debate in Buenos Aires is whether they have three or four months left in office and how chaotic will be the transition of power. Argentina has a nasty history of political collapses. The untimely demise of the military junta and the ousting of Presidents Alfonsin and de la Rua were associated with sovereign defaults and/or hyperinflation.

Hopefully, this time the situation will be different. Argentina has fiscal and current account surpluses. The economy is growing and the government’s financing needs are relatively low. Argentina’s macro indicators are sound, for now. Unfortunately, the deterioration of the external environment and the rapid erosion of the domestic situation could put it in dire straits by the end of the year.

Walter Molano is head of research at BCP Securities.  

Related News:
- ATFA:  Argentina Deserves Better - Where's the beef, Cristina? - Argentina: Waiting for Revenge - Another Argentina Default? - Argentina: What Now?
 

Post Your Comments
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From: Carlos, Buenos Aires
Don't criticize Cristina. She is an expert - in Louis Vuitton, Rue Foch, Paris, Via Venetto. Channel, Rolex. To be President, you don't need anymore. Any one disagree with me?

From: Miguel, Bs. As.
I suppose the statement that "the untimely demise of the military junta" means that the likes of Molano would like Argentina to return to what it used be for some reason known only to themselves because the great majority of us who lived under that military junta consider its "demise" anything but "untimely".

From: Aroldo Kaplan, Argentina
It would be helpful to the readers if W Molano explains what he means by "untimely demise" of the Argentine military junta. It is creating a bruhaha that shifts the attention away from the main points of the article!

From: Santiago Plaza, Argentina
The thinking of Mr. Walter Molano is from twenty years ago more or less. It's not up to date and quite false for people who are trying to understand the Argentine situation for business.

From: allegra, buenos aires
Even before the start of the agro business strike , I have been an anxious spectator of the coming demise. I was very disappointed when CFK was elected. During her tenure as Senator of my province, she did little for hthe constituents. But as a couple they did manage quite well to increment their personal wealth........
Aug 17...http://www.theargentinepost.com/
I have been in California for the last 4 months and due to go home next week. I am preparing myself for the next financial crisis due by early 2009.

From: Eduardo Real, Buenos Aires, Argentina
Molano got the heebie-jeebies, and expresses his will as if they were prognoses. What a insightful idea! Fortunately, and in spite of Molano, ATFA and other vultures, Cristina and/or Néstor will be reelected in 2011. We, the Argentinians, we support you! Kudos, Cris!

From: Martín, Pergamino, Buenos Aires, Argentina
You should be ashamed of yourself. You are supporting a soft coup against our president. Remember what happened to Mark Thatcher for trying to do the same in Ecuatorial Guinea!

From: Soledad
Cristina is never going to quit because she's smart and has great character, more than anybody else in this country. I'm glad that she's my president and i'm proud of that. There are many, many many people (46%) that support this goverment Maybe we cannot be OK with everything, but we support the type of politics and the improvement that we had the last 5 years.

From: Guillermo, Buenos Aires
The Kirchners MUST continue until the end of 2001 at the very least. Latin Business Chronicle should be ashamed of supporting such opinions.

From: alfredo cardenas, rosario
Cristina is very intelligent. She's a wonderful person to serve the poor people of Argentina.

From: cecilia, buenos aires
"When the Kirchners will be ousted".....What? Walter Molano, are you promoting a soft coup? You disrespect the 45% of Argentines who voted for Cristina and support her.

From: Ignacio Mansilla Derqui, Buenos Aires
Do you remember Argentina in 2001? An economic system that increased the poverty and unemployment and indebted the country like never in its history - in favour of a small class of capitalists.

From: Alejandro, Chivilcoy, Argentina
Cristina is the best president that we can have. She's very intelligent.

From: Diego, Buenos Aires
To the people who are against our DEMOCRATICALLY elected president: I don´t know wy you are so anxious to get back to crisis times. You should be happy that we aren´t, and that opinions like the ones this articles supports are now no longer important since international financial groups no longer have the power they used to in Argentinean politics.

From: miguelantonio@argentina.com, Buenos Aires, Argentina
Mr. Molano: Thank for your words, but President Cristina Kirchner will be en Casa Rosada until 12-10-2011. She isn´t a president from the Union Civica Radical.

From: Enrique Martín, Buenos Aires
Cristina=Chávez. She will be relected in 2011. Néstor Kirchner will be president 2015 and 2019, Cristina 2023 and 2027. Perón is not dead.

From: Politico Aficionado, Argentina
The economy is still running strong. This year´s expected GNP growth is around 7%, and government spending is non-deficitary. We still have to control inflation, but our economy seems to be in a better shape than the economy in the USA. And the Peronists have a far greater chance of staying in power beyond 2011 than the GOP.

From: MERCEDES, buenos aires
Cristina is the best president we Argentines have had.

From: Mariebel , Buenos Aires - Argentina
Perhaps he does not support that the governments of Argentina, Bolivia, Venezuela, Ecuador, Cuba think by themselves.

From: Monona Ines Iznal, Santa Fe-Argentina
The people are with this government.

From: Julian, La Plata
Molano wants cristina out. Argentinians not

From: martin, argentina
By saying these things you are promoting a coup against a president that has been voted by 45% of the Argentinian people just 9 months ago. Let the Argentinian democracy be and please respect the decisions of our people.

From: Emiliano, Argentina
Mr Molano should be more responsible when he decides to write any report about any president of any country. We may have economic problems, but our president has a team of experts that will solve the problem. Besides, she has most people's support, and not like Molano writes.

From: Julieta, Gran Bs.As
Cristina Fernandez has the support of the people who voted her. Till 2011 she will be our president. It's the first time in a very long time that poor people and all the country have the chance to be someone. The ones that hate her are those who only think about themselves.

From: Pablo, La Matanza
The Kirchners themselves have committed political suicide. They don't know anything about democracy or about managing a political or economic crisis. They will be out of goverment because of their own misleading politics. Inflation will be lethal for this government.

From: Manuel, Provincia de Buenos Aires
As an Argentinian citizen I acknowledge that the current government has made many mistakes. But I think it is also funny how foreign media treat this subject. "Not a question of if but when"? Who are you to judge? I believe that whenever there is a government that has certain anti-liberal ways, the right-wing journalists do their best in cultural sabotage. The new ways to sabotage governments include the monopolized media and every form of mass comunication.

From: Sabrina Gatrilo, Buenos Aires
I only know that if people like Mr Molano is against the CFK's government, then she must be doing some good to her people. And that pleases me, after so many years of slavery to USA, at last someone came to dignify us.

From: Graciela, Ciudad de Buenos Aires-Argentina
I don't agree with Mr. Molano´s statement. Cristina Fernández was voted by 46% of the population 11 months ago, and we would surely support her if necessary.

From: pat, Buenos Aires
Mr. Molano,
Let me tell you that according to our Constitution we shall be having elections in 2011. As a democratically-elected president she will be supported by the Argentinians all throughout this period.
Are you by any means suggesting a coup? quote "not a question of if, but when"??? quote "her days are numbered" ???
You must be kidding... really, you are misleading your readers.

From: Jose Mario Giannattasio, Buenos Aires
Our president Cristina has the courage, ability and the beauty and the people are in love with her.

From: Juan Jose Radies, Buenos Aires
By no means do the Kirchners have to be ousted. This would open the grounds to flee to Venezuela and victimize themselves. For those worried about a soft coup, my answer is no, this should not happen. If they are ousted, it is to be [like] the Ceausescu in Romania... If not, they shall remain and get cooked by themselves. Last, but not least, those who support the Kirchners in their comments [here] are either paid people or simply represent the Argentine [school of thought] that has made Argentina plunge for the last 50 years.

From: Marta, Buenos Aires City
We have chosen Cristina Kirchner and we' ll choose her again.

From: Ezequiel, Buenos Aires
Mr Molano thinks that his attemps against Argentinian democracy are just part of the game of politics. He doesn't even think about the consecuences of a new 2001. That's, at least, a very irresponsable tought.

From: marylina, buenos aires
They have disappointed not only us but the whole world. Their Golden Days are over.

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