THE NEW YORK TIME
It's been a rough six months for Cristina Fernández de Kirchner. The Argentine president assumed power in December 2007, replacing her husband, Nestor, who is broadly credited with expanding the influence of the country's presidency. The honeymoon didn't last long. Sky-high inflation and unpopular agricultural policies prompted three rounds of strikes in as many months by Argentine farmers—strikes which, experts say, Cristina has proved ill equipped to confront. The farmers eventually lifted the third strike (MercoPress), though no clear resolution to their demands was reached. More troublingly for Cristina Kirchner, regional analysts say the turmoil served to erode her power and could lead Argentineans to turn on the program of populist economic policies favored by the Kirchners' party.
Argentina's most recent woes stem in large part from rising food prices. In early 2008, Cristina Kirchner sought to shore up supplies and boost government revenues with a scheme of tariffs aimed at discouraging food exports. This proved a bitter pill for Argentine farmers, who are among the world's preeminent producers of beef and grain. They answered the tariffs by challenging the presidency and boycotting all exports (NYT). Nestor Kirchner faced similar crises during his tenure, but he was able to stand them down (Economist)thanks mainly to a backdrop of robust economic growth. With inflation bubbling and energy shortages sweeping the country, his wife hasn't had the same luxury. The farm disputes concluded with the resignation of Argentina's economics minister (Stratfor) and left Cristina seeking help from the Argentine congress. The country's lower house narrowly passed (Bloomberg) her tariff bill on July 5, but it still needs senate approval to become law.
Argentina has one of the highest inflation rates in the world, and rising prices are rapidly eroding economic gains the country made earlier this decade. Official statistics put the country's inflation rate below 10 percent, but economists say those figures grossly understate (RGE Monitor) consumer price increases. The country's central bank has cooked the books, they say, by measuring inflation a way no other country does—disregarding the price of any good that rises too much on the grounds that people won't buy it anymore. Unofficial estimates now put Argentina's actual inflation rate somewhere between 25 percent and 30 percent.
As economic concerns mount, the Kirchners populist approach to governance has increasingly come into question. Argentina is South America's second-largest economy, but since the late 1990s, when IMF mandates helped push the country's economy into a tailspin, Argentine political elites have consistently rejected measures aimed at economic liberalization. The Kirchners have gone a step further, extending populism to the political realm. Allegations that Venezuela's Hugo Chavez helped fund Cristina Kirchner's presidential campaign have only exacerbated strains with Washington.
The biggest fear for policymakers is that Argentina will sink back into a major economic crisis comparable to the financial implosion of the 1990s. Preventing this will require potentially unpopular decisions. Artificially deflating inflation figures has saved the government massive payouts on the inflation-protected bonds it issues, the Economist says, but it has also dampened investor appetite for long-term investments—precisely the sorts of investments needed to help stabilize the Argentine peso. Revisiting the issue won't be popular, and turmoil with farmers has weakened Cristina Kirchner's position to admit error. If she doesn't act soon, however, analysts see a growing possibility that 2009 midterm elections could make her a lame duck.